Beyond Bridge Rounds: Why Warrant-Based Financing Might Be Your Best Option

TLDR: Warrant-based deal structures preserve cash like a bridge round but without the negative signaling effects of convertible notes or the immediate dilution of priced equity, creating strategic alignment that helps startups reach their next primary round.

The data on bridge rounds from a recent Carta 2025 analysis is striking but not surprising. Looking at 1,743 companies that raised a Series A from 2019-2021 and subsequently needed an extension, they found that companies using convertible notes or SAFEs were 10x less likely to reach their next primary round compared to those using priced equity. This stark difference reflects a fundamental challenge in the startup funding ecosystem that we've witnessed firsthand.

The Bridge Round Dilemma

Both traditional bridge options come with significant drawbacks:

• Priced equity bridges require immediate dilution, often at suboptimal valuations
• Convertible bridges create debt obligations and can send negative signals to the market about your ability to raise capital

Yet many founders feel trapped between these two suboptimal choices when they need to extend runway.

The Overlooked Third Option: Warrant-Based Financing

At Wrnt, we've built a platform that enables a different approach – using stock warrants to transform your relationships with key suppliers. This model allows startups to:

1. Preserve cash immediately by converting a portion of supplier costs into success-based payments
2. Minimize dilution with warrant structures that only convert at exit
3. Avoid debt obligations that can complicate your cap table
4. Create strategic alignment by turning suppliers into partners invested in your success
5. Improve fundraising metrics with better runway and burn rate numbers

Why This Works Better Than Bridge Rounds

The beauty of warrant-based financing is that it addresses the root causes of bridge round failure:

• It doesn't signal weakness to the market like convertible bridges often do
• It doesn't require immediate dilution at potentially unfavorable terms
• It creates advocates for your success rather than just capital providers

This model has a proven track record. Many of the biggest names in the ecosystem have used warrants at later stages–to land marquee clients or partners, to offer more competitive terms, and to extend runway. Now we've democratized this approach with modern technology and processes that make it accessible to startups at all stages.

The Numbers Don't Lie

When properly structured, warrant-based financing typically requires minimal dilution while preserving your cash outlay. This can extend your runway by months without signaling desperation to the market.

If you're considering a bridge round, I'd encourage you to look at warrant-based financing as a potential alternative or complement to your strategy. It's not just about avoiding the pitfalls highlighted in the original post – it's about transforming necessary expenses into strategic assets.

Learn more about how warrant-based financing works at wrnt.co – we're helping startups rethink how they manage cash and create stronger partnerships in today's challenging funding environment.