SuRo Capital Corp (SSSS) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GSV Capital Second Quarter 2012 Conference Call.

(Operator Instructions)

This conference is being recorded today, August 8, 2012. I'd like to turn the conference over to Mr. Alex Wellins of Blueshirt Group. Please go ahead.

Thank you, and thanks for joining us on today's call. I'm joined today by Michael Moe, GSV's Founder and CEO, and Steve Bard, the Company's Chief Financial Officer. Today's call and webcast are being recorded. An audio replay of the conference call will be available for seven days.

The webcast can be found on our website at www.gsvcap.com. Replay information is included in our press release that was released after the market closed today. Please note that this call is property of GSV Capital. Any unauthorized rebroadcast of this call in any form is strictly prohibited.

I'd also like to call your attention to the 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 our 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 statements, as a result of a number of factors, including those described from time to time in our filings with the SEC.

We do not undertake to update our forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit the IR section of our website. With that said, I'll turn the call over to Michael Moe. Michael?

Thanks, Alex. Good afternoon. Thanks for joining us today, and we appreciate your interest. Over the past quarter and the last 15 months since going public, we have executed against the strategy we laid out for investors. We've built a diversified portfolio of, now, 40 of the leading, fastest growing, top venture-backed companies across five focus areas of investment. We believe that many of these game changing [companies have] the potential to drive outsized growth and significant shareholder value in the years ahead.

I'll start out with a quick summary -- a snapshot of the state of our portfolio as of June 30, 2012. First, the total value of GSV's portfolio investments was $171.6 million. The net asset value, NAV, of the fund is $13.81 per share, and we ended the quarter with $96 million in cash and money market funds.

As of today, our five largest positions in the portfolio are as follows -- Twitter -- we've invested $32.7 million, representing 12% of the overall portfolio; Palantir, which is a position that we've expanded significantly in the past quarter, and then, since the quarter-end, where we have $20.6 million invested, which is approximately 7.6% of the portfolio; Violin Memory, where we have $14.8 million invested, representing 5.6% of the portfolio; Chegg, where we've invested $14 million, representing 5.3% of the portfolio; Dropbox, where we've invested, to date, $12 million, representing $4.9 million of the portfolio.

We also made new investments in leading companies, such as Solexel, which is a Kleiner Perkins backed solar company, which we participated in the financing that they've recently completed, where we put $10 million into Solexel. Just a quick highlight on the company is it really is potentially extremely disruptive in the alternative energy space, with both higher efficiency and lower cost.

Basically, the -- it's - we think could be -- it's a huge, huge win for us. Spotify, a leader in the social music area. This is a company that we've had our sights set on for some time, and we were able to acquire the shares at a price that we thought were -- was very attractive and get approved by the Company, and so, we're delighted to have Spot -- be on Spotify's cap table.

In addition, as -- we added a new position in Avenues -- The World School, which is getting quite a bit of attention with its open -- its new campus in New York City, creating a global network of private schools with a top tier focus, with the former President of Yale University, former head of Exeter -- Phillips Exeter, head of Hotchkiss, and for people in New York City, you'll appreciate this -- the former head of the 92nd Street Y for the preschool program.

Additionally, we made a $10 million investment in Tutor. Tutor is a rapidly growing company that partners with universities such as [UFC] and Georgetown to create online programs. And also, just kind of an interesting company, to make note, Dataminr, which we were introduced to from Twitter, which they use Twitter's firehose to provide real-time information primarily being used by traders today, but a significant advantage to other sources of that information. And we made a small investment in Dataminr, but we think it has huge potential that shows sort of the power of the network.

In addition, as we said we were going to do, and we've done repeatedly, is we've added to core positions, and we did in the quarter, including Bloom Energy, which is doing extraordinarily well, and we continue to add to that position at prices that we think are attractive to both fair value and where recent financings have been done. We continue to look to add significantly to our Dropbox position. I mentioned that we -- it's now our fifth largest position, but we continue to actively look to increase that.

Kno, which is a leader in digitizing textbooks; again, a very disruptive business that we are very excited about the potential of. We added $7.5 million to our relatively small position that we had earlier. And companies like Control4, which is just a classic growth company, which we continue to accumulate positions as we are able to get shares at prices that we think will generate substantial return over time.

So, the five investment themes that we focus on and have focused on from the beginning -- social mobile, cloud computing and services, Internet commerce, growth -- green technology and education technology are the areas where we focus. And we believe that these themes are the core themes in the growth economy, powered by megatrends that we believe will have the greatest return potential for our investments in the years to come, and that's why we continue to believe that the greatest opportunities are going to be found in those five themes.

If you look at -- by percentage across the portfolio, approximately 25% of our portfolio is in social mobile, 23% is in cloud computing and services, 12% is in Internet commerce, 29% is in education technology, and 11% is in clean technology. So what our strategy is is to build a robust, diversified portfolio of great dynamic companies, and we're very pleased by the fundamentals and the performance of the companies that we've invested in, with the overall revenue growth rate, year over year, of the companies that we've invested in, being well over 100% -- close to 150%, year over year.

So we're experiencing hyper growth, and that's particularly appealing, vis-a-vis, alternatives that you see in the public markets. We focus on maximizing the portfolio's total return through our proven and rigorous process that we've developed over many years, the core being the 4P formula, looking to identify and invest in companies with great people, leading products, huge potential, and predictability, but a systematic process that we use to dynamically identify, evaluate, and rank private companies in the growth universe.

We've had three companies go public so far -- Facebook, Groupon, and Zynga. Obviously, the current value of these stocks reflect the challenging market facing the Internet stocks, in general, and social media, specifically. However, I would stress that we're very early in the lifecycle of these public companies, and also note that if -- while we certainly aren't pleased by the performance of the stocks of these three companies, they're relatively small in the context of the overall portfolio. So, to provide a framework around that, we've invested $16.5 million in Facebook, Groupon, and Zynga.

If you compare that to our three largest holdings today of Twitter, Palantir, and Violin Memory of $68.5 million, we have four times more invested in those three companies than we do in Facebook, Groupon, and Zynga. So -- and we're extremely pleased with the fundamental performance of Twitter, which continues to just be a rocket ship in terms of growth and, we think, value creation.

Palantir, which is a name that we're extremely excited about, is a leader in high security software -- helps the CIA, for example, track terrorists and bad guys all over the world, and Violin Memory, which is a company that we think has opportunity to go public in the near term. So those are all important things just to kind of keep in reference as our overall portfolio.

Looking at the IPO market, despite the Facebook IPO, which was a disappointment for most everybody, in terms of what expectations were, the IPO market is actually showing signs of life, and after the pause of the Facebook's IPO, seeing strong recent debuts by companies like Palo Alto Networks and KAYAK. One of our companies, Silver Spring Networks, is on file with the SEC for an IPO. We believe that all the companies that we have large positions in are the size and scale that could go public today, if they chose, and we believe that several of these companies, if not more, will start the IPO process soon or before the end of the year.

Some investors have asked why we haven't pursued a stock buyback program, as of now, given the fact that our stock has been trading well below the NAV. In a nutshell, it's our philosophy that investors didn't invest with us -- they didn't trust us with their capital for a 20% or 30% return, and it's only been 69 days since the stocks have been dislocated, and our stock responded in-kind. Additionally, a stock buyback would decrease the flow, make it more difficult for institutional investors to participate in GSV.

That all said, it is our job to optimize shareholder value, and so, we are carefully monitoring this. We are actively making -- we are actively analyzing and evaluating what's the right -- best way to create shareholder return, and we'll keep that option open, and we'll continue to monitor it. We'll continue to evaluate all our options on an ongoing basis to deliver the best long-term return for our shareholders.

We are extremely pleased how the portfolio is shaping up, and I think a key philosophy that we have that, in the short-term, there's a lot of things that impact stock value. In the long-term, what impacts the stock value is the fundamentals, and we couldn't be more confident in the fundamentals of the portfolio that we've assembled. We're even more confident in the strategy that we have today than we ever been, focusing on leveraging our network in a due diligence process to identify and invest in what we think will be the huge winners in years to come -- the stars of tomorrow.

So, thanks for your attention today. I'm going to ask our CFO, Steve Bard, to quickly review our financials with you before opening up the call for your questions. Thank you.

Thank you, Michael. As of June 30, the total value of our investments was $171.6 million. That compares to $75.8 million as of March 31. Net assets as of June 30 were $266.9 million, translating to a net asset value per share of $13.81, and that compares to net assets of $167.3 million, or $13.47 per share, as of March 31.

During the quarter, we originated approximately $98.5 million in investments in nine new and eight existing portfolio companies. That's exclusive of transactions costs.

Since inception, we've invested a total of approximately $173.9 million in 34 companies, and that's through June 30. As Michael indicated, subsequent to quarter-end, we've invested in 40 companies, representing approximately $216.5 million in investments.

Investment income, which is comprised of accrued interest as well as money market dividends, was approximately $110,000, which translates to $0.01 per share for the second quarter, and that compares with investment income of about $118,000, also $0.01 per share, for the first quarter of 2012.

Net investment loss for ongoing operating expenses for the second quarter was $2.1 million, which translates to $0.13 per share, and that compares to a net investment loss of about $1.1 million, or $0.12 per share, for the first quarter of 2012.

Net realized loss on investments was $1.4 million, or $0.08 per share, for the quarter, and that was related to our investment in PJB, which was the synthetic Zynga investment that we'd made, and that compares with a realized loss of essentially zero for the first quarter of 2012.

The net change in unrealized depreciation, which is comprised of transaction costs, such as finder's fees, legal expenses, escrow fees, associated with acquiring portfolio investments, and, most importantly, any fair value adjustments, was approximately $2 million, or $0.12 per share, for the second quarter. And that compares with a $1 million, or $0.11 per share, of unrealized appreciation for the first quarter of 2012.

That all results in a net decrease in net assets, resulting from operations, for the second quarter of about $5.5 million, or $0.34 per share. That compares with $83,000, or $0.01 per share, for the first quarter. We ended the quarter with about $95.6 million in cash and money market funds. With that said, I'll now turn the call over to the operator to start the Q&A session. Operator?

Ladies and gentlemen, we will now begin the question and answer session. (Operator Instructions) Ladies and gentlemen, we remind you to please limit yourself for one question and then requeuing up. Our first question comes from the line of [John Suffridge] with -- private investor.

Yes, gentlemen -- and private investor is correct. I was one of the ones that talked, I believe, with Jean or Jeanie about stock repurchase. But beyond that, what is the cash today? Not June 30. What is the NAV today? Not June 30. I know you can calculate that. I mean, I did spend 30 years on Wall Street. Is it possible you could share that with us, because I think the recent public positions have been a disaster, and it would be good to get a sense of where we really are.

Sure. Steve, why don't you give the precise number on the cash today, and again, I think, as it relates to the positions that we have, obviously, we've gone through the portfolio extensively, and we're very confident in terms of the mark that we've provided. And again, we think those -- the fundamentals are what we reflected, but, Steve, give the precise cash position, please.

Sure. Through today, it's about $40 million.

Thank you. Jon Hickman, Ladenburg Thalmann.

Hi, guys. Steve, would you walk us through the Zynga? Have you written that off? Is that what I heard you say?

No, John, we haven't written it off. The note actually matured on June 27.

Yes.

And we received shares as settlement for that note, so the interest that we'd obtained over the life of the loan, about $300,000, was capitalized into principal. Again, the note was settled in shares. Specifically, we received 533,333 shares. The closing price on June 29 was $5.44, so we did realize a loss on the PJB investment of about $1.4 million, and we're now holding Zynga shares on the book. So you'll notice -- on the schedule of investments, you'll see that.

Okay. So they -- he -- they gave you enough shares to equal the total value of the note, and then, the stock has declined from that period of time.

Correct.

That's where the loss is coming from. Okay. Got that.

Correct.

Okay. So, in -- could you talk a little bit about your -- you have a large position -- I mean, 29%, 30% of the portfolio is invested in the education technology space. Could you talk about that? That's the largest position in the portfolio, and you must have a philosophy there. Could you share that with us?

Sure. Couple, three things. One is that we do have a strong conviction in terms of growth potential in the education technology space. You're seeing substantial activity going on in the market, looking for education innovation to -- when you look at what's going on in the knowledge economy, where you have 8.3% unemployment, you got 30% of high school students dropping out, you got 50% of college students that can't get a job in the first 12 months, 45% of law students can't.

What we see is the opportunity for education technology to have a substantial role to allow people to participate in the future. You're starting to see education technology models, for the first time, really have disruptive characteristics, kind of Version 1.0. The companies like Capella and Blackboard were effectively creating access. Now you're seeing a truly -- true network effects, where you're seeing the growth of the network grow exponentially.

So you look at our largest positions -- Chegg, which is a leader in creating a network in college students. [If] Trojan Horse was effectively renting college textbooks, provide a compelling value proposition outlet, like a Netflix. What they've able to do is take that position and basically capture 40% of all college students on their network, providing other services that are utilized by that demographic.

You have Kno, which has digitized over 225,000 textbooks, as a leader -- this shift that's going on from paper textbooks to smart digital textbooks, where the publishers are partnering with Kno and college and universities, as well as the large strategic businesses are partnering with Kno, basically to help them create a smarter, richer, interactive, less costly product. So, with Kno, we're investors with Marc Andreessen as well as with Intel and Goldman. Chegg -- we're an investor with Kleiner Perkins and Insight.

And so, we look at a Tutor -- again, you're seeing this wave where universities are looking how they create a better value proposition for their students. The typical college student has $25,000 of debt. There's $1 trillion overall college debt. Tutor goes in, partners with a university, helps them create online program, creates incremental revenue for the university as well as a better student online experience.

So you're just seeing a lot of -- what I call a confluence of catalysts taking place in that market. We actually just put out a white paper, because we're seeing such activity, and we're -- and, candidly, because of our reputation, we're getting invited to participate with all the best stuff. You're seeing the leading investors, the guys who are always early and usually right -- Benchmark, Kleiner Perkins, Sequoia all being active in the education technology space, and we're in there with them, because we see such growth and such strong fundamentals.

I will say, if you kind of look at -- if you aggregate Internet commerce, social mobile, and cloud services, which all could be categorized, kind of, Internet, and that's still, by far away, the largest, with green technology being 11%, but we're also looking to grow our green tech investments selectively. We continue, as I mentioned, add to our position in Bloom Energy, which is experiencing a tremendous growth and really strong fundamentals.

Our recent investment in Solexel, which is a business that we think has just huge growth in front of it, truly disruptive, and obviously, a gigantic energy market. And Totus is another new investment we've made, which is a -- in a sustainability green-lighting space.

And then, just one more question. If you would hazard a guess right now, is Silver Spring the next -- probably, in your portfolio, the next one to go public?

Well, it's the one that's filed, so it's certainly probably the most probable. That said, we're aware of several of our companies that are kind of spinning up the process and kind of carefully evaluating whether it's time to go out or not. And as I made in the formal remarks, I think all these companies are looking at their options and are core holdings.

And again, we have concentrated positions in companies that are greater scale -- greater market value, and we think all of them could go public if they chose. And they're obviously strategically valued. There's a natural -- there's a consolidation that's taking place in the technology world, which is going to, whether we like it or not, pick off companies that we're invested in, because we're investing in [liquors].

Okay. Thank you.

Thank you.

Thank you.

This is Steve Bard. I'm sorry to interrupt. I just wanted to revisit John Suffridge's question, with respect to cash on hand. The number I provided earlier netted out investments, which we've committed to make, but haven't completed yet. The actual cash on hand, as of this morning, was $51.5 million. Thank you, operator.

Thank you. Ed Woo, Ascendiant Capital.

Yes, I had a clarifying question. Is it correct that the bulk of your loss in the quarter, net realized, as well as unrealized, was due to Zynga? Was there anything else involved?

Yes, I'll let Steve answer the question, but, no, there was a handful of adjustments, but go ahead. Go through them, Steve.

Sure. The net realized loss was exclusively the PJB note, $1.38 million. There were a few marks to the portfolio, so net changes and unrealized depreciation on investments. We marked down Facebook, Groupon, and [Sirius]. We marked up Dropbox. There were transactions fees, such as finder's fees and legal expenses, involved there. But, with respect to the net realized loss, that was exclusively PJB.

Okay. And then, just another clarifying question. Is Silver Spring the only company you're investing that has actually filed and everybody else hasn't filed yet?

Correct.

Okay. And the last question I have is now that you're up to about 40 companies, do you have an optimal amount of companies that you would like to see GSV invested in?

Yes, and that's a great question. I think that's evolved as our capitals grow. We still have a strong philosophy of concentrating the capital in core holdings. So, we made reference to our five largest holdings earlier, but if you look at our top 20 holdings, the top 20 investments we've made is 86% of the portfolio.

And we anticipate -- and what I've said, as sort of a -- as a framework to -- that we're trying to -- as we're constructing our portfolio, I mean, we're looking at different investment themes, we're looking at size and stage of companies. But we look to continue to have the bulk of our investments in a relatively 20 to 25 names, and then, we'll sprinkle that with interesting companies in smaller positions as we think it's appropriate.

But I think what we had created as a model was that we would have 25 to 30 names. That was sort of what our thesis was as we've kind of evolved this, looking at where we think we can optimize the portfolio the greatest. We continue to believe it's about concentrating and adding to core positions and leading names, but we're complementing that with making smaller investments in companies where we think we have an advantage, where we think it makes sense, because it will compensate us for -- in terms of return potential.

So that's how we're thinking about it. So we're not looking at having to expand the number of core positions, but we have added what we think are compelling, smaller type of investments on top of the large positions that we continue to add to.

Great. Well, definitely, good luck.

Thank you so much. Appreciate it.

Thank you. (Operator Instructions) John Suffridge, Private Investor.

Yes, sir. I'm sorry, but I did not get -- my first question was cash and NAV for -- as of today, not June 30, and you did give cash, but did not give me any NAV. Good enough to do that, that'd be terrific.

Well, Steve, this is your realm to discuss, but we're not going to give a -- we give an NAV once a quarter, and that process that we go through is pretty rigorous. So we're not just going to throw NAV, but I think you can do -- the portfolio is marked on a per investment basis, current as of June 30, but I don't think there's anything materially that's changed to the portfolio. Again, we put an appropriate value on, and we're confident in the fundamentals. The cash, I think, is important. In terms of the total cash is just over $50 million that we have in the -- in our bank today.

Right. Well, thank you, but I think a lot of the cash position, as you know, was from the secondary offering. And listen, don't get me wrong. I'm just a very discouraged individual investor that would like to see a little bit more from a standpoint of information flow or whatever, and I don't mean what investments you're looking at, but something that allows for the market not to penalize what your NAV (inaudible).

Yes. Well -- and believe me, I understand your frustration, and it's -- I mean, we're all frustrated in terms of where the share price is. We're frustrated and disappointed with how our three public companies have done, and yet, I'll tell you that we've been around this for quite some time and being involved in emerging growth companies, and we're going to be wrong from time to time, but we're focused on the batting average. We're focused on fundamentals, because we know that, over time, fundamentals will drive the stock price.

And so, [what] we're working extremely hard at GSV is to focus on and identify and invest in the best growth companies in the world and be diligent and be transparent and honest with ourselves about what's going on, and we work really hard at doing that. I will say that we try to be communative with our investors. It's our obligation. It's our duty. We feel very strongly about that, and we will do -- and if there's suggestions or things that we can do on an ongoing basis that will provide better information, better insight to what we're doing, we think that's important, and we think that's to everybody's benefit.

So we'll focus on how we can deliver against that, and I think that's completely fair, and again, your frustration is fair as well. And what we're focused on is making smart decisions and doing everything we can to be involved in the right companies, because if we do that, everything will take care of itself, and I assure you. Thank you.

Thank you. [Tony Polak], Maxim Group.

Could you comment a little about your valuation on Twitter? I see, if I'm right, it's about $17. Could you comment on where it is trading now? I assume it is trading somewhat higher than that.

Yes. So, the reality with Twitter is, I'd tell you today, I don't think there's a real -- there's not the kind of market that we've seen in the past. Even the fact that Twitter, as you might know or recall from previous calls, is a company that is very systematic. It has a process about who's approved to buy their shares and so forth, and we're an approved buyer.

But, nonetheless, you've seen a pretty active market and with marks that give you some pretty good sense of how investors are valuing it. Since Facebook -- before Facebook, Twitter shares were certainly north of $20 a share -- I think, $21, $22. You saw a pretty good institutional market. Since Facebook and the disappointment, my -- it was our expectation that we were going to see Twitter shares be much lower than where you're seeing a market today, and it's not -- like I said before, it's not a great market, but I think we're seeing Twitter -- we think we're reflecting the value of Twitter today well, in terms of what we state in the -- in our statement.

Your point about $17 and change is -- my -- it's a feeling -- it's the appropriate -- we think it's appropriate level. They will be going through -- they are going through a tender process, as we speak, so I think we'll have a pretty good sense of what the current price is, but it's not my expectation that you'll see it materially above where we have it marked. But we do love what's going on with Twitter. We're very close to that situation. I just was with a very senior, senior person of Twitter last night, and we're very excited about what's going on there from a value creation standpoint.

I'll also make the point, which I probably could have referenced in the earlier formal remarks, but maybe there isn't time to mention, because people ask what's going on in the marketplace. And certainly what's happened -- Twitter is unique.

Dropbox candidly is unique, in that the values -- I mean, Dropbox is smoking. But, generally speaking, we've gone from a -- from being a sellers' market, meaning the sellers dictated terms. There was -- people were chasing -- we were -- and we thought we were very disciplined about how we bought our shares.

As was mentioned before, as disciplined as we are with Facebook, we own the shares at $29, which there was no market, to our knowledge, below $30 in the period that we bought the shares. But, nonetheless, they're trading where they are today, but generally speaking, the good news here is it's become more of a buyers' market, meaning buyers are able to dictate terms. Buyers are able to get that much greater value on great companies.

So I made the point about Spotify earlier. I just kind of referenced in passing. We're delighted by the Spotify stock that we own and the price that we own it, vis-a-vis, where its recent financing was done. The fundamentals there are explosive, are just fabulous, and we've got a very good price, vis-a-vis, where our financing was done very recently. But the financing was done pre Facebook, and we bought our shares after Facebook, and so, that was -- that's good news for -- I think, for our shareholders.

Okay. Thank you.

Thank you.

Thank you. Danilo Kawasaki, Gerber Kawasaki Wealth Management.

Yes. In light of what happened to Facebook IPO, would you guys be willing to consider taking some profits for the next few companies that go public?

Well, we're always looking at what's the right decision, and, generally speaking, it's our philosophy, once we become liquid or once we are permitted to sell, we'll be looking for an opportunity to sell. So, with the companies that we invested in, we have a lockup period of six months. In some cases, underwriters will allow you to sell before that lockup period is done.

We haven't had that opportunity. Whether we would've or wouldn't have, that's -- we -- that's different (technical difficulty), but, generally speaking, you can expect that we're going to hold the position for at least six months, and we'll then look for the appropriate time and price to exit.

Okay. Thank you.

Thank you.

Thank you. [Darnell Elliott], Private Investor.

Hi. I had a couple questions, particularly about some of these companies, i.e., Dropbox. Do you really think that they can compete in the space with such names as Google, Apple, Microsoft? If I'm not mistaken, they're cloud computing. So, if I'm not mistaken, Google has Google Drive. Apple has iCloud. I think Microsoft has SkyDrive, something like that. Do you really think Dropbox can compete?

And another question regarding Twitter. Do you feel -- I mean, how do you feel about Twitter? Do you feel that it's going to flop like Facebook or what?

Well, let me -- first, on Dropbox. And obviously, we'd be naïve to say that we don't pay attention or don't carefully watch the developments of very powerful, tremendous companies, such as I believe Google is doing to iDrive, the iCloud with Apple, Microsoft. I mean, these are great companies -- lots of resources and so forth.

What our experience is with emerging growth companies is that you come across -- again, often those company -- the big guys kill the little guys. You've seen that many times more than the little guys winning, right? But you come across these very special companies every so often that have the special sauce, the special leadership, special product and potential and culture. And I'm telling you -- we know things can change, but Dropbox is a company that we are huge believers in.

iCloud -- the -- I -- with -- obviously, Apple tried to buy Dropbox three years ago for $1 billion, and Drew Houston said he wasn't going to do it. And they've just got their head down, and you walk in that company, and they are relentless, and they have a product that is basically magic. And it's so much (technical difficulty), basically, 100 million people's view right now, that this is a product that is superior -- vastly superior to anything in the market.

They've commoditized operating system; they've commoditized device, and they made a seamless remarkable product, and when you have real network effects going -- I mean, you've got the network that everybody's sharing on, it doesn't matter how big your competitors might be, you have built-in network effect type advantage.

So, look, Dropbox -- we -- as I said, we would be foolish to ignore their shares' competitors, but we think Dropbox is a special company, and they are doing unbelievably well, and their value has gone up, even though the carnage that you've seen taking place in a lot of the Internet names.

On Twitter -- and again, the Twitter, Facebook comparison. One, I'll just make a point on Facebook, and certainly, there's a number of different reasons why stock is trading at $20 and change versus what many of us expected it was going to do. But one has to do with Facebook. I mean, their growth decelerated in the past three quarters from over -- well over 100%, at when we bought our stock, to, the last three quarters, 55%, 45%, and 35%.

And so, that -- when investors are paying futures, that makes it tough on Facebook, and that, coupled with every kind of miss -- where you could mishandle an offering, which went on here. Investors pay futures for growth companies, and that makes them work. When people start to question that have -- and look in the rear view mirror, that's where you have a stock compressed like Facebook's compressed

That said, you have an amazing network that's been created by Facebook. Some of the issues that people point to -- not being able to monetize their mobile usage and so forth. I mean, that's true. They've got to monetize their -- it's lagging their mobile users, but they've got almost a half a billion peoples using their mobile -- using Facebook on a mobile device every single month. That's just -- incredible.

So, if Mark Zuckerberg, tomorrow, were to decide to kind of overweigh monetization versus user experience, I think you'd see Facebook -- the Facebook revenues and profitability would soar. Wall Street would love it, but I think what they're looking at building is a long-term business, and we do still continue to believe that Facebook is the communication collaboration platform of the future.

Long way of saying Twitter, while analogous, because you're seeing similar early growth with Twitter and Facebook, and we've made the comparison, looking at Twitter, which started three years after Facebook -- basically being three years behind it in the value creation. We think that part of the thesis is correct. The difference is what Facebook -- what Twitter is creating is a modern media network of lever -- its foundation is real-time search.

And we made a reference to an investment we made in Dataminr, which is benefiting off the remarkable Twitter firehose of information. So businesses are being created off of - just like a Facebook, but off of the power of the Twitter network. But I think it's game [homer] as it relates to network effects and how Twitter's being integrated into every old media business, every business. Everything that's going on is basically -- has Twitter in mind, in terms of a partner, just because of the power of this network that they're creating.

So, again, we're -- in sitting down with the Twitter people, when you look at the opportunities in front of it, they're going to be able to grow at a really high rate for a really long time. So they've got to execute, they got to continue to attract and retain the best people, but it's a great growth business, and we're delighted that that's our largest position.

Thank you. [William Corley], Private Investor.

Yes. I'm actually William Corley with 22nd Century. Hi, Mike. How are you?

I'm doing great. How are you?

I got a few -- couple questions for you. First of all -- and I'd like to thank you for your weekly writings that you put out. I met you in San Francisco at your offices a number of years ago. I also run 1st Discount Brokerage, and -- but the writings that you put out each week are very helpful.

Thank you.

I think that you have done an excellent job of telegraphing your views, and even with the debacle on Facebook, I think that you addressed it to the readers readily. And I want you to know, firsthand, I appreciate it and believe in the way that you approach your investing, and these things get tricky.

That being said, I have been a professional money manager for quite some time, and these private equity deals, sometimes, moving forward -- and I know you're such a valuation and trying to place assets to what they'll be valued in the marketplace over a period of time. What do you expect the multiplying effect to be in the closed in space of private equity? You've got other private equity investments that have been out there for a number of years that have been -- that they're leading discounts to NAVs in the group. And so, it's interesting that this particular stock, GSV is now somewhat getting painted with that same brush.

So I want to kind of get your view on, as you move forward, on how we can separate ourselves from that stigma. And then, secondly, to understand, if the market -- it can close that 30%, 40% discount to NAV, moving forward.

And secondly, because of your writings, going back in March, you introduced a number of companies, one, Coursera, and I just finished taking their sociology course online from Princeton University, because you introduced that to me. And I took the time to take that course, just so that I could be informed to be able to let investors and the community know whether this was real or whether this was just a hodgepodge.

And thanks to your initiation, it's very real, and it's phenomenal. They expected there to be 5,000 students in my class, and by mid -- by the midterm, there were 40,000, and the professor did a brilliant job, and what I as the student took away from the class was knowledge at a very high institution, i.e., Princeton. So my question to you is as you're investing the GSV funds into the knowledge space, how is the -- how are those investments going to play out when now you have MIT, Harvard, Coursera bringing high level education to the public at no cost?

Yes. So, let me -- you said a lot of different things, but first, let me, one, thank you very much for your kind comments about the newsletter we put out. And anybody on the line -- we make this available. We put our kind of weekly thoughts out, and we do try to communicate and provide information on how we're thinking and what we're doing.

And so, one, very much appreciate those kind comments, (technical difficulty) and it's -- we should have probably done that before, just to make sure people are aware that we do that, and that's something that we hope people find useful and adds to that point about communicating well with our shareholders.

Secondly, as it relates to kind of the state of our discount to NAV versus what can happen over time and how do we avoid being in sort of the perpetual discount to NAV hell. And there's a couple, three things that -- how we look at that. One is we understand. We understand what happened to our stock, and we think that, again, as the stock was ahead of NAV, we got 4% of the fund in Facebook. We got undue credit for Facebook in the fund, and then, when things went the other way, we certainly got punished along with it.

But I think the gap between the NAV in the portfolio and what we've got, I mean, it's -- I think -- some investors think that everything in the portfolio is -- and obviously, it's discount [like this is the case]. We bought at one price, but [they're] significantly below where we bought it. I mean, that's -- we have NAV. We go through a third party valuation firm. Our auditors go through it. Not -- there's no routine matter with an auditor.

And so, our NAV is our stated NAV, and I think, as people appreciate that it's not -- the portfolio doesn't have a bunch of black holes and the fact the fundamentals are outstanding. We think that gap -- and as we tell that story, -- and people understand what we're doing, we're more confident in what we're doing than what we ever have been. We think the vehicle addresses a huge structural change that's taken place in the private market, which we think will benefit our shareholders. And I think as people understand that and understand what's in the underlying portfolio, we'll see that gap close materially.

Along with that, we'll have events that will confirm that, and candidly, the real thing that people need -- will get -- we think we have to educate about, we have to prove this is correct, is that, over time, the intrinsic value of the portfolio should be materially above stated NAV. And I think if we show that that's correct -- because other words, the things that create marks are more -- are going to be more episodic. I mean, on the negative side, they happen right away. On the positive side, it's not going to happen as fast.

And so, over time, when you invest in a portfolio that's growing well over 100% per year, if you're right on the fundamentals, the value creation -- and if we buy them right, which we think we are, the value creation should be extreme, and that -- ultimately, as investors start to have confidence that that's the case, we think that the shares should trade at a healthy premium to the stated NAV. But the first step is to get it back to approximation NAV, and I think communication and execution are the key things to that, and execution the most important, but we want to communicate, want to be transparent.

As it relates to the point you made about Coursera and what's going on in the disruption in the education space, and Jon Hickman asked the question earlier. There is tremendous change that's taking place in this industry, and it's a huge industry. It's $4.5 trillion globally.

The US -- it's 10% of GDP. In the classic investment opportunity is where there's a problem, the bigger the problem, the bigger the opportunity. In a global marketplace, knowledge economy, there's no bigger problem than how to more effectively educate our populace. And education makes a difference not only in how an individual, but how a company does, and how a country does.

And so, we're looking to invest in companies that are the change agents, the disruptors in this. Coursera, regrettably -- you're right. We highlighted it, because we think it's such a fascinating, powerful company, but we haven't had the opportunity to invest in Coursera to date. They have nearly 1 million -- they were created 12 months ago. They have nearly a million students today. Kleiner Perkins and NEA are the big investors there. We certainly are in dialog with Coursera. We're trying to get close to them. We have a nice relationship with Kleiner Perkins. So, all that's good.

But Coursera is a fascinating company and a good example of the type of companies that we're looking to invest in. And when you see -- with these free models, what's interesting -- we've got this thesis called knowledge is a currency, and so, what we believe, and you gave a great kind of commercial for this thesis.

With Coursera, because it ultimately -- if you can get a class for free and you can demonstrate the -- you benefit from that knowledge, in this knowledge economy, you're going to continue to be able to replenish your knowledge tank to be relevant. And that's -- and change is happening so fast, so to keep the job you have, to participate in the future, people are going to have to kind of keep on coming back and get this knowledge, and it's going to make more difference of what you know versus where you go.

And so, that's the kind of company -- so, Coursera is a great example of that. Tutor is a great example of that, [we think, now]. We're investing in the companies that are disruptive. That's what we're doing, so that's what we're excited about. That's why we're saying about these -- lot of money spent. Knowledge is critical. Knowledge economy is critical. You're seeing all the things circle around it, and we're going to be investing in the very best companies with the companies that are disruptive in this marketplace, and our shareholders, we think, will participate in a material way. But I appreciate all your comments and yours questions.

And so, with that, I think it sounds like we're done, in terms of questions, but we're always available. Just -- we're sincerely appreciative of the support and the confidence people have put in us. We're -- sharing the comments of some earlier questions, we're certainly frustrated along with you, but we're focused.

We know, if we execute, we know, if we do our job, in terms of investing in great companies at great prices, we're going to be -- we're going to reward our shareholders and the people that show confidence in us. So, thank you very much for your interest and attention, and again, we're certainly available offline. Thank you.

Ladies and gentlemen, that does conclude the GSV Capital second quarter 2012 conference call. Thank you for your participation. You may now disconnect.