Bridge rounds, SAFEs, and venture debt: How to stack capital without boxing yourself in

Capital decisions have a long half-life. The money you raise today shapes your leverage, your timelines, and the kinds of conversations you’ll be forced to have six or 12 months from now. And, yet, many founders still think about funding in binary terms: Either you raise a priced equity round, or you don’t.

In reality, early-stage capital is stackable. There’s a middle layer between “raise a big round” and “bootstrap harder,” made up of tools designed to buy time, extend runway, and preserve optionality. This includes simple agreements for future equity (SAFEs),  bridge rounds, and venture debt. Each solves a different problem. And each carries tradeoffs that aren’t always obvious in the moment. Used well, these instruments can help you de-risk the business before a major raise. Used poorly, they can limit your future business choices.

This guide walks through how these tools work, when they make sense, and how founders can think about stacking capital, without painting themselves into a corner.

Most founders don’t wake up wanting a complicated capital structure. Complexity usually creeps in because timing is imperfect. Perhaps revenue is taking longer than expected, a key hire slips, the market moves, or the next priced round feels close, but not quite close enough. That’s where “in-between” capital shows up — tools that help you extend runway, bridge valuation gaps, or fund growth, without locking in long-term consequences too early.

Many founders reach for these tools reactively when a round drags on and cash gets tight. But smart capital stacking works best as a strategy, not a scramble.

Founders who plan for stacked capital think in terms of phases, not rounds. Consider these questions: What does the business need to prove next? What risk are you actively trying to remove? Which metrics will change how the market perceives and values your business?

When capital is tied to a specific de-risking goal, it sharpens execution. When it’s raised just to relieve pressure, it often delays the inevitable. The same instrument can feel liberating or constraining, depending on whether or not it’s pulling the company toward a clear inflection point.

Here, we’ll focus on three of the most common instruments founders use outside of traditional priced rounds:

1. SAFEs
2. Bridge rounds
3. Venture debt

Each exists for a reason, and optimizes for a different constraint: speed, valuation clarity, or dilution control.

Knowing the mechanics is table stakes. Understanding the long-term effects is where good decisions happen.

SAFEs are often a founder’s first exposure to outside capital. They’re familiar, fast to execute, and easy to explain.

What is a SAFE?

A SAFE (Simple Agreement for Future Equity) is a funding instrument that lets startups raise capital now in exchange for equity later, typically at the next priced round. Instead of setting a valuation up front, SAFEs convert into shares based on terms, like a valuation cap or discount. They’re designed to be fast and founder-friendly. But, because dilution is deferred, it’s easy to underestimate a SAFE’s long-term impact on ownership.

Why founders like SAFEs

Founders are particularly drawn to these features of SAFEs:

• Minimal legal overhead
• No immediate valuation negotiation
• Founder-friendly structure
• Capital that can arrive quickly, when momentum is high

SAFEs shine when speed matters more than precision. This option might be a match when you’re building early traction, fostering strong inbound interest, or as a short bridge before a clearly defined next round.

The tradeoffs with SAFEs 

The tradeoff with SAFEs is that dilution is delayed, not avoided.

Because SAFEs convert later, it’s easy to lose sight of how much ownership you’re promising away. Multiple SAFEs at different caps can create a future cap table that surprises founders and confuses new investors.

There’s also very little built-in discipline around the use of funds. Without a repayment obligation or milestones tied to the capital, SAFEs can quietly fund inefficiency.

When to use SAFEs

SAFES are best used when:

• Your company is pre-traction or early traction.
• You need a short runway extension before a priced round.
• You’re confident a valuation inflection point is coming soon.

For a deeper breakdown of SAFE mechanics, see Mercury’s guide to SAFEs for startups.

Bridge rounds sit between SAFEs and priced rounds. These are equity raises, but typically smaller, faster, and framed as transitional.

Why founders use bridge rounds:

Founders use bridge rounds because:

• They lock in a valuation.
• They reset expectations with existing investors.
• They can clean up or consolidate earlier SAFEs.
• They position the company more clearly for a Series A or B.

Bridge rounds are often about alignment. They force clarity around valuation, ownership, and next milestones.

The tradeoffs of bridge rounds

Bridge rounds come with real legal and negotiation costs. They can also signal uncertainty, if they’re not carefully framed. New investors may ask why a full round wasn’t possible, and existing investors may push for protective terms.

Your cap table can also become increasingly complex if the round is layered on top of SAFEs or notes, without thoughtful cleanup.

When to use bridge rounds

Bridge rounds are best used when: 

• Your company has meaningful traction, but unclear market timing.
• You need more time to hit a valuation step-change.
• Existing investors are willing to re-engage and lead.

Bridge rounds should be less about buying time blindly and more about buying focused time. You always want to know what you’re working toward on the other end of the bridge, right?

Venture debt often enters the conversation later, but it’s increasingly part of early capital stacks. At a high level, venture debt can give you cash without giving up ownership, depending on the deal structure. That’s the appeal. But the tradeoffs are structural, not cosmetic.

Why founders consider venture debt

Founders consider venture debt because it:

• Comes with no immediate dilution
• Extends runway post-raise
• Preserves equity for later, higher-valuation rounds
• Can fund growth, not just survival

Debt is particularly powerful after an equity raise, when your balance sheet is strongest and investor confidence is highest.

The constraints of venture debt 

Venture debt isn’t free money. It requires repayment. Often it comes with covenants, warrants, or operational restrictions.

One of the most common mistakes founders make with venture debt is treating it like emergency capital.

Debt works best when things are already going well. It assumes future cash flow will arrive on schedule. If you’re still searching for product-market fit or running highly experimental GTM, debt will only add pressure.

Strong teams use venture debt to accelerate what’s already repeatable: Hiring against proven demand, smoothing cash flow between large contracts, or extending runway after a raise to avoid premature dilution. 

Weak teams use it to avoid hard decisions. Lenders can’t fix fundamentals; they’ll only magnify them.

When to use venture debt 

Venture debt is best used when:

• You’ve recently raised equity.
• Revenue is predictable or trending that way.
• You want to extend runway without further dilution.

Used thoughtfully, venture debt can preserve optionality. Used reactively, it can force decisions you didn’t want to make.

Most capital stacks aren’t designed up front. They evolve. Here are a few common patterns founders can use to intentionally stack capital.

SAFE plus venture debt

A SAFE extends runway early. Venture debt comes later, once revenue or institutional backing is in place. This works when the SAFE is truly a transition and not a long-term substitute for pricing. The debt then amplifies momentum without compounding dilution.

Bridge round, then venture debt

A bridge round resets valuation and investor confidence. Venture debt follows to fund execution against clear milestones. This pattern works well for companies approaching Series A or B that need extra time to hit scale metrics.

SAFE, then bridge round

Using a SAFE followed by a bridge round is less common, but strategic in certain cases. Early SAFEs fund initial traction. A small bridge consolidates ownership, cleans up the cap table, and creates clarity for a major raise.

The key is intentional sequencing. Each layer should simplify the next conversation, not complicate it.

More capital doesn’t always equal more freedom.

Overstacking happens when founders layer instruments without a clear plan or exit path. The risks compound quietly. This could look like:

• Future investors struggling to model ownership
• Repayment schedules limiting strategic flexibility
• Cap tables becoming harder to explain and harder to clean up

A good rule of thumb: Every instrument you add should either buy time or reduce risk. If it does neither, it’s probably not worth the complexity.

It’s also worth thinking about capital stacking from an internal perspective. Different instruments create different behaviors inside the company. SAFEs can feel “cheap,” leading to looser spending discipline, whereas debt introduces urgency and accountability, but can discourage long-term bets. Equity rounds often unlock hiring and ambition, but also raise expectations overnight.

Founders who understand these dynamics use capital intentionally to shape focus, not just fund it. The right stack aligns incentives internally as much as it reassures investors externally.

The best founders don’t chase instruments. They protect optionality.

SAFEs, bridge rounds, and venture debt are all valid tools. None are inherently good or bad. What matters is sequencing, intent, and discipline.

Stack capital to buy clarity, not just time. And remember, the cleanest cap table is the one that lets you say, “yes” when the right opportunity shows up.

For more perspectives on how founders can think about financial optionality and timing, read Mercury’s conversation with Carolynn Levy, inventor of the SAFE.

This article is for informational purposes only and does not constitute legal, tax, investment, or financial advice. Founders should consult their own legal and financial advisors before making capital or financing decisions.