VC Minute – quick advice to help startup founders fundraise better.
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This is Rich Maloy with SpringTime Ventures, bringing you the VC Minute, quick advice to help startup founders fundraise better.
Welcome back to another week of the VC minute. This week, we’re going to be talking about that bridge round.
No matter where you are in your fundraise cycle, whether you’re raising for the first time, you’ve already raised a Seed round, or even if you’ve already raised a Series A, you need to be prepared for the dreaded bridge round, starting now.
But first, I highly recommend you go back and listen to episode 37 when I first talked about the bridge round and why you should never call it that. For most of this week, you’re going to hear me say bridge round, and every time I say bridge, I want you to think about a bridge to nowhere.
There are two situations that typically lead to a startup needing to raise a Seed Extension or a bridge round.
The first one is that you hit your numbers and the goalposts moved. And so now you can’t raise that Series A and you need to come back to market to raise a Seed 2. That is totally acceptable in this market.
The other reality, is that you didn’t hit your numbers. And look, this is hard. If building a company was easy, everybody would be doing it, but it’s extremely difficult. There’s no shame in working hard and sometimes coming up short.
When that happens, you’re in a situation where you need capital to get to the next level, but you are in the worst possible position to raise it. However you can set yourself up for success for that potential future bridge round, but only if you start working on that now.
The idea for this week’s theme rose out of a conversation that I had with my friend, Eric Marcoullier, and I’ve mentioned him before, he’s got a great blog called Obvious Startup Advice.
I was trying to explain to him why we would not participate in a bridge round for half a million dollars. Our typical check size is about half a million dollars. Seems like a perfect fit, doesn’t it? It’s a terrible fit.
I’m going to go into great detail about why seed funds do not do this; why we don’t behave in this way. And why that half a million dollar bridge round / seed extension round / whatever-you-want-to-call-it round is going to be the hardest round that you raise… unless you set yourself up for success starting now.
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