The Hindu Business Line : VC firms mull bridge loans for existing portfolio cos

Bangalore, Jan. 5 Venture capital firms are now considering bridge loans to some of their existing portfolio companies as part of their hand-holding assistance to tide over the temporary liquidity crisis.

“We are considering additional funding through bridge loans to about two of our portfolio companies,” said Mr Sudhir Sethi, Managing General Partner of IDG Ventures India.

IDG Ventures India manages a $150-million venture capital fund and has a portfolio of companies such as Manthan Systems, iViZ, 3D Solid Compression, and Aujas Networks.

However, Mr Sethi declined to name the portfolio firms availing themselves of the additional funding, and the quantum of the bridge loans.

A bridge loan is a short-term liquidity support mechanism provided by venture capitalists or funding agencies. Companies that raised funds about 18-36 months earlier may now be requiring a further round of funding to fuel their growth needs. However, they are finding it difficult to raise money as the global credit crunch has impacted availability of funds.

“We will absolutely support those companies requiring additional funds,” said Mr Ashish Gupta, Managing Director at Helion Ventures, a $350-million, India-focused stage-independent, venture fund. Some of the portfolio companies of Helion are Anantara Solutions, Kirusa, ngPay and MakeMyTrip.com.

Conserving cash

Mr Gupta said Helion was encouraging its portfolio companies to cut down their cash burn and conserve cash. “Conserving capital has become very important. They (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 Mr Harish Gandhi, Executive Director, Caanan Partners.

Majority of the Caanan portfolio companies have raised funds in the past one year and are adequately capitalised, Mr Gandhi said, adding that the firm was willing to provide an internal round of funding to companies, if required.

The economic crisis has forced the venture capital companies to go slow with their new investments. As a result, majority of them are now spending more time with their portfolio companies, making sure that those companies survive the economic downturn. “About 60 per cent of our time is now spent with existing portfolio companies,” Mr Sethi said.

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