Sramana Mitra: How does that split out of the 700 investments you’ve made? How many follow the route of going on to venture capital? How many continue to bootstrap? Is there any other nuance to it?
Joe Silver: Of the companies that have exited our portfolio, which is about 15%, it’s split down the middle. Roughly half of them have been acquired or raised for their equity and another half may have refinanced with us with other debt or paid off with organic cash flow.
Sramana Mitra: Why does the $3 million cap if company is doing well and is servicing your debt? Isn’t there a case in continuing to work with that company as your firm’s strategy?
Joe Silver: There absolutely is. It’s right front and center on our product roadmap to continue expanding and providing larger facilities as companies grow. It’s just due to structure and size where we are comfortable lending that amount of capital, but we have consistently increased that over the years.
We plan to be able to help companies as they continue to grow. Until that time, making introductions and meeting with our strategic partners like Silicon Valley Bank is the key to our model so we can help companies get additional capital whether it’s debt or equity.
Sramana Mitra: What is the source of the capital that you are lending? You said that you have a $200 million facility that you are lending, but it tells me that it is not equity that you are parceling out, could you talk about the source of the capital that you are lending and the business model?
Joe Silver: We have multiple lending partners right now who are large private debt funds. They focus on small business lending. They don’t have the infrastructure to make the loans on the right and manage the loans directly. They look for originators of loans like ourselves to do that work for them.
One group is called Community Investment Management which is based out of the Bay area. They are a social impact fund that focuses on job creation, transparency, terms, and supporting all types of entrepreneurs. We have worked with them for five years now. That’s a $100 million facility.
We opened a second $100 million with a group called HCG management which again supports small businesses and consumer loan originators. These two are catalytic to our growth. Our challenge is to get it into the hands of the best companies that we can find as quickly as possible.