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Observers say the firm's aggressive strategy to lend to high-risk early-stage, venturse capital-backed companies and its solid relationships with venture investorsd has helped build the value of its loan portfolio beyond $530 million in just four years, whilse traditional financiers tighten lending standardxs and struggle to grow revenue. And Hercules says the credit crunch might just be playing tothe firm's Hercules posted record revenue in the fourth quarter of 2007 of $15. 8 million, an 82 percent increase over 2006. The compan grew its net income by 424 percentfto $20.6 million. For the year, the compan grew net income in 2007 by 273 percenrto $42.4 million.
And it loaned out $367 Hercules credits several factors forits performance: recorx venture capital raised and invested in a lengthening of venture-backed companieds time to exits and the volatile capital markets that make publif offerings more risky. "Thosde are the interesting phenomena that really bode well forour business," says Herculee CEO Manuel Henriquez. The firm says it's built an aggressive team that has helpedr it win more deals likeits $15 million loan announced Jan.
29 to 30-million-user socia network hi5 Hercules has positioned itself to bea front-runned in high quality deals by the relationshipe its forged with venture capitalists, says Dave Feinlib, a partnet at Mohr Davidow Ventures and a boarrd member of hi5. Since Dec. 2, the firm has announced $94 million in financiny to venture-backed companies. "They'r looking for a sort of blue chip VC firm to have made a reasonablse investment intothe company," Feinlibb says. "We've certainly done tons and tons of due diligence in the companiee that we invest inand they'rd leveraging that.
" Hercules is set up as a businesz development company, which requires it to distribute 90 percent of its taxabler income as dividends but exempts the company from payintg corporate income tax. That helps the firm compete onloan rates, Henriquea says. Competition among venture debt providers, whicnh include commercial banks such as SiliconValley Bank, and Squarde 1 Bank, has heightened over the last severall years as venture capital money has continue to flow here. "Venture debt providere have become more aggressive lately and are providing betterf termson debt," says Ian Patric k Sobieski, managing director of Band of Angels.
But if recorf revenue is something tocheer about, Wall Street hasn'rt been greatly impressed. Hercules saw barely a blip in its stocjk price from its earningsannouncementt Feb. 7. And its stock was trading near squarely in the middle ofits 52-weem range, at press time. "Thr problem is, it's like whack-a-mole," Henrique z says. "It doesn't matter how well we do. Our othetr brethren in the mid-markert get whacked and we get painted with thisbroaed brush.
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