How do I know if I need a bridge round or a down round?

If you are 6 months from zero and need a quick cash injection to hit a specific metric, go for a bridge. If the market has repriced your sector or your growth has stalled significantly, a down round is likely unavoidable. In the UK, the British Business Bank notes that bridge funding often acts as a survival mechanism during market volatility.

What happens to my equity in a down round?

It takes a hit. Down rounds often trigger 'Full Ratchet' or 'Weighted Average' anti-dilution protections for previous investors. This means they get extra shares to maintain their value, while your founder stake is diluted further. Most UK term sheets use broad-based weighted average, which is slightly less painful for founders than the aggressive full-ratchet alternative.

Are bridge rounds always a better option?

Not necessarily. A bridge round with high interest and a low valuation cap is just a down round in disguise. If you cannot realistically hit the milestones required for a larger Series A or B within 12 months, you are just delaying the inevitable. Be honest about whether you're building a bridge to a cliff or a destination.

Do I need to notify Companies House about these rounds?

Yes. Any time you issue new shares or change rights, you must file form SH01 within 30 days. For bridge rounds involving convertible loan notes, you won't file the share issuance until the debt actually converts. Keeping your filings accurate is vital for maintaining EIS/SEIS tax status for your investors under HMRC rules.

Can I use a bridge round to reach profitability?

That is the ideal scenario. By using a bridge to reach 'default alive' status, you remove the desperate need for external capital. This shift in power allows you to dictate terms in the next round. Aim to secure at least 12 to 18 months of runway to ensure you aren't back at the table in ninety days.