Funding for startups: A guide to bridge funding

Pre-Seed, Seed, and Series A are all terms that are probably familiar to you if you have, or are looking to, raise funding for startups. Bridge funding may be a term that is less familiar, but as the name suggests it often provides crucial short-term funding for startups and more established companies, helping them to ‘bridge-the-gap’ between funding rounds and maintain their operations until they are able to secure more permanent funding, or reach their next funding milestone.

It’s a source of startup investment that I have also personally made use of.

When I founded my first startup, Seek & Adore, a curated online marketplace for designer-makers, I raised our first funding round to build the team, accelerator sales and grow revenue. This took longer than we expected and as our cash began to run out we had to look for additional funding.

The feedback we were receiving from investors was that we hadn’t hit the right revenue numbers to raise another full round of funding, so instead we had raised a bridge round to give us the runway to achieve our next set of milestones. We were lucky, as we were an online marketplace that had both customers and suppliers of the products we sold, it meant we had a large customer base – and a supplier base – we could approach to help fund us, and this is exactly what we did.

Those closest to your business can be a good source of funding for startups

A crowdfunding round, backed predominantly by our existing customers and suppliers, gave us the cash investment and runway needed to take us through to our next investment round. If we hadn’t had our customers and suppliers to lean on it could have been a very different story. It is worth exploring all your options if you are in need of short-term funding for startups, it’s often the case that your next source of funding comes from those closest to your business.

In a recent article I wrote for Elite Business Magazine, I discuss:

the metrics you need to monitor so you know when to start looking for bridge funding for startups.
the evidence you need in order to raise funding.
who are your best first points of call to speak to about raising bridge funding.
how you can use an Advanced Subscription Agreement (ASA) to limit the impact on valuation compared to a traditional priced funding round.

Hatty Fawcett of Focused for Business writing for Elite Business: Funding for startups - How to raise bridge funding.

If you are a founder who has already raised funding for your startup – but you know you will need to raise more funding – it’s worth considering these four things now to make it easier to attract bridge funding should you need it in the future.

Read the full article

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