TriplePoint Venture Growth BDC Corp. (NYSE:TPVG) Q3 2023 Earnings Call Transcript

Unidentified Analyst: Helpful. And then just a follow-up, does a higher for longer interest rate environment impact how you’re thinking about just managing the portfolio broadly for the long term? And then does this at all impact the sectors you ultimately will invest into over time?

Sajal Srivastava: Interesting question. I would say as we look to higher yields, right, I do think from our perspective, right, there is a cap on the total return that we can make on an individual loan, right? If we’re charging a certain high level or 20% return on the loan from the debt component, I think equity investors will take a second look and say, “My gosh, that’s approaching equity-like returns, particularly when you factor in the warrant”. And so I — maybe I’ll just provide that financing instead of this company taking venture debt, and then it makes you think about the companies who don’t raise equity or who sponsors don’t say, forget it, we’ll do it instead. And then it means are you getting adversely selected because the new companies that you’re talking to with these really high rates are ones whose investors don’t want to give them more capital.

That’s why our approach has been to hold yields generally in the same level, but take on what we think are companies with stronger credit profiles, as Jim mentioned, lending to companies that have recently raised rounds of equity financing. We have seen the reset in their valuations. So from an LTV perspective, we feel stronger in terms of using that as a calculation and then have lower cash burn rates, longer cash runway. So I think that’s our perspective on that. But I think on the other hand, we do think of the impact of interest expense on their cash flow. And so that obviously impacts burn rates. And so it’s something to be mindful of. But again, the majority of our portfolio companies are focused to get to profitability, but they aren’t necessarily there yet today.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jim for any closing remarks. Please go ahead.

James Labe: Okay. Thank you. And as always, I’d like to thank everyone for listening and participating in today’s call. I hope you found it helpful. We look forward to talking with you all again next quarter. Thanks, again. Have a nice day. Bye-bye.

Operator: The conference call has now concluded. Thank you for attending today’s presentation. You may all now disconnect.