Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: This quarter, 2-rated loans went from 1 to 4 loans, and 1-rated loans went from 4 to 5. Can you talk a little bit about the reasons for some of those downgrades? A: Sure, Cory. This is Dan Devorsetz. In our portfolio and the market right now, it's challenging to get rounds completed. Some companies are in the process of raising money or getting acquired, but there are delays in commercialization or R&D. In today's market, these rounds are more challenging, especially with multiple investors having different priorities. We're working with these companies to get them properly capitalized.
Q: Are there any particular sectors in which you're starting to see more activity? A: The pipeline is quite across our sectors of technology, life science, healthcare services, and sustainability. We're seeing a lot of AI-enabled technology in these sectors. It's important to ensure that AI is used for business reasons and not just as a buzzword.
Q: In terms of the challenged companies in the portfolio, what has driven the deterioration? Is it the lack of exit opportunities or available financing? A: It's primarily the lack of exit markets, such as IPOs and strategic M&A, which affects the willingness and capability of VCs to fund across their portfolio. The exit markets drive a lot of behavior in terms of funding and access to cash.
Q: How should investors think about earnings given the current situation? A: The venture debt model assumes prepayments every quarter, which have been picking up. The run rate is where you could expect it, but it can fluctuate quarter over quarter based on prepayments.
Q: Can you provide more details on the second half pickup and what it could look like? A: We've been holding our fire to ensure markets are turning positively. We believe the second half will be better for venture lending. We've already had $30 million in prepayments in July, with fundings exceeding that. We expect a stronger second half with quality investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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