Most startups don’t have a clean run of their pre-seed round through an IPO when it comes to fundraising. Fast-growing tech companies sometimes pause at certain stages, for example to raise some extra cash on the terms of their previous round.
This becomes especially true when the economy deteriorates and startups are incentivized to submit an extension or bridging round. Why are those rounds potentially more popular in lesser macroeconomic periods? Because if startups can buy a little more time to grow before raising their next price round, they may be better able to defend, or perhaps even surpass, their most recent valuation when they formally increase.
Facts from Carta, a software service that supports companies’ cap tables and the like, indicates that bridging rounds — “a type of interim financing that companies can choose while waiting for a bigger fundraising effort,” in its own language — is growing in popularity, as toptecheasy.com expects given our coverage of this. However, Where the financing variety is gaining the most popularity, was somewhat surprising. The companies with the least capital raised aren’t the ones making the biggest gains in bridging activities, it turns out.