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In an ideal world, bridge rounds wouldn’t exist.

True, execution sometimes doesn’t go as planned. Totally get that.

After investing for over four years and in 19 companies, I fear that many bridge rounds are the symptom to a deeper root of the problem that startups do not know how to adequately plan their fundraise.

Let me explain what I mean.

Insights on Fundraising from Football

Fundraising is very similar to moving down the football field.

In football, a first down is ten yards. If the Green Bay Packers offense gets a first down, they receive another first down and a fresh set of four downs to get another 10 yards to continue to move down the field in sequence to score a touchdown.

Parlayed to startups and venture capital, let’s assume that each investor round (Pre-Seed, Seed, Series A, Series B, etc.) represents the next first down, one another another. That’s how it functions in practice. When the Green Bay Packers get a first down, or a startup closes a fundraising round, they get a limited set of time to make it to the next first down or funding round. Or else, they have to punt.

Knowing where the first down is gives clarity to execution. If the Packers are facing a 3rd and 22, then typically won’t run the ball and choose to pass. Similarly, if they are facing a 3rd and 3, they are more likely to move the ball on the ground. They adjust their play calling to the scenario at hand - the distance to get the first down.

But in a hypothetical scenario, what would happen if the Packers didn’t know where the next first down is? In that scenario, they would have no idea how to do their play calling.

Clarity of the distance to the next first down makes all the difference in a football team’s execution.

But, when it comes to startups… I’ve seen that most startups plan their fundraises having no clue where the next first down is, that is, what the investors in the next round expect.

This is the Achilles’ Heel of most fundraises, and is a concept that I call “The Capital Chasm.”

✅ The Capital Chasm = the mismatch between:

The milestones that the founders’ are executing towards 

VERSUS,

The milestones that the investors in the next round expect. ✅ 

At the bottom of the Capital Chasm is a vast startup graveyard, littered with tombstones of companies that fell into the chasm due to not making it to the next round of funding. That’s why a bridge round is called a bridge round. The startup needs more time and capital to bridge to the next stage of funding.

Yet, bridge rounds tend to be difficult entry points for new investors, and they only make sense for existing investors if the insiders like the traction story change since the initial investment.

That’s why that knowing what the next first down is, what the next round of investors expect, is mission critical when planning your fundraise. Here is what to do about it.