Good day, ladies and gentlemen. Welcome to the Hercules Technology Growth Capital Q4 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today's conference is being recorded. I would like to turn the conference over to Jessica Baron. You may begin, ma'am.

Thank you, operator, and good afternoon, everyone. On the call today are Manuel Henriquez, Hercules' Co-Founder, Chairman and CEO; and myself, VP of Finance and Chief Financial Officer. Hercules' fourth quarter and full year 2013 financial results were released just after today's market closed. They can be accessed from the company's website at www.htgc.com. We have arranged for a replay of the call at Hercules' webpage or by using the telephone number and passcode provided in today's earnings release. I'd also like to call your attention to the Safe Harbor disclosure in our earnings release regarding forward-looking information. Actual financial results filed with the Securities and Exchange Commission may differ from those contained herein due to timing delays between the date of this release and in the confirmation and final audit results. In addition, the statements contained in this release that are not purely historical are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including without limitation the risks and uncertainties, including the uncertainties surrounding the current market turbulence and other factors we identified from time to time in our filings with the Securities and Exchange Commission. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate and as a result, the forward-looking statements based on those assumptions can also be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this release are made as of the date hereof, and Hercules assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of related SEC filings, please visit sec.gov or visit the website, www.htgc.com. I'd now like to turn the call over to Manuel Henriquez, Hercules' Co-Founder, Chairman and CEO.

Thank you, Jessica, and good afternoon, everybody, and thank you all for joining us today. We're going to try something a little different in the call. We're going to try to make the call a little shorter, try it with a little bit slightly different format and also I would love to get folks feedback as we try the new format of the call and to allow a greater time for Q&A. So let's see how this tries and works out. I'm encouraged to share with you reporting our performance for 2013 and Q4 2013. With that said, we had an exceptional year and a fantastic quarter and ending up a tremendous year for Hercules in 2013. We delivered record new originations of over $700 million and delivered an impressive year-over-year total investment income of $140 million representing a 43% increase over 2012. In addition, and equally as impressive, was our growth, our net investment income or NII of $73 million or 52% over 2012. As for the agenda today, I plan on doing a brief overview of our operating performance for Q4 2013, a quick overview of the current market conditions including venture capital, investment activities, IPO and M&A, as I usually do, and then a prospective on our outlook for Q1 2014 and the entire period of 2014, including the potential realized gains of $20 million to $60 million that are of course conditioned upon market conditions remaining in place as they are today and then of course I'll turn the call over to Jessica to provide lot more details on our financial performance. Now, let me start by talking about 2013. As I said earlier, it was an excellent year for Hercules. Our strong performance was driven by our continued focus by maintaining high asset quality and…

Thanks, Manuel, and thanks, everyone, for listening today. I would like to remind everyone that we filed our 10-K as well as our earnings press release after the market closed. I'll now briefly discuss our financial results for the fourth quarter of 2013. Turning to operating results, we delivered total investment income or revenues of 33.2 million, an increase of 21.2% when compared to the fourth quarter of 2012. This year-over-year growth was driven by increased interest income from higher average outstanding balances of yielding assets year-over-year. We had also increased fee income attributable to early payoff of debt investments which totaled $105 million during the fourth quarter. Note that our period end net debt investment balance on a cost basis is $835.9 million, a decline of 74.5 million during the fourth quarter of '13. The all-in GAAP effective yield on our debt investments during the fourth quarter was 15.1%, excluding the income acceleration impact from early payout to one-time events; effective yield for the quarter was 14.7% up approximately 40 basis points relative to the previous quarter. We don't expect yields to trend much higher beyond Q4 based on what we're seeing in the marketplace today. Interest expense and loan fees were approximately $9 million during the fourth quarter of '13 as compared to $7.5 million during the fourth quarter of '12. The quarterly increase is primarily related to interest and fee expense related to the aspect notes we originated in December of 2012. These notes resulted in a year-over-year increase of approximately $90 million in weighted average outstanding debts during the quarter. Our weighted average cost of debt comprised of interest and fees was approximately 6.4% during the fourth quarter of '13 versus 6.3% during the fourth quarter of '12. This slightly higher rate average cost of debt…

(Operator Instructions). Our first question comes from Greg Mason with KBW.

Manuel, I wanted to touch on your last topic there about competition. You mentioned banks and other things and obviously you've got some new entrants like (indiscernible) and I think TriplePoint, they're trying to get an IPO done. Can you just talk about the competitive landscape and who are – who is pressuring prices, it sounds like?

Well, the three you mentioned are not at all causing pricing pressures. The pricing pressures are coming more from commercial banks who are – to me desperate to book assets in this environment, given their continuing swelling deposit base. And I personally think that we're probably in the early stages of a C&I bubble and no different than probably – it's going to end no different than as the mortgage crisis did with some banks. I think that the amount of risks that I'm seeing banks taking on right now for some companies is unprecedented, and we're just basically not going to play that game. We're choosing to wait it out, preserve our balance sheet and we're seeing transactions that are beginning to look extremely silly in the marketplace.

We've heard commercial banks with the new regulatory rules, particularly leverage loans are potentially having to pull back. Is there anything in the regulatory guidance that impacts your market in the BC lending market over time?

Well, there obviously is. There's some changes that are being contemplated in Congress alone having a 2x leverage on BDCs. I know some BDCs, I won't name who they are, view that as a negative issue. I actually happen to believe that seeing a 2x leverage in the BDC industry will help drive loan growth which will help drive employment in this country. So I think it's actually a good thing to increase BDC leverage. I also think that banks are doing a handy job of lobbying against that because it's viewed as a threat to banks given the fact that the bulk will start kicking in on some of these banks on the higher leverage transactions. As you said, you have one chance which is leverage transaction and you have a six EBITDA multiple or greater that's high leverage transaction with high reserve requirements. So I think it's too early to call it. I think that I'm personally waiting to see a little shakeout on credit. As some of these deals are being done, what I consider to be marginal underwriting, and as I've been doing this as long as I have, when I see a market like this, the greatest thing that can happen is a nice good credit shakeout and you'll see how that thins the herd quickly on competition.

Great. And then one question on the interest income, early repayments were similar last quarter and this quarter, 3Q and 4Q; yet the interest line went from 36 million down to 28 million. I was kind of surprised to see that decline. Could you talk about anything that was unusual movements either high last quarter or low this quarter, given repayments were…?

Well, I'll let Jessica answer but to answer your question, it's a little bit of both.

Right. That's true. Again, it comes down to the compositions of which portfolio companies are paying off if they happen to be further in their life cycle and then we may have done a material modifications earlier in this life cycle which would have resulted in some fee recognition at the time of the modification. So it's generally driven by the composition of who it is that's paying us off and it just so happens that some of the larger credits that were in our portfolio at a more mature age happened to be what paid us off this quarter.

Okay.

And we are eagerly taking advantage of commercial banks in the space of appetite for asset that's we are diligently continuing to be purging some of the larger credits and marginal credits off our books.

Great. And one last question, and I'll hop back in the queue. On the comp line, obviously another kind of big change quarter-over-quarter, 7 million last quarter versus 1.2 this quarter. Can you just discuss the changes there and what should we think about kind of a normalized rate over a year from quarterly rate?

Sure. Well, as you know, we are – we try to align our compensation with our shareholders and we had a very robust Q3, precipitated by a lot of good events. And then in Q4, albeit it was a good quarter. We had some events that we were anticipating to occur on other IPOs and other items that just so happened as you heard me say earlier fled to Q1, and therefore that compensation will probably be more reflective in Q1 than it will be in Q4. So we tend to align results and outcomes with compensation.

Great. Thank you.

Our next question comes from John Hecht with Stephens.

Good afternoon, guys. Thanks for taking my questions. A little bit of follow-up from Greg's first question and in the context of near-term kind of expectations. What do you expect to see based on competitive trends and the $50 million of reduction in portfolio, what would we expect yield drift to be in the next few months?

Believe it or not, we're not expecting much deal drift – yield drift at all. This is why we're maintaining a higher cash balance. I mean to make it very simple, if we decide to go out and start underwriting on some lower margin, lower yielding credits, for example, we can deploy literally a $100 million of our cash and see our yields compress by about 50 to 60 basis points if we do that, say, at an aggressive rate of even 8% or 9%. And so we have plenty of margin to play with in our overall yield. We have just chosen not to do that for the time being and continue to focus on credit quality and better outcomes for our portfolio. So unlike other players in the marketplace, we don't feel the pressure to simply have assets under management and earnings growth at the risk of credit quality. And for 10 years we haven't done that and I'm not about to start reaching for marginal credit at the cost of – the risk of the balance sheet. And so we are – we don't anticipate any yield compression meaningful in Q1 over Q4, and yields – yield compressions can move or yield changes can move about 15 basis points in the other direction relatively easy, but nothing more than that I'm not anticipating.

Okay. And understanding your solid record with credit management and you don't believe your balance sheet is at risk and considering what the balance sheet is doing, it did look like there was an increase in fair value of non-accrual assets. Is that the one on the watchlist or what's going on there? And then can you give us more details about the watchlist credit you referred to?

Sure. This is one transaction that also had an impact on bonus accruals. This is a transaction that was contemplating a sale of itself. The sale fell through and when that happened, we elevated the credit monitoring of the credit. The company has at this point ample assets, but we are monitoring it very closely. And yes, the non-accrual is concentrated in basically one single credit.

Okay. And then Manuel, last question, I was wondering can you tell us, the last quarter if I recall, there was more of a normalization of a relationship between funding and commitments and it seemed to drift back lower this quarter. Is there any seasonal elements there or is that just something that changes quarter-to-quarter now depending on the portfolio needs?

Yes, great question. For those investors who have been with us for the last 10 years, you may remember that the funding ratio was 75% to 80% of commitments to funding. And it wasn't until – I think it was the spring of 2012 that that became dislocated with drifting as low as almost 45%, 50% funding to commitment ratio. We started seeing a pickup of that again back to a more normalized rate in Q3, back up to about 65%, funding to commitments. And then Q4, you're obviously right, it drifted back down again. So at this point, I don't know what the real consistent pattern is other than there is no more consistent pattern. So that's the only thing I can tell you that we're monitoring it very closely, which is why you'll see an increasing of unfunded commitments of $151 million and keeping cash around $260 million to ensure that we have liquidity if and when that were to take place, for example. But at this point, I don't know what the new norm is other than saying that 55, 65 is probably the right funding commitment ratio to use.

Great, appreciate the color. Thanks.

Our next question comes from Robert Dodd with Raymond James.

Manuel, a question on – kind of coming back to the same issue on competition, I mean you gave color that you expect the back half of 2014 to be a lot more attractive than the first half. I mean, can you give any more color on that? Because obviously if its commercial banks that are driving some of the irrational pricing right now, et cetera, disguised with a lot of deposits that going to stay pretty solvent for a while unless either (indiscernible) step in and tell them to knock it off, or the credit correction happens in the second half of this year. So I mean can you give us any more color on why you're relatively more optimistic about the second half?

I think that in the second half of the year, I anticipate seeing a much more robust origination activity to technology companies and earlier stage companies. I think that we are still going to recycle liquidity taking place as more and more companies get acquired, and more IPOs are completed, the new crop of companies being funded by VCs are going to be much more attractively priced than they are of the existing more maturing companies in the marketplace today. As an example, I mean maybe in your world this is a normal for you, it isn't for me. But when I see WhatsApp being acquired for $19 billion when I see a Dropbox raising money at $10 billion, when I see Palantir claiming valuations north of $9 billion and I can keep on going through a list of companies now that are deemed to be the billion-dollar club, that makes me a little alarmed. I appreciate that we have a lot of assets or investments in those legacy companies, so I appreciate the net asset value increase but at the same time from the overall return, when I see yield compressions and increased higher valuations, it starts squeezing long-term returns and that gives me a little bit of concern. So I want to see a little bit of shakeout. As to the competitive environment, I want to be very clear about this. These competitive entrants into the marketplace whether its BDCs or this other small player looking to go out and try to raise a $100 million, those players have been in the marketplace all along. They're not changing our competitive environment whatsoever. What they are, however, are is much more hungry for assets and willing to do much more marginal underwriting and because of what we believe is going to happen here in the near-term, I think that those players will suffer some significant losses and pull back and they'll also have very limited pools of capital. And I've already disclosed two competitors of ours that basically vacated the space and I anticipate another two or three to occur by the next three to six months that are probably going to be out of business as well.

I appreciate that color. On the portfolio side, can you give us – one of the questions obviously is how much of the $50 million decline at the midpoint, how much of that is expectations that are early repayments, redemptions, et cetera, will remain at the elevated level we've seen the last couple of quarters versus you guys obviously being very disciplined on actually deploying the capital? Are we going to see another very high level of early repayments in Q1?

No, we actually think that the early payoffs are tapering off. Now, there's a phenomena that is totally out of our control which is kind of a positive thing in an odd way and that is sometimes we get early payoffs, we have monster IPOs completed by our companies. And so these are very positive development events that take place. And some more companies are about to go public, I expect some payoffs to take place from that. But that said, I don't think that we're going to be seeing $70 million, $90 million of early payoffs in the next two or three quarters. I think that the more normalized unanticipated early payoffs are probably in more the $20 million to $40 million range for the next quarter or two. And then that's – I'm not thinking much bigger than that.

Got it. And then – just my last question on the IPOs. Of the four that have happened so far this year, have you monetized the warrant positions on those or exited rather – you talked about $20 million to $60 million of gains this year. The talk is that you expect on reading into it, you expect a lot of that activity to happen in the first half. Any color on the four IPOs that have already happened in terms of when those exits have been realized or are still on the books?

Well, the only thing I'll adjust to what you said, I'm not sure I advocated the first half, I think I advocated 2014 of IPO activities. I did, however, say that I expect the first half to see a handful of companies complete their IPOs in the first half. But just to remind everybody, it's very typical that when a company goes public, there's generally an investment banker lockup of 180 days. So if they go public late in Q2, you won't see monetization of that exit until probably early December, October timeframe, if you will. It all depends on when they go out. So let's – we got to decouple the exit event itself, the verb of IPO-ing and the monetization or the harvesting that takes place, 180 days, 190 days later.

Okay, I appreciate that. Thanks a lot, guys.

Our next question comes from Aaron Deer with Sandler O'Neill & Partners. Aaron Deer - Sandler O'Neill & Partners: Hi. Good afternoon, guys.

Hi, Aaron. Aaron Deer - Sandler O'Neill & Partners: Going back to the subject of the kind of competitive environment and outlook for growth, you mentioned that there were two to three competitors out there that you expect to disappear. Is that part of what you calculate in this credit shakeout or is that due to operational difficulties among those companies currently?

There is a great phenomena taking place right now in the marketplace. Small capitalized venture debt lenders are struggling. The venture debt category which is why I walked in the entrance of larger BDCs in the asset class which is well – good underwriters, solid balance sheets, disciplined underwriting, focused on earnings. And so what's going on is you're seeing a very significant consolidation with the private players that exist in the marketplace struggling to gain access to capital. And then some private players now struggling to complete an IPO or trying to raise some money out there, portfolios of some $100 million, $200 million are going to be very difficult in this marketplace when you have well capitalized players like ourselves and the other two BDCs who are in this asset class. So it's going to be – the world is going to be bifurcating itself with those who have financial discipline and strong balance sheets and those who have small weaker balance sheets. Aaron Deer - Sandler O'Neill & Partners: Okay. And then, Jessica, you mentioned the venture pay down expectations. Can you go over those details again?

Sure. Aaron Deer - Sandler O'Neill & Partners: And then is the thoughts there just that because of the excess liquidity, is that where you're looking to pay those down at this time?

If you go to the SBA discussion in our 10-K, you'll find a table that shows our debentures and the interest rates fixed for 10 per each pool. We have about $35 million of debentures which are originated under our first license which has a stated interest rate of about 6.4%. And that's an outlier relative to the rest of the debentures that we have. So we're investigating paying those down. And like I said, as a result of that pay down, we'll probably have a penny hit to earnings as a result of amortizing the unamortized portion of the fees we paid at origination on those debentures. But then of course on a quarterly basis, the savings will be about a penny due to non-incurring interest expense on those debentures.

Also, Aaron, something I think we omitted too and we'll be talking more about this in Q1. We're still studying how we're going to do this. I want to make sure that investors realize that, but one of the things that's missing in this overall narrative is that although you'll see us pay down those debentures, we will actually be filing for re-increasing that with eventually a new license as well. So, we're going to be maintaining 225 million capabilities under the SBA program. This is simply managing our cost of capital and recycling older mature bonds, debentures into more cost effective new ones that will be issued in the future. Aaron Deer - Sandler O'Neill & Partners: Okay. And then just hoping to go to the other side of the balance sheet, what – I know most of the loan book is variable rate. What percentage of those are currently below floors? And by how many basis points on average are – is that part of the loan book below the floor relative to the natural range?

Great question. And unfortunately most of our deals – substantially all of our deals are above the floors. So rates would have to move approximately 50 basis points on our calculation before we see accretion on an EPS basis. Aaron Deer - Sandler O'Neill & Partners: Okay. That's great. Thank you, Manuel.

And also just as a footnote I believe in having good transparency, most of our loans are indexing off of prime. So prime would have to move at least to 375 before we start seeing any material impact. Aaron Deer - Sandler O'Neill & Partners: Got it. Thank you.

Our next question comes from Andrew Kerai with National Securities Corporation.

Yes, hi. Good afternoon. And thank you for taking my questions. I just wanted to add another quick follow-up on the funding side of the balance sheet, if I could. So, are you guys considering potentially doing another securitization maybe sometime towards the end of 2014 to the extent at some point, you start growing your portfolio again as the notes continue to run off?

Well, I want to be very clear, because the tone of this call is something that's disturbing me. We are not at all stopping underwriting. I want to make sure people understand that. We have a very, very active pipeline and I am not at all concerned about achieving our financial performance and earnings expectations that are out there. We simply have decided to simply take our foot generally off the gas pedal in Q1. So the answer to your question, I absolutely do believe that we'll be doing securitization later on in 2014 as we have a cash need, meaning that as we convert our $260 million in earnings asset, you'll see us go back to the capital markets and do another securitization to continue to fuel portfolio growth. So this whole comment that somehow competition and we're not growing our portfolio, I want to make sure I dispel that right away. We are absolutely going to be growing our portfolio. We're absolutely going to be growing earnings and income. Let's not take this thing out of context in Q1 while we're purposely more and more conservative for reasons that we're talking about right now, but I am not at all interested in losing our premier position in the venture debt category that we have and continuing to originate assets. So please do not misinterpret my comments. We are going to be very much defending our venture debt position in growing our loan book.

Sure, sure. Thank you. That's certainly helpful. And I just had a question as well because I noticed in your release; it said that you're looking to distribute about $0.06, about $3.8 million or so of spillover earnings from 2013. I mean it looks like based on kind of the delta between your distributable NII and what you paid out, I mean there's a significantly higher amount of spillover. So I mean is part of the thinking on your end that you're going to use I guess some of those lost carryforwards to offset your roughly about 15 minus of realized gains in 2013?

Yes, I mean you absolutely just nailed a very important issue. There's no question that earnings spillover is $0.06 and if you take in context what I just said, of $20 million to $60 million in realized gains, and if you look at our financials we have about $35 million of tax loss carryforwards, all of that will be absorbed on a GAAP basis, all of that will be absorbed with realized gains growing book value organically. So I'm very optimistic about our organic book value growth and continue to, in essence, absorb all those tax loss carryforwards and allowing even more future potential distribution to shareholders in the form of some of these capital gains that we have.

Sure. Thank you. And then I just – so I just wanted to clarify, if I could, as well, Manuel, so the 20 million to 60 million of warrant gains that you kind of guided to for – to look for in 2014, that just includes the four companies that have – that have already filed for the IPOs as well as the five you guys currently have in the pipeline, correct?

In essence, one missing here, but yes, relatively speaking your comment is within reason, correct.

Okay. So there could be potentially additional upside to that to the extent you have additional portfolio companies filing in the second half of the year that you haven't necessarily seen within your forecast at this time then?

That's correct. But again I want to make sure that the company files and goes public in Q3 because of lockups that naturally (indiscernible) because of banking, we won't be able to harvest those gains until 2015.

Right. No, exactly. And I just wondered, I guess, to kind of get back to some of the comments about kind of the market being frothy and you guys staying disciplined on the underwriting standpoint. So at the end of December on your cash – your cash is roughly about a quarter or so of the total assets. So just for – just for argument sake, let's say the market stays frothy throughout 2014. I mean, at what point if at all, do you kind of step back and say, well, we don't want to sacrifice on credit, but if 30%, 40% of our assets aren't earning any interest at all, maybe it's prudent at some point to maybe take a little bit of yield degradation while maintaining credits. At least you're on a positive carry on the otherwise unvested cash.

Absolutely right, absolutely correct. And that math is quite easy to do. If we decide to do that which at this point we've chosen not to do that, if we choose to do that and it will force our competitors into matching those yields if we originate at lower yields, because we have such a strong base of earning asset, 14.3, 14.7, we can afford to go down and deploy $200 million of capital at much lower yields. And our yield compression in our overall portfolio will be down only 50, 60, 70 basis points at a whole. So we have plenty of room to do that and still maintain like 40% yields overall. We choose not to do that but that option is always in our back pocket.

Sure. And maybe wouldn't an alternative to be sort of work maybe some of the later stage more established credits where those are a bit more liquid to where – to the extent that the market turns more favorably, you can easily flip those loans and deploy them into higher yielding assets?

There's always a balance between maturity of the loan and liquidity exits of the underlying derivatives and warrants associated with the transaction, and also embedded as credit quality. All those things we take into account at all times. But again, you're absolutely right. We have chosen not to do that as of yet. If we so choose to do that, we're more than happy to deploy $200 million of capital at 8%, 9%, 10% and the impact in the overall yield is 50, 60, 70 basis points. And so we are easily able to do that and still be in a very strong overall yield position by generating tremendous earning assets.

Sure. Fair enough. Thank you for taking my questions, guys.

Our next question comes from Jon Bock with Wells Fargo Securities.

Hi, Jon.

Hi, guys. Thank you for taking my questions. One real quick one first, Manuel, as we start. I know you mentioned that there were certain stages of companies that you were choosing to maybe deemphasize at this period in the technology or credit cycle. And so could you maybe give us some color on what those stages are as they relate to early, mid, late stage growth, et cetera, where are you starting to see on a venture stage the most valuation bubble or shall we say the least compelling valuations in your view?

So one of the things that no one has asked me yet is what really is our competition? And I would like to surprise everybody. Our biggest competition is none of the players that you just asked me about. Our biggest competition is actually the venture capitalist wanting to put equities in these companies to take advantage of that last round before a liquidity event. We're losing more term sheets to equity valuations that are so inflated that I got to be honest; these companies are doing the right thing. They should take the equity to a higher valuation because they're able to establish a new valuation before they go public. And so as much as from a financial point of view they should use debt to preserve equity ownership, there's a strategic importance for them to actually use equity to set a new value. And so our largest competitor, believe it or not, is not really all these other players you're talking about. It's really the equity guys chasing these valuations. Now that said, you're seeing still a fairly robust increase in valuation in technology companies and early-stage social media companies and SaaS-type companies. We are purposely – we are the most under invested in technology that we've been in the history of Hercules. However, I believe that that tide will change in the second half of 2014 as all these companies finally get acquired, you'll start seeing a whole new birth of new technology companies being started that have new business models and a much more attractive valuation to be in. At which point, we will wade back in with some new product offerings that we will have to offer new plans of services to earlier stage companies that we don't have today, to really start grabbing some of that market share and some of that void in our portfolio today. So, technology is something where we purposely are under investing today. It is the easiest transaction to originate to. It doesn't require a lot of sophistication when you're first doing early stage deals to the expertise needed in energy technology or life sciences investing, for example.

No, I appreciate that. And an additional question, and I'm just trying to understand a little bit more, so to the extent that venture capitalists are getting more competitive, equity is getting more competitive in the space in general, I would imagine that yields would be a bit down, and yet you talked about kind of looking forward that yields either are to likely remain flat to perhaps up. So walk me through the disconnect at why that's the case?

So what happens is that eventually, the entrepreneurs start realizing that taking on more and more equity is eluded to them and it's a cycle that I've seen over 25 years. And what happens is, in a market where IPOs become so hot in demand, the entrepreneurs or the founders have much more power and control on saying what the capitalization of their company should look like. So early stage investors and entrepreneurs themselves want to preserve as much ownership in their company as possible. Suddenly debt starts becoming a much more tactical use and they want to preserve more ownership. So debt demand is going up. And that starts allowing more and more debt providers to provide capital. However, as the market for debt gets more competitive, the smaller capitalized players, which is exactly what's happening today, the smaller weaker capitalized players, $100 million, $200 fund size folks when they end up using up all the available capital, what happens is they're now out of the market and the remaining players will start seeing yields start lifting up because of the scarcity of capital. We are now concentrating on three or four large players providing capital in the marketplace.

All right, got it. That makes total sense. Thank you so much for taking my questions.

I would now like to turn the conference back over to Manuel Henriquez for closing remarks.

Well, thank you everybody for being on the call today. Great set of questions. I have to tell you that I'm still not happy with the format of the earnings call, so I'm going to tweak it again next quarter. I want to make it more sesynced [ph] and make it much more Q&A for investors and our analysts to be able to ask questions about. If you would like to arrange management meetings, please feel free to contact our Investor Relations department or contact Hercules directly. With that, operator, thank you for your time and thank you shareholders.