IPO Preview: TriplePoint Venture Growth BDC

Mar. 6.14 | About: TriplePoint Venture (TPVG)


TPVG is a newly-formed business development corporation.

TPVG plans on paying 8.5% with warrant kickers from high-tech companies.

Probably a good investment for patient investors for the income portion of their portfolio.

Based in Menlo Park, CA, (NYSE:TPVG) scheduled a $125 million IPO on the NYSE with a market capitalization of $129 million at a price range midpoint of $15 for Thursday, March 6, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: Morgan Stanley, Wells Fargo Securities, Goldman Sachs, Credit Suisse, UBS Investment Bank

Co-Managers: None

Ed of lockup (180 days): Tuesday, September 2, 2014.


TPVG is a business development corp (BDC) that focuses on venture growth stage companies in technology, life sciences and other high-growth industries.

The primary focus is on companies that have received investment capital from the Sponsor's select group of leading, well-known venture capital investors.

Compensation is mostly in cash with warrant kickers as well.

TPVG expects to pay cash quarterly dividends at an average annual rate of 8.5% based on the price range midpoint of $15.

The weighted average yield of TPVG's expected Initial Portfolio is 14.3%, of which approximately 11.1% is current cash interest, with a weighted average remaining term of 3.1 years. Also see 'Management Fees' below.



There will be a 4.3% per share dilution to IPO shareholders.

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TriplePoint Venture Growth (TPVG)







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Almost all business development corporation IPOs initially trade down. TPVG is interesting, see below, but we expect it to trade down a little initially.

The rating therefore is neutral on the IPO.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:

Business Development Corp

TPVG is an externally managed, closed-end, non-diversified management investment company that intends to elect to be regulated as a business development company, or "BDC," under the Investment Company Act of 1940, as amended, or the "1940 Act."

TPVG was formed to expand the venture growth stage business segment of TriplePoint Capital LLC's (the Sponsor) investment platform and will be the primary vehicle through which its Sponsor focuses its venture growth stage business.

Investment Objective

TPVG's investment objective is to maximize its total return to stockholders primarily in the form of current income and, to a lesser extent, capital appreciation by primarily lending with warrants to venture growth stage companies focused in technology, life sciences and other high-growth industries which are backed by TPVG's Sponsor's select group of leading venture capital investors.

Market Opportunity

TPVG believes that the current and near-term market environment is favorable to pursue an investment strategy focused primarily in venture growth stage companies in technology, life sciences and other high-growth industries, with a primary focus on companies that have received investment capital from the Sponsor's select group of leading venture capital investors.

Initial Portfolio
Shortly prior to the time TPVG elects to be regulated as a BDC, TPVG intends to acquire its Initial Portfolio for approximately $102.5 million in cash based on a February 3, 2014 valuation.

The weighted average yield of TPVG's expected Initial Portfolio is 14.3%, of which approximately 11.1% is current cash interest, with a weighted average remaining term of 3.1 years

Investment Pipeline
As part of the acquisition of the Initial Portfolio, TPVG expects to acquire certain of the Sponsor's unfunded obligations to venture growth stage companies.

These funding obligations include 13 borrowers with remaining funding obligations of approximately $153.3 million. TPVG may also receive additional warrants when these funding obligations are drawn.

Dividend Policy
TPVG expects to pay quarterly dividends at an annual rate of 8.5% based on the price range midpoint of $15.

TPVG to authorize a quarterly distribution of $0.30 to $0.34 per share for the quarterly period ending March 31, 2014, which amount will be proportionately reduced to reflect the number of days remaining in the quarter following completion of this offering.

This distribution is contingent upon the completion of this offering and the acquisition of TPVG's Initial Portfolio during the first calendar quarter of 2014, and the actual amount of the distribution, if any, is subject to authorization by TPVG's board of directors and there is no assurance it will equal $0.30 to $0.34 per share.


TPVG's competitors may include both equity and debt focused public and private funds, other BDCs, investment banks, venture-oriented banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity and hedge funds.

The Sponsor
The Sponsor has not realized any credit losses with respect to its venture growth stage loans.

The Sponsor, TriplePoint Capital LLC, is widely recognized as a leading global financing provider devoted to serving venture capital-backed companies with creative, flexible and customized debt financing, equity capital and complementary services throughout their lifespan.

The Sponsor is located on Sand Hill Road in Silicon Valley and has a primary focus in technology, life sciences and other high-growth industries.

The Sponsor's portfolio of venture capital-backed companies included and/or includes widely recognized and industry-leading companies, including, among others, Facebook, YouTube, Bloom Energy, Chegg, Cyan, Etsy, Gilt Groupe, Oncomed, One Kings Lane, Proteolix, Ring Central, Ruckus Wireless, Segway, Shazam, Splunk, Square and Workday.

Since the launch of its investment platform in 2006 through December 31, 2013, the Sponsor has successfully raised approximately $1.25 billion of capital commitments from institutional investors, which may be increased to approximately $1.75 billion at the option of one of the Sponsor's existing institutional investors.

To supplement these capital commitments, the Sponsor has secured approximately $1.4 billion of cumulative warehouse-based and other multi-year credit facilities from international banking firms over the same period.

Management fees

Base Management Fee
The base management fee is 1.75% of average adjusted gross assets, including assets purchased with borrowed funds.

Incentive Fee
The incentive fee consists of two components-investment income and capital gains-which are largely independent of each other, with the result that one component may be payable even if the other is not.

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Under the investment income component TPVG will pay its Adviser each quarter 20.0% of the amount by which the pre-incentive fee net investment income for the quarter exceeds a hurdle rate of 2.0% (which is 8.0% annualized) of net assets at the end of the immediately preceding calendar quarter

"Any investment income incentive fee that is payable in a calendar quarter will be limited to the lesser of (i) 20.0% of the amount by which our pre-incentive fee net investment income for such calendar quarter exceeds the 2.0% hurdle, subject to the "catch-up" provision and (ii) (X) 20.0% of the cumulative net increase in net assets resulting from operations since the effective date of our election to be regulated as a BDC minus (Y) the cumulative incentive fees accrued and/or paid since the effective date of our election to be regulated as a BDC. For the foregoing purpose, the "cumulative net increase in net assets resulting from operations" is the sum of our pre-incentive fee net investment income, realized gains and losses and unrealized appreciation and depreciation since the effective date of our election to be regulated as a BDC."

5% stockholders

James P. Labe 50%

Sajal K. Srivastava 50%

James P. Labe

Jim Labe is the Chief Executive Officer and co-founder of TriplePoint Capital. Mr. Labe is widely recognized as the pioneer of the venture leasing and lending segment of the commercial finance industry. He played a key role in making venture leasing and lending an essential source of capital for venture capital-backed companies. Over the past twenty-five years, Mr. Labe has worked closely with venture capitalists and entrepreneurs introducing them to the benefits of venture leasing and lending. He has closed venture lease and loan transactions with hundreds of venture capital-backed companies. Prior to co-founding TriplePoint, Mr. Labe founded Comdisco Ventures in 1987, the venture division of Comdisco, Inc. He led the division as CEO for more than 15 years, managing more than $3 billion in lease and loan transactions to more than 970 leading venture capital-backed companies. Under his leadership, Comdisco Ventures recognized thirteen consecutive years of profitability representing more than $500 million in cumulative pre-tax profits. Comdisco Ventures was recognized by BusinessWeek, Forbes, The Red-Herring, and other industry publications as the leader of the venture leasing and lending industry. Mr. Labe personally trained senior members of many of the existing firms in the venture leasing and lending industry.

Prior to Comdisco Ventures, Mr. Labe served as a Director at Equitec Financial Group, the first nationwide institution to provide warrant-based leases to venture capital-backed companies. During his tenure at Equitec, he helped develop the concept of venture leasing and originated many venture lease and loan transactions. Mr. Labe has played a pivotal role in making venture leasing and lending an essential source of capital for private venture capital-backed companies and in the process has educated the financial and academic communities on the concept. Mr. Labe is a speaker at venture industry conferences and has appeared as a guest speaker on the topic at both Harvard Business School and the University of Chicago School of Business. When not at the helm at TriplePoint Capital, his diverse civic interests have included Stanford University's Athletic Advisory Board, Silicon Valley Community Ventures (Pacific Community Ventures), the Youth Tennis Association (YTA), the East Palo Alto Tennis Tutorial Program (EPATT), and serving as a volunteer camp counselor for underprivileged inner-city youths. Mr. Labe holds an XM.B.A. from the University of Chicago and a B.A. from Middlebury College in Vermont.

Sajal K. Srivastava

Sajal Srivastava is the Chief Operating Officer and a co-founder of TriplePoint Capital. He oversees TriplePoint's investment analysis, account servicing, portfolio monitoring, and documentation groups. Mr. Srivastava brings a strong venture leasing, lending, and technology finance background to TriplePoint Capital. He carries a unique perspective, having worked on the investment side in concert with his expertise in the operational and servicing aspects of the business. Prior to TriplePoint, Mr. Srivastava worked at Comdisco Ventures, where he worked directly with Jim Labe. While at Comdisco Ventures, he structured, negotiated, and managed over $200 million of transactions in private communications, infrastructure, semiconductor, and software and Internet companies as well as managed the diligence and credit analysis team.

Prior to Comdisco Ventures, Mr. Srivastava was a financial analyst in the technology investment banking group at Prudential Securities working on debt and equity financings, as well as mergers and acquisitions advisory services. Mr. Srivastava was part of the team that structured Prudential Securities' partnership with a leading venture-focused commercial bank. Mr. Srivastava holds a M.S. in Engineering Economic Systems & Operations Research and a B.A. in Economics from Stanford University.

As a BDC, TPVG will be required to comply with certain regulatory requirements.

For instance, TPVG will generally have to invest at least 70% of total assets in "qualifying assets," including "eligible portfolio companies," cash, cash equivalents, U.S. government securities and high-quality debt instruments maturing in one year or less from the time of investment.

In addition, TPVG will be subject to borrowing restrictions such that, with certain limited exceptions, the asset coverage, as defined in the 1940 Act, will be required to equal at least 200% after each borrowing. The amount of leverage that TPVG will employ will depend on the Adviser's and the Board's assessment of market and other factors at the time of any proposed borrowing.

TPVG also intends to elect to be treated, and intend to qualify annually thereafter, as a regulated investment company, or "RIC," under Subchapter M of the Internal Revenue Code of 1986, as amended, or the "Code," for U.S. federal income tax purposes beginning with its taxable year ending December 31, 2014.

TPVG is an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012, as amended, or the "JOBS Act." For so long as TPVG remains an emerging growth company under the JOBS Act, it will be subject to reduced public company reporting requirements.

Use of proceeds

TPVG expects to net $123.4 million from its IPO. Proceeds are allocated as follows:

to repay in full the outstanding indebtedness under the Bridge Facility. The Bridge Facility is expected to have a maturity date of not more than seven business days after the pricing date of this offering and will terminate upon TPVG's full repayment of the outstanding borrowings thereunder.

TPVG will invest the remaining net proceeds, if any, primarily in cash, cash equivalents, U.S. government securities and other high-quality investment grade investments that mature in one year or less from the date of investment.

Disclaimer: This VTPVG IPO report is based on a reading and analysis of TPVG's S-1 filing, which can be found here, and a separate, independent analysis by IPOpremium.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.