Investing in a startup: what is a bridge-round?

Investing in a startup: what is a bridge-round?

Bridge-round - a small series of investing. Bridge-round to growth indicators of the qualitative and quantitative for the next more massive round. The startup needs investments for a period of 3 to 6 months. 

A startup can announce a Bridge-round at any time either the initial or late stage of its life, But most often bridge rounds are announced when moving from the seed round to round A, where the startup gets its first grade.

Why do startups use a bridge-round?

The startup goes to a bridge-round because they want to move into the next big round of investing at a higher rate. A high score depends on the financial and quality indicators of the startup, which the founder of the startup wants to achieve by announcing the bridge-round..

What is a Convertible Note and how does it work?

The structure of investing in a startup in the early stages, as well as the initial strategy for the company to enter the market, should be as simple as possible. Therefore, the top American accelerator Y Combinator developed the Convertible Note tool.

This tool maximally satisfies the preferences of startups in obtaining money on debt obligations and allows investors to get startup shares at a bargain price.

Convertible Note is an open-source and reduces the time and cost to investors and startups. A similar SAFE Note tool later appeared.

Startups can use Convertible Note an unlimited number of times. Attracting investments in the right quantities and at the right time, and supports the startup’s flexibility and sustainability.

Convertible Note in the bridge-round gives a discount of 5-10% to the next round. The pricing limits the startup and protects investors from an unrecognized increase in startup costs that can add to Convertible Note or SAFE Note. 

Convertible Note represent debt, not equity. The money is returned to investors if the startup does not take off.

Regardless of whether you prefer to invest in startups under a debt agreement or in the price round, you can choose startups from Silicon Valley in your investment portfolio.

The founders represent startups for investing at the webinars of our syndicate club.

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Date of publication: 04.05.2020

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