There are many kinds of bridge loans. But one that's very relevant to HN readers is the bridge loans offered by VCs to startups. Let me relate to you one expe

There are many kinds of bridge loans. But one that's very relevant to HN readers is the bridge loans offered by VCs to startups. Let me relate to you one experience. I experienced this directly. The startup was very profitably using consulting to support development of the product by making initial versions available to clients before productizing it. They had a consulting team and a product team. This method allowed them to have a product team larger than they would have had if they didn't have the consulting team-- effectively more than doubling the engineering investment in the product. They started talking to VCs and all the VCs insisted they shut down the consulting team and "focus" on the product. Of course this had the side effect of killing their income and making them completely dependent on investment. When one of these VCs got "serious" they actually too the advice and shut down the consulting business.... then the VC proceeded to delay closing the round for months. We had a term sheet, but three months went by, then 6 months. All the while the accounts receivable from the consulting clients are dwindling. Around 6 months we were out of money and the VC offered us a "bridge loan" until their investment would close. Of course this loan had really absurd terms, but by that point the founders backs were agains the wall and they had no choice. Ultimately the startup was a failure- they were a bit too early to market, and because they had shut down the consulting business they didn't have the revenue to keep the doors open for the extra 2 years -- about how long it took for the market (Which is many billions of dollars now) to show up. In the end they sold for a smallish amount to a large company that made great hay with the technology... and the founders were pretty much wiped out due to liquidation preferences and the bridge loan. This is when I learned that "focusing" was nonsense. The product development slowed as a result of "focusing", it didn't get better, and the problem for the company was not lack of focus but being ahead of the market by a couple years. The sad thing is, here we are years later and what's common in this industry is a technology that wasn't nearly as good as what the company developed. So VCs not only killed the company, but delayed technological advancement of the industry (in this part of it anyway.) Part of the reason is that this superior technology is part of a large companies platform. If the startup were offering it, it could be widely distributed and adopted, but since this platform owns it, only a minority of people on the platform use it-- most have to support multiple platforms or are worried about lock in from the platform provider.