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VC firms grant bridge loans to portfolio companies
By siliconindia
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Bangalore: Lending a helping hand, Venture capital firms in India come forward to assist their portfolio companies who are struggling amidst of liquidity crisis, by allotting bridge loans to them, reported Business Line. It is a short-term liquidity support mechanism provided by venture capitalists or funding agencies. The assistance is expected to be a great relief for many portfolio companies who find it difficult raise money as the ongoing financial crunch has impacted the availability of funds.
IDG Ventures India, who manages a $150 million venture capital fund has a portfolio of companies are now considering additional funding through bridge loans to about two of its portfolio companies. Ashish Gupta, Managing Director at Helion Ventures said, "We will absolutely support those companies requiring additional funds." The company is presently managing a $350 million venture fund. Gupta also opined that Helion was encouraging its portfolio companies to cut down their cash burn and conserve cash.
"Conserving capital has become very important. The portfolio companies do need to realise that they don't want to go out to raise money for the next year or so and need to plan well," said Harish Gandhi, Executive Director, Caanan Partners. According to him many of the Caanan portfolio companies have raised funds in the past one year and are adequately capitalized. "The firm was willing to provide an internal round of funding to companies, if required," he added.
Though many venture capital firms have reduced their new investment, they want to make sure that their portfolio companies survive the economic downturn.