4 Oct 2008

Biotechs seek venture debt but lenders are tight

As cries of anguish from biotech companies seeking funding grow louder, and the capital markets remain firmly closed, many are turning to a non-traditional form of debt.

General Electric's (GE.N: Quote, Profile, Research) GE Capital, SVB Financial Group's (SIVB.O: Quote, Profile, Research) Silicon Valley Bank, Hercules Technology Growth Capital Inc HTGC.O and other specialty financing companies offer a type of borrowing known as venture debt that is becoming increasingly popular with cash-strapped biotech companies.

Venture lenders provide secured loans with warrants to venture capital-backed companies. The loans are not necessarily based on hard assets such as factories and equipment, as bank loans are, but on intangibles such as intellectual property.

"The way we look at it is we provide investors with a lower-volatility way to get exposure to great venture-backed companies," said David Fischer, a partner at Gold Hill Capital, which specializes in technology and biotech venture lending.

Venture debt funds are often structured like venture capital funds, with............


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