∞Direct answer
Direct answer
A bridge can add months between priced rounds. A new seed round can reset the plan. Compare cash need, share, terms, and time. A loan needs payback. A note can add interest and later lower share. Local law matters. [1] [2] [3] [4]
Start with the cash question
Runway means months before cash runs out. Map cash in and out each month. Mark the cash floor for pay, tax, debt, and key suppliers. Then ask what the next cash must prove.
A bridge is extra money between priced rounds. An existing backer often leads it. It may buy time for a product release or sales proof. It does not fix weak margins by itself. [1]
- Cash needed and months covered.
- Proof expected before the next raise.
- Cash floor and action date.
- Base case and hard case.
Compare the three main tools
A new seed round usually sells shares at a set price. Equity means share. New shares cut the share old owners. Each founder then owns a smaller share. Investors may seek board or approval rights. Equity can avoid loan payments. [2]
A note note starts as debt. It may turn into shares later. It can have interest, a due date, a discount, or a cap on value. These terms can make future share hard to know. A priced bridge sets share now. It may show a lower value. [1]
A loan keeps share unchanged at first. It still needs payback. A founder may face personal debt or credit harm. UK Start Up Loans, for example, are personal unsecured loans with fixed interest and personal credit checks. Other countries use different rules and products. [3]
- Ownership: shares now or later.
- Cash cost: interest, fees, or payback.
- Control: votes, board seats, and consent.
- End point: next round, maturity, or payback.
Ask what dilution really means
Dilution means a lower share of the company after new shares. It is not cash lost today. Ask for a share table. It records who owns what before and after each case.
Model the bridge discount, cap, interest, staff share pool, and next-round price. Model the new seed price and shares sold. Show each owner in both cases. Ask who takes the loss if the next value is lower.
A short bridge can cut fundraise time. It can also delay a hard choice. A larger seed round may add time and reports. The name does not show the safer path.
- Pre-money and post-money value.
- Shares or share swap amount.
- Interest and maturity date.
- Option-pool change and backer rights.
Check the country and the documents
Securities rules differ by country. In the United States, an offer must be filed or use an legal path. Regulation D has routes with different rules. Form D is due within 15 days after the first sale. State rules may also apply. [4]
In the UK, a loan, share sale, and note can have different tax and company effects. Other countries have their own rules. Use a local lawyer and accountant before you sign.
Ask for the full term sheet, fees, side letters, payback, share swap, and data rights. Keep a cash model. Let the board and old backers review conflicts.
- Country of the company and backers.
- Securities legal path or local filing.
- Repayment, share swap, and default terms.
- Independent legal and tax review.
FAQ
Frequently asked questions
Is a bridge round always note?
No. A bridge may use preferred equity or a note note. It can have interest, a cap, or a discount. Read all terms. [1]
Does a new seed round always cause more lower share?
Not always. It depends on price, amount, option pool, and old rights. Compare cap tables.
Can a loan be safer than equity?
It avoids immediate share lower share. It adds payback and credit risk. Some products can create personal debt. [3]
Can I use U.S. fundraising rules in another country?
No. SEC rules cover some U.S. offers. Your company and backer locations may add rules. Get local advice. [4]
REF
Sources
- 1
- 2
British Business Bank
Equity Financing: what it is, how it works, and where to find it ↗ - 3
British Business Bank
Start Up Loans ↗ - 4
U.S. Securities and Exchange Commission
Exempt Offerings ↗