GSV Capital's CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug. 7.13 | About: GSV Capital (GSVC)


Q2 2013 Earnings Call

August 7, 2013 05:00 pm ET


Michael Moe – Chief Executive Officer & Chief Investment Officer

Steve Bard – Chief Financial Officer

Dave Crowder – Executive Vice President

Kristen McNally – Financial Profiles, Inc. (NYSE:IR)


Jon Hickman – Ladenburg Thalmann

Larry Deraney – Raymond James

Edward Woo – Ascendiant Capital


Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GSV Capital’s Q2 2013 Earnings Call. (Operator instructions.) This conference is being recorded today, August 7, 2013. I would now like to turn the conference over to our host, Kristen McNally, Financial Profiles. Please go ahead.

Kristen McNally

Thank you. Thank you for joining us for today’s call. I’m joined today by Michael Moe, GSV’s Founder and CEO; Steve Bard, the company’s Chief Financial Officer; and Dave Crowder, Executive Vice President. Please note that a slide presentation that corresponds to today’s prepared remarks by management is available on the company’s website at under Investors, Events & Presentations.

Today’s call is being recorded and webcast on Replay information is included in our press release that was issued today. This call is the property of GSV Capital Corp and the unauthorized rebroadcast of this call in any form is strictly prohibited.

I’d also like to call your attention to customary disclosure in our press release today regarding forward-looking information. Statements made in today’s conference call and webcast may constitute forward-looking statements which relate to future events or future performance or financial condition. These statements are not guarantees of our future performance, condition or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward-looking statement as a result of a number of factors including those described from time to time in the company’s filings with the SEC. Management does not undertake to update such forward-looking statements unless required to do so by law. To obtain copies of GSV Capital’s latest SEC filings please visit the website at

Now I would like to turn the call over to Michael Moe. Michael?

Michael Moe

Thanks, Kristen, and good afternoon. I’m going to begin today with a review of our portfolio as of June 30, 2013, and recent key developments at some of our companies. Then Steve Bard will provide a brief financial overview and we’ll take your questions. Our remarks will follow the slide presentation available on the Investors section of our website at

Let’s start with Slide 3. Net assets totaled $248.6 million or $12.87 per share as of June 30, 2013. This is up $0.18 per share from our NAV of $12.69 per common share at the end of Q1. Our top ten investments represented 62.9% of net asset value and the three top investments represented 30.5% of net asset value as of June 30.

Twitter remains our largest position by a wide margin, representing 15% of the portfolio. Given the strong fundamentals of the social mobile market and the fact that Twitter is a native mobile company we feel very confident in the value that is being created in this position. We’ll have more to say on that in a little bit.

As a whole, the hyper growth characteristics of our portfolio are one of the most attractive features of GSV Capital. Our estimate is of our top ten positions, seven are growing year-over-year from 2012 to 2013 at 100% or greater. Elsewhere in the portfolio, companies like Dataminr, CorpU, and NestGSV all successfully closed up rounds during Q2.

Additionally Grockit sold its test prep technology to Kaplan, which by the way used to be called Kaplan which was part of The Washington Post, now it’s The Washington Post which is Kaplan. But that aside, what we’re excited about that is it’s providing additional capital to fuel Grockit’s new Learnist business which is experiencing tremendous growth – think Pinterest for education.

Now please turn to Slide 4. A question that we are often asked is how do we calculate the NAV on a quarterly basis, so I’d like to spend a few moments on this, how we determine NAV. First what we do is we have an internal group that is reviewing each portfolio position and is going through a process that we’ve determined to calculate that fair value. In addition we have an outside valuation firm going through each position, and that outside valuation firm is WTAS, one of the largest independent valuation firms in the world. And they go through each position.

And then when we see that there are differences that are enough to have a discussion, we have that conversation. And then our Board has a Valuation Committee which looks at all the different positions and also looks at where there could be difference between the outside valuation firm and our internal valuation; and then makes a decision on what they believe is the appropriate valuation. Then our auditors, Grant Thornton, looks at the way that the process went and again, ultimately signs off on the valuation that goes through a very detailed, rigorous, systematic process.

So let’s apply this to a few of our companies. We currently value our 1.8 million share position at Twitter at $19.80 per share. This creates a total value of about $37.6 million. Our cost basis for Twitter is $17.21 per share – this is a slight markup of Twitter shares which is based on relevant information that we process in our valuation work and trades where the terms are known in terms of the price and the size and so forth. Our objective is to reflect the most appropriate value based upon that information. This isn’t a perfect science by any stretch of the imagination but we put as much rigor and factual analysis as possible – and the goal is again to get to the correct value.

But just as a reference point there’s another publicly traded fund which has Twitter as a position, which carries their Twitter position at $23.00 a share. Last quarter we were slightly higher than where their mark was, but if we carried our shares at that value – just to put some math behind it – it would result in an additional $6.1 million markup of that position and would ultimately carry forward into our NAV which would result in a little over $0.30.

Look at Facebook which closed June 30th at $24.88 – that’s the price that obviously NAV is calculated from. That’s a public security so that goes right into the NAV calculation. So subsequent to our NAV pricing for the quarter obviously Facebook reported huge Q2 results which resulted in their shares lifting over 55% to today $38.87. We keep the mark in the portfolio is back again at the end of Q2, June 30th.

Also we look at smart grid provider Silver Spring Networks which IPO priced at $17.00, now trading at $30.27 who saw again a strong Q2. As of June 30th we held our Silver Spring position at $23.19. The price there reflects a discount to what it was actually trading at on June 30th because we’re still under lockup until September. We own 102,000 shares of Silver Spring.

And then Control4 priced at $16.00 on Friday which is a position that we own and traded up over 25% on its first day. There was a 5.2 to 1 pre IPO reverse split on July 22nd, so our split adjusted cost price was $8.79. So we had marked the position to $9.62 at the end of Q2, and we own 782,821 shares of Control4 which closed today over $21.00 a share. So we owned about $7.6 million of NAV.

Today Control4 trades over a $16 million position for us which is over $0.40 per share if that carried through in the NAV. So I just wanted to put some framework and perspective about both how we do our process and how the positions in our portfolio are reflected.

If you turn to Slide 5 about equities in the IPO market, not surprisingly given NASDAQ’s rise of approximately 21% year-to-date and the good performance of many new issues the IPO market is robust – the best we’ve seen in over five years. Overall the pricing has been good with half the IPOs pricing within the range and 21% pricing above the filing range. The average first day pop is 14% with the overall performance showing a 20% appreciation for new issues compared with a minus 10% last year.

Year-to-date there’s 161 IPOs that have priced which is up 35% from the same period last year, and there’s 136 IPO filings which is up 56% from a year ago. Growth stocks are performing well and looking ahead we are very bullish on the liquidity prospects for many of our highest conviction and largest positions.

Next I’d like to profile one of our newest companies we’ve added to our portfolio; please turn to Slide 6. Coursera is a $10 million investment that we led the investment as part of a $43 million financing that included amongst us the World Bank; Laureate, which is one of the world’s largest universities; Yuri Milner. Also we had University of Pennsylvania, Caltech, and also included existing investors NEA and Kleiner Perkins. And now Coursera is one of our top ten positions in terms of investment size.

Coursera is truly a disruptive leader and core to our education technology theme. Coursera is a pioneer and leader of the emerging MOOC trend, which stands for massive open online courses. Coursera has partnered with 84 of the leading universities around the world including Stanford, Columbia, Princeton, and the University of Pennsylvania to offer courses online for anyone to take for free. This has been incredibly disruptive to this $4.5 trillion industry.

Coursera is right at the cross-section of three über trends that we’ve highlighted in a past call which is part of why we’re so bullish on this. One is a trend that we call Kaizen EDU. The Japanese terminology Kaizen – “continuous improvement” and education is about continuous learning. Because of the knowledge economy we’re in you’re no longer going to fill up your knowledge tank to age 25 and drive off through life. You’re going to continually need to replenish your knowledge to stay relevant in the job you’re in or get a better job.

The second trend that we see is knowledge as a currency. It’s about what you know, not where you go; it’s about knowledge, not college. Again, online learning, access to the world’s best professors, best universities and being able to show what you know we think is core and consistent with a theme that we are very bullish on. And a third is return on education or ROE – being able to show strong learner outcomes, at the same time lowering costs and increasing access. Obviously free is a pretty compelling lowering-the-cost type of proposition.

So Coursera has the potential to democratize education as we know it, essentially giving access to the best universities in the world to everyone. It’s transformative we believe and it’s disruptive approach could easily attract hundreds of millions of learners. It’s already attracted over 4 million and we believe it has the potential ultimately to generate billions and billions of dollars of revenue, and we believe billions of valuation.

We believe Coursera will be the leading platform for online learning, and think of basically the Facebook of learning with a massive user base and significant share of the higher education, the continuous learning market, and online AP just to name some examples.

To provide some perspective on why we think this is such a big deal, and just to put some reference points to Coursera, in the first year of their existence they had 3.0 million monthly active users or students in the first year – and you compare that to 1.5 million monthly active users of Facebook right after their first twelve months of launch. We think it just shows the kind of growth and what these guys are tapping into.

Courses are taught by the world’s top professors, rock star professors from 84 of the world’s leading universities. There’s over 400 courses that are available today and this investment I think is a great example of our access and our opportunity to participate in truly the world’s most exceptional opportunities. This is a direct result of I think the reputation and the quality of the portfolio that we’ve been able to create to date.

In addition to Coursera we’ve also invested in Jawbone and ODesk during Q2. Jawbone as you may know is a developer of wearable technology including the UP wristband; and ODesk is an online global job marketplace. These are smaller positions for us but still we think we have tremendous conviction and believe there’s tremendous potential. And as we’ve demonstrated in the past, a key part of our playbook is we get a position in a company that we think has tremendous potential. We get to be on the cap table. We get to know the people involved and we add significantly to our position.

Frankly, that’s how we created our Twitter position. Twitter, the $37 million and change that we own was comprised of 17 different transactions, and that’s a situation that we’ve done many times to date. Please turn to Slide 7.

Here you can see the portfolio mix across the five growth themes that we outlined in the past as of June 30th – social mobile consists of 22% of our invested capital, cloud computing and big data is 26%, internet commerce is 7%, green technology is 11%, and education technology is 34%.

Last quarter I said that each quarter going forward we’re going to highlight a key area of our portfolio to keep you apprised of how these companies are changing the playing field and making headlines. Today I’m going to talk about social mobile and discuss some of these leaders that are delivering what we think will be tremendous return potential for our shareholders. Please turn to Slide 8.

As we look at the social mobile theme, what is core is that people are made to be social. We’re happier, we’re healthier, we’re more productive when we’re connected to people we like and share something in common with. And people are made to move. We’re happier, healthier and more productive when we’re out and about rather than being tethered to a desk or couch.

Well accordingly the convergence of social media and mobile computing is a natural force that we see and the consequences are being plaid out amongst the businesses that tap into this social mobile megatrend. Growth in smartphones is one fundamental of the mobile wave, and last quarter mobile smartphone shipments grew 47% to 230 million units globally.

There are now over 1.5 billion smartphones operating, still over 5.0 billion cell phones still out there – and this is up from 1.0 billion just six months ago. Tablet unit growth is also growing very quickly with the crossover occurring just three years after the introduction of iPad. Today about 25% of US adults have a tablet up from zero three years ago.

In Q2 we saw mobile having both positive consequences for companies that benefit from mobile and negative impact for companies who are not naturally mobile. Facebook’s epic quarter was driven almost exclusively by its transition to mobile, with 41% of its $1.8 billion in the quarter coming from mobile versus 0% of its revenue coming from mobile in Q2 2012. This has important implications for other social mobile leaders in our portfolio – obviously Twitter.

Let’s look at a few other of GSV’s social mobile portfolio companies more closely. Obviously Facebook remains an important position for us. Facebook is the communication and collaboration platform of the future. It has 700 million people using it daily and most of them from a mobile device. We learned last week that Facebook will be looking to leverage its 88 million to 100 million audience during prime time television hours to do television-like ads.

Also it’s going to essentially take interest in emerging game operators and give them the tools and the platform to reach the 1.15 billion people in the network. Again, we think that Facebook is just scratching the surface of where they’ll be able to take this very robust platform.

Twitter, again, a position that is 15% of the portfolio. When we made our investment in Twitter they had 175 million users. Today they have 550 million registered users; there’s 555 million tweets per day. There’s 11 new users per second.

In addition, besides just basically the explosion of traffic and opportunities that Twitter represents, the company acquired a startup called Vine that was just started in January of 2013 which is essentially the video version of Twitter. Today, Vine has 13 million users and it’s growing very, very quickly. So again, we think that we’re very pleased with how Twitter’s performing from a fundamental standing and are very excited about our outsized position in Twitter.

The second company that we are an investor in that plays into this social mobile theme is called Dataminr. We were actually introduced to Dataminr through Twitter. In fact, Dick Costolo, the CEO from Twitter said that Dataminr was his favorite startup in the Twitter ecosystem, and the reason for this is that Dataminr taps into this enormous traffic – essentially the fire hose from Twitter.

And from that different clients are able to use this real time information in profound ways, whether you’re a news media outlet which Dataminr let people know twenty minutes before the major media about Osama Bin Laden’s death; or whether it’s security traders again given real-time advantage in terms of information; or security people. And there’s all sorts of applications.

The company’s growing quickly. Again, we made an early stage investment in Dataminr last year and then we recently participated in the round that was led by Venrock and IVP which was a nice up round and where they raised about $30 million. And again, we think it’s extremely exciting technology and potential, and certainly it’s experiencing substantial growth.

And the last social mobile company that I’ll just reference is Spotify, which is the leader in social music. Music is inherently social and Spotify is experiencing both explosive growth, but I think from our standpoint even more compelling a real connection with their members that is represented by very low churn and real passion about the Spotify product.

When we made the investment in Spotify they had 13.0 million users and 2.5 million subscribers. Today there’s 24 million users, 6 million subscribers – so 25% of their users are actually paying roughly $10 a month. And again, because the Spotify user is typically a pretty young person, doesn’t want to give it up. I’ve got two college-aged daughters. They’d rather have their electricity turned off than their Spotify account, and I think that kind of commitment passion creates both real leverage in terms of the recurring nature of their revenue but also how it spreads to other friends and so forth.

In the US which is just two years old for Spotify, they’ve streamed over 60 billion songs which is pretty remarkable. The company’s already very sizable and we think it again has tremendous growth ahead of it.

So that was a quick tour around some of our key social mobile holdings, and again, when we look at the overall portfolio we’re very pleased with the fundamentals that these companies are exhibiting. Overall the revenue growth year-over-year for our entire portfolio is over 80% and the one thing that we believe with great confidence is that over time the stock price reflects the fundamentals of the portfolio.

And with that I’m going to turn it over to our CFO Steve Bard to make some comments.

Steve Bard

Thank you, Michael. Now I’d like to direct everybody’s attention to Slide 11.

As Michael indicated, net assets as of June 30, 2013, were $248.6 million. That included $4.6 million of cash, $8.7 million of Facebook stock, and $2.4 million of Silver Spring Networks stock which by the way is under lockup through September 8th. Again, Facebook and Silver Spring are two stocks that have moved up meaningfully since June 30th, but as Michael mentioned we’re of course holding them on our books based upon where they closed out the quarter.

Our net assets of $248.6 million on June 30th translates to a net asset value per share of $12.87. That represents an increase of $3.5 million or $0.18 per share over the quarter ended March 31st. Now let’s look at the attribution of that increase in NAV during the quarter.

First, operating expenses or net investment loss was $2.4 million or $0.12 per share. That figure includes management fees, administrative fees, director fees, legal, audit fees, as well as insurance and investor relations expenses. On an annualized basis that trend equates to an expense ratio of 3.9% of net asset value and it compares to a 4.2% expense ratio for the quarter ended March 31st.

We’re pleased with the downward trend in our expense ratio and 3.9% happens to equal the average expense ratio for the universe of 42 business development companies researched by Keefe, Bruyette & Woods. That said, we don’t want to be average. We want to be better than average and expenses will continue to be an area of focus for us.

Next let’s turn our attention to our realized losses of $6.3 million or $0.33 per share. As you may recall we’ve been holding our investments in Serious Energy and Top Hat at zero. This quarter unfortunately we’ve also written off our $1.4 million investment in AltEgo. Since we believe that these impairments to our investments are permanent we are now realizing those losses.

Finally and on a more upbeat note, the third component of our asset value is the net change in unrealized depreciation which increased by $12.2 million or $0.63 per share this quarter. As Michael mentioned, the largest contributors to that increase in unrealized depreciation were Twitter, Palantir and Dataminr where we concluded markups as of June 30th.

In conclusion, when we combine operating expenses, realized losses and unrealized appreciation GSVC has experienced an increase in net asset value per share of $0.18, taking NAV to $12.87 per share for the quarter ended June 30th. And with that I’ll turn it back to you, Michael.

Michael Moe

Great. Again, we just want to reiterate that one, we appreciate your interest in GSVC. We do believe that we’re in front of something that is very powerful and we think has tremendous potential for our shareholders by investing in the fastest growing, most dynamic public companies in the world. That’s our focus, that’s our objective. We work very hard at identifying and investing in those companies at a good price and we will continue to focus on how we can deliver shareholder value.

Just to give an update, one of the things that we promised our shareholders the last few quarters is that we were going to turn up the volume in terms of letting people know what was underneath the hood in terms of the investments that we’re making. We’ve had a number of good meetings with investors as well as presented at some conferences, and having good conversations with analysts that have an interest in GSV Capital’s story.

We will be presenting next week on Tuesday at Oppenheimer’s 16th Annual Technology, Internet and Communications Conference in Boston. You can tune into our presentation via webcast on our website. While you’re there you can also check out the news feed for portfolio companies for the latest coverage of corporate announcements.

We’re going to be also gearing up to provide more video content, more information to allow our shareholders to have better input, better insight in terms of our portfolio to allow them to have appreciation for what the fundamentals and dynamics of the portfolio are.

So with that I want to again thank you for your attention. I’ll turn it over to the Operator and we can start our question-and-answer session. Operator?

Question-and-Answer Session


Thank you, sir. We will now begin the question-and-answer session. (Operator instructions.) And our first question comes from the line of Jon Hickman with Ladenburg. Please go ahead.

Jon Hickman – Ladenburg Thalmann

Hi Mike, Steve. Thanks for taking my questions. Could you, Steve, talk to me a little bit about you were holding those assets you mentioned at zero already, and then you’re not double booking the loss, are you? I mean you’d already taken an unrealized loss.

Steve Bard

No. The three positions which we realized losses on this quarter, two of them had been held on the books at zero – Serious and Top Hat – and we are simply realizing those losses, so converting those from unrealized losses to realized losses. And then we did write off Alt Ego during the quarter.

Jon Hickman – Ladenburg Thalmann

So when you change it from an unrealized loss to a realized loss, I mean you’d already taken a… I mean isn’t there a line for unrealized losses here on your income statement?

Steve Bard

There is. We actually have a net realized deprecation but we did convert. Last quarter those had been held on the books as unrealized losses and we converted those to realized losses as of June 30th.

Jon Hickman – Ladenburg Thalmann

But it’s not a double.

Steve Bard

It’s not a double booking if that’s what you’re asking.

Jon Hickman – Ladenburg Thalmann

Okay. So my real question is now that you have the potential here in the next little while of actually realizing, booking some gains if you choose to do so, what’s your strategy or what’s your thought process on paying out gains to the shareholders?

Michael Moe

What are commitment is is to pay out 90% of the gains offset against the losses, and that’s what we’ve committed to do – that’s what we’ve articulated we would do. And you know, again what we’re excited about frankly is, as everybody who knows about private investing, the lemons ripen faster. And what we’re looking at is a portfolio that is evolving in a way that we think will produce very nice distributions here over the next twelve to 18 months for sure. And that’s good.

That’s a good thing and what’s nice about this is we’ve got kind of it’s not just something all at once – we’ve got just a nice backlog of companies that we project depending on the markets staying open and so forth that we’re going to have a series of what we think will be good events here for kind of a nice [drumbeat].

Jon Hickman – Ladenburg Thalmann

So as you book gains you’re going to net those against your losses, and then whatever’s left over you’ll pay out 90%.

Michael Moe


Jon Hickman – Ladenburg Thalmann

Okay. So Steve, can you tell us what the total net loss is right now?

Steve Bard

Sure. The net realized losses cumulative are $9.7 million.

Jon Hickman – Ladenburg Thalmann

So that’s the hurdle?

Steve Bard

That’s correct.

Michael Moe

Just to give you a reference point, and again because I do think it’s important. So if you look at our Control4 position, and again, we’ll be under lockup for six months. We own that at about a $7 million total investment. Today that position trading over $21 is worth over $16 million. So basically that by itself kind of gets you there.


Thank you. And our next question comes from the line of Larry Deraney with Raymond James. Please go ahead.

Larry Deraney – Raymond James

Hey Michael. I’ve got a four-part question but it’s real simple things you can address. Cash on hand, $4 million – it seems a little low. Does that alarm you going forward? You’ve put together a beautiful portfolio and I wanted to ask you about Facebook, if you still own all the shares as of today and will it be added to the S&P 500? Is it eligible? You would think at $70 billion it would be. Twitter, worth about $10 billion and Facebook $70 billion – it seems like that would be a bigger markup for Twitter. And the final question is, is Palantir similar to Sourcefire in the cyber security area? Thanks, Michael.

Michael Moe

Thanks, Larry. All good questions so let me kind of address them one-by-one. In terms of the cash on hand we made a conscious decision, both looking at what our cash needs were as well as what we saw as liquidity for us both in terms of publicly traded securities that we own, future realizations – because as we said, we see a pretty big backlog of companies that we believe will be public and liquid here in the not-so-distant future. And looking at other sources of liquidity for us we felt like what kind of prompted us to take it to a position that is lower than what we’ve kind of used as a benchmark was the opportunity to invest in Coursera.

We made a very calculated decision that said we thought our shareholders would be far better off with us taking our cash position to something that is fine but lower than we’ve had historically because we think there’s such gigantic potential in Coursera. And we felt like making that $10 million investment, it wasn’t even much of a debate just because of what we think this can do for our shareholders.

The one thing that people should have an appreciation for, just because it’s important, is as we look at sources of capital for us, cash for us – we will not be issuing equity. We will not be doing an equity offering even at current share prices. The stock has had a nice move recently but it’s still at in our view a pretty significant discount both NAV and then you add some other things that we discussed on this call. We’re not interested in that at all. We’re looking to do smart things that are accretive for our shareholders, and just to be very clear that’s not something that we would do now at this price.

But we do feel we have multiple sources of cash to let us continue to do what we’re doing but we did take the cash down below kind of our target for a very specific reason, and that was for this Coursera opportunity.

Secondly, as it relates to Facebook we made a very conscious decision that the shares that were selling at what we thought was significantly under value, and we weren’t looking… As much as we’ve said this to our shareholders and we’ve said it consistently, we know that we’re not being paid to manage a portfolio of public companies. We also as a fiduciary aren’t looking to sell shares that we think are significantly undervalued. Facebook obviously has had a huge move and we think by the way the fundamentals for Facebook are outstanding as we look ahead. And I think what you’ll see us do is to execute on kind of smart portfolio management as it relates to Facebook in the short to intermediate term just because we think that’s the appropriate thing to do with the strategy that we have.

As it relates to your third question about Twitter markup, again, what we’re trying to do –and we want to be very transparent with our shareholders. We want to have the confidence by our shareholders that we’re doing the right thing and we’re reflecting appropriate prices and the confidence of kind of what’s underneath the hood. Yet I will say that we certainly don’t want to be accused of aggressively marking something up. And I just say that because our reputation is really important for us obviously and it’s important that we do everything to get what we call kind of the realistic value.

That all said, clearly when you look at both what’s going on with Twitter as a business fundamentally, what’s going on in the marketplace – I made the reference to the other publicly traded fund which owns Twitter which has got it marked up $3.00 above us, and certainly I’m sure they have a very appropriate reason for doing that. We just think where we’ve got it is the correct place to be right now, but we certainly hope as Twitter goes public and perhaps some other trades get visible that there’s good upside with our Twitter position. I mean if the fundamentals remain the way they are we feel extremely good an fortunate that our largest position by far is Twitter.

And the fourth question as it relates to Sourcefire, the answer is the security space broadly speaking is what both Palantir and Sourcefire play into. Clearly Sourcefire’s a company that I’ve been familiar with for a number of years and that was a great outcome for it, and while you could say that they’re of the same security family I think it’s fair to say that Palantir, what they’re doing is… Palantir wouldn’t say that Sourcefire would be better, nor would Sourcefire say Palantir, but this megatrend of security, of needing all the data and all the commerce that is going on over the internet and how you create security around that – there’s going to be a number of great winners that are created in that space.

We’re certainly looking for more. Sourcefire was great. Palantir we didn’t talk about but their company is our second-largest position and we feel great that we have a meaningful position in that company. So thank you.

Next question, please.


And our next question comes from the line of Edward Woo of Ascendiant Capital. Please go ahead.

Edward Woo – Ascendiant Capital

Yeah, thank you. You mentioned that the IPO market is relatively strong right now. Do you see that continuing and do you think that that’s going to accelerate potential IPOs or liquidity events for your portfolio companies?

Michael Moe

Thanks, Edward. Yeah, as we referenced in our remarks, just looking at the filings – it’s up significantly year-over-year. And what we’ve historically seen, and there’s a bunch of factors at work here but the greatest leading indicator of future IPOs is how is the overall market doing and specifically how’s NASDAQ doing? And so typically what you see is as private company executives, as venture capitalists are kind of evaluating whether it makes sense to go out in the market or not they look and see what’s the overall health of the market and what other companies are going out and doing.

And what they’re seeing, and which we should have probably got more specific – when you look at generally speaking the companies that are coming out, they’re pricing well and they’re trading well. Obviously NASDAQ’s up 21% year-to-date. Moreover I think growth investors, people that are investing in fast-growing emerging companies, many that I speak to are even having a better year than that. And so that’s all kind of an environment that encourages private companies to go out. That, coupled with the fact that you really have had a very modest IPO environment for a number of years – that creates a pretty substantial backlog.

And so with this quiet filing you don’t see all the activity that’s going on, but I think what you will see here over the next six to twelve months is some really exciting companies coming public. We’re really fortunate to own a number of them. The Barron’s article over the weekend was accurate or was yeah, I think was a kind of good prospectus in terms of what’s going on, what that’s likely to lead to. We were lucky that it confirmed a little bit, they referenced a number of our companies, some that we didn’t talk about on this call like SugarCRM. So yes, I think that is something that’s going to be what happens and that should be beneficial for us.

So what happens, I mean the pendulum is definitely swinging the right way and what historically happens is when it gets carried too far something will happen and will carry it back. But right now for the foreseeable future I think you see the pendulum going the right way. Thank you, Edward.

Edward Woo – Ascendiant Capital

Thank you.


(Operator instructions.) And I’m showing no further questions at this time. Please continue with any closing remarks.

Michael Moe

Yeah, thank you. Again we very much appreciate people tuning in this afternoon. We’ll continue to work very hard to demonstrate to you that we have a business that is rewarding to support and we see the opportunities in front of us to be significant. We’re continuing to focus on them and deliver returns to our shareholders. So thank you very much, have a great rest of the afternoon and we look forward to talking to you shortly. Bye.

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