Triplepoint Venture Growth BDC Corp (TPVG) 2021 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the TriplePoint Venture Growth BDC First Quarter 2021 Earnings Conference Call. (Operator Instructions) This conference is being recorded, and a replay of the call will be available in an audio webcast on the TriplePoint Venture Growth BDC website.

Company management is pleased to share with you the company's results for the first quarter 2021. Today, representing the company is Jim Labe, Chief Executive Officer and Chairman of the Board; Sajal Srivastava, President and Chief Investment Officer; and Chris Mathieu, Chief Financial Officer.

Before I turn the call over to Mr. Labe, I'd like to direct your attention to the customary safe harbor disclosure in the company's press release regarding forward-looking statements and remind you that during this call, management will make certain statements that relate to future events or the company's future performance or financial condition, which are considered forward-looking statements under federal securities laws. You are asked to refer to the company's most recent filings with the Securities and Exchange Commission for important factors that could cause actual results to differ materially from these statements. The company does not undertake any obligation to update any forward-looking statements or projections unless required by law. Investors are cautioned not to place undue reliance or any -- on any forward-looking statements made during the call, which reflect management's opinions only as of today. To obtain copies of our latest SEC filings, please visit the company's website at www.tpvg.com.

Now I'd like to turn the conference call over to Mr. Labe.

Thank you, operator. Good afternoon, and thank you for joining us for our first quarter 2021 earnings call. It's been a little more than a year into the pandemic, and we liken the changes during this period to a pendulum swing. In the early months of the pandemic, the overriding focus was on survival. And now more than a year later, the pendulum has swung the other way. Today, the topics of focus are now on record levels of venture capital investment, record valuations, record exit activity and the strong demand for venture lending.

The venture capital ecosystem has demonstrated its strength and its resilience during 2020, and we're all off to a robust start here in 2021. The strong investment activity environment enhances the prospects and credit quality of our existing portfolio companies. It also drives demand for debt financings from new companies, enabling us to achieve our portfolio growth goals over the course of the year. Our focus remains on continuing to execute on our playbook, and the work we're doing now will translate to a very busy second half of the year given this pickup in venture investment, venture fundraising and our growing pipeline.

As we progress through the remainder of the year, we will remain disciplined and balanced in response to adapting to the post-COVID recovery. We will continue our exclusive focus in high-growth companies backed by our group of leading select venture capital investors. Given our experience in this field and our franchise, TPVG has never been better positioned to capitalize on today's market and for what we think of as riding the wave. When you have substantial liquidity lined up and combine it with long-standing venture capital relationships and a strong pipeline, that's the formula for driving outsized yield.

During the first quarter, we continue to position ourselves to take advantage of the strong demand we are seeing from venture growth stage companies. We expect this to continue throughout 2021. In the first quarter, we increased signed term sheets by 142% year-over-year, and our pipeline continues to be more than $1 billion. We expect to accelerate funding throughout 2021 and are poised to draw on our ample liquidity, which we further enhanced in the first quarter through upsizing our credit facilities, and also completing our second investment-grade notes offering under very attractive terms.

During the quarter, we also increased NAV, which was driven by growing our EPS to $0.38 and the significant progress we have made in strengthening our credit quality, which has resulted in TPVG's very strong credit outlook. While we under earned our distribution for the quarter, we expect to make it up during the year based on prepayments, our healthy spillover income and our expectation that fundings will continue to accelerate throughout the year. We remain in a strong position to generate NII, or net investment income, in excess of our distribution over the long term as we always have. In fact, over the last 4 years and cumulatively since our IPO, we have over earned our distribution. We've also paid 3 special distributions, including one that we just made last quarter.

Additionally, another trend that we will benefit from is the acceleration of exit events and their income contributions. During the first quarter, 50 venture capital-backed companies were publicly listed, including our portfolio companies, Hims and View, which completed their SPAC mergers during the first quarter. There's currently 2 additional TPVG portfolio companies that are in the process of going public via a SPAC and a number of others in very active discussions.

Our portfolio companies remain strong, and we are pleased how they have adapted to the new environment, putting 2020 behind them and positioning themselves to excel in the emerging post-COVID world. Market conditions remain very favorable for us. For the first quarter, a record $52 billion of capital was deployed across almost 1,300 deals in the late-stage venture market. This is a segment which TPVG operates in and targets.

More importantly, we remain in regular and active dialogue with our select venture capital investors to help maintain a high-quality pipeline consistent with our investment objectives. We have not stopped or dropped our venture capital partner interactions to chase near-term deal flow. Per our playbook, now is the time to be just as proactive in our interactions with them as we were a year ago during the peak of the pandemic. This helps us gain insight, understand market dynamics, match our activity alongside of them and remain ready to support their existing and new venture growth stage portfolio companies as these opportunities develop.

To summarize, we're bullish on TPVG's outlook. The fundamentals are there, the demand is robust and the second quarter is already off to a strong start. We have a sizable backlog, pipeline and liquidity position, and we expect to continue to draw on our differentiated platform, our best-in-class management and our strong and select venture capital investor relationships to grow in a very prudent manner. As we look to the future, we continue to foresee a strong and stable yield from our high-quality portfolio and continued accretion in our warrant and equity positions, which includes our anticipation of more portfolio exit events, and are excited on the outlook for the remainder of 2021.

I'd now like to turn the call over to Sajal.

Thank you, Jim, and good afternoon. As Jim mentioned, during the quarter, we executed on the playbook we put together last year in anticipation of a strong recovery in the venture capital and venture lending ecosystems in 2021. Our playbook for the first quarter was intended to position our business and our team to prepare for and to execute on driving capital efficiency, credit quality and portfolio growth over the course of the year.

Key objectives for the quarter included building strong funding capacity and overall liquidity, increasing our use of leverage, diversifying and reducing our cost of capital, concluding prior credit situations and, of course, originating high-quality and high-yielding investments. We accomplished most, if not all, of these objectives during the quarter. However, our earnings were impacted by the significant prepay activity we've experienced over the past several quarters on our overall portfolio size despite strong new commitments, growing investment fundings and stable core portfolio yield. As in the past, we believe any shortfall is temporary and will be more than made up during the rest of the year as the fundamentals of our industry and our business continue to be strong.

With regards to investment portfolio activity, during the quarter, TriplePoint Capital signed $192 million of term sheets with venture growth stage companies, and we closed $90 million of debt commitments to 7 companies at TPVG. Both signed term sheets and closed commitments were up from last quarter. Three portfolio companies were fintechs, or financial technology companies; 2 were in the consumer fitness or better yet, fitness tech category; and 2 are companies in the mobility category with 1 focused on warehouse automation with software and robots and the other an e-bike manufacturer. Almost all of these companies have raised equity rounds recently, and many actually have enterprise values greater than $500 million.

We also received warrants valued at $1.6 million in 13 portfolio companies as a result of these commitments and new fundings as compared to receiving warrant investments representing $3.8 million of value in 26 companies during all of 2020. Given the strong equity investment activity within our portfolio, which I'll actually discuss in more detail later, we made 4 direct equity investments valued at $2.3 million. In 2020 as a whole, we made direct equity investments of $2.3 million in 8 companies.

During the first quarter, we funded $56.9 million in debt investments to 7 companies, which was in line with the guidance we gave of targeted gross fundings between $50 million and $75 million for Q1 and Q2. The debt investments we funded during the quarter carried a weighted average annualized portfolio yield of 12.6% at origination. The yield profile this quarter reflects the strong credit profile and substantial cash reserves of the obligors funded. In fact, one obligor funded is EBITDA positive and another has several billion of cash reserves.

As noted in today's earnings release, we have funded over $20 million of new loans just one month into the second quarter, and we have funding requests in process from portfolio companies for roughly an additional $25 million to $30 million here in May. As a result, we expect to come in towards the higher end of the $50 million to $75 million targeted gross funding range for the second quarter. Consistent with the prior guidance, we expect gross fundings for Q3 and Q4 to come in between $100 million and $150 million per quarter, supported by our backlog as we are building -- the backlog we are building as well as the pattern of our portfolio companies drawing on existing unfunded commitments towards the second half.

We are seeing substantial equity fundraising activity in the venture capital industry as a whole and within our portfolio, in particular, which we believe is a testament to its quality. During the quarter, 10 portfolio companies raised over $700 million in capital in total in addition to 5 portfolio companies raising over $200 million in capital last quarter and 27 portfolio companies raising rounds during 2020 as a whole.

Robust venture capital industry-wide equity financing activity does 3 things. First, it creates demand for debt to complement or top off an equity raise and to be drawn upon in the future. Second, for others, it allows them to accelerate growth even faster in order to achieve higher valuations when they ultimately raise equity, and therefore, they raise debt to help finance that accelerated growth. And third, for those companies that have raised equity capital and already have debt, it allows them to delay drawing on existing lines and in many cases, to pay off outstanding debt to save on interest expense given their large cash positions. Although given their cash burn profile, there's always the potential to revisit a debt financing with them after a couple of quarters.

We are seeing all 3 right now in addition to equity investors willing to invest earlier while still rewarding anticipated future growth from a valuation perspective. The robust equity environment is generally very positive, improving the outlook and liquidity of existing portfolio companies. And as a result, we also received accelerated fees and income from prepays.

Given our portfolio quality, our unique access to these rounds of financing and a robust exit environment, we are also increasing our direct equity investment activity to take advantage of our relationships for the benefit of shareholders. These are not purchases of secondary positions from third-party marketplaces or sellers. Rather, we're actually selectively investing in rounds typically led by one or more of our select VC funds and investing alongside of them, in most cases, in existing obligors and in other cases, future obligors. These are rounds that are generally aren't even available to many other venture capital investors. So we think this is something very differentiated for our shareholders that we expect will have a long-term benefit of not only the upside potential from the investments, but also from cementing our relationship as a lender to these companies.

During Q1, we had loan prepayments of $36 million. And as a result, we achieved an overall weighted average annualized portfolio yield on total debt investments of 13.3% for the quarter. Excluding prepayments, core portfolio yield was 11.9%. As Chris will go into detail later, these were more seasoned loans that paid off early this quarter. Here in the second quarter, we've had about $46 million in prepays, generating more than $2 million of accelerated income. At the end of the quarter, our 71 portfolio companies were spread across 30 subsectors with our largest concentration, again, in business application software, which represents nearly 11.5% of our portfolio.

Moving on to credit quality. During the quarter, one company was removed from category 1 as a result of a prepay, and one company was removed from category 5 as part of the sale of our notes, which was consistent with our fair value mark on that investment as of Q4. Based on the continued progress of our 2 category 3 obligors, we expect to upgrade both over the next 1 to 2 quarters. Our one category 4 portfolio company, Roli, is our only loan on nonaccrual and continues to build momentum with its business, and we are cautiously optimistic for their continued progress here in 2021.

During the quarter, 2 portfolio companies completed their SPAC mergers, Hims and View, with our positions in both companies reflecting an additional net unrealized gain of $1.2 million. Our portfolio companies Talkspace and Live Learning Technologies announced their SPAC mergers during the first quarter as well. As mentioned in today's earnings release, subsequent to quarter end, portfolio companies Sonder and Enjoy also announced SPAC mergers.

Generally speaking, we don't mark up our investments in these companies until merger exchange ratios are announced. And when they are, we further discount given the uncertainty associated with their completion. So that generally results in gains in our investment on an unrealized basis after the SPAC merger closes rather than before. While there has been some slowdown in new SPAC issuances, there hasn't been a slowdown in exit activity within our portfolio. In fact, we have another almost dozen TPVG portfolio companies actively exploring SPAC exits, IPOs or M&A exit this year, which, if consummated, will unlock additional value for our shareholders from our equity and warrant portfolio.

In closing, we continue to follow our long-term playbook of nurturing strong relationships with our select venture capital partners and meeting the needs of their venture growth stage companies through deliberate and disciplined portfolio growth while generating strong returns for shareholders.

With that, I'll now turn the call over to Chris.

Great. Thanks, Sajal, and hello, everyone. Let me take you through an update on the financial results for the first quarter of 2021. Total investment income was $20 million with a portfolio yield of 13.3% on total debt investments for the first quarter as compared to $20.8 million and 12.7% for the first quarter of 2020. Operating expenses were $11.1 million as compared to $8.6 million for the first quarter of 2020, and operating expenses for the quarter consisted of $4.4 million of interest expense, $2.9 million of base management fees, $2.2 million of income incentive fees, $0.5 million of administrative agreement expenses and $1 million of general and administrative expenses.

We earned net investment income of $8.9 million or $0.29 per share and net investment -- net increase in net assets resulting from operations of $11.9 million or $0.38 per share. During the first quarter, the company recorded $15.7 million or $0.51 per share of net realized losses on investments consisting primarily of the sale of the company's investments in Knotel, which was rated a 5 credit on the company's watch list. Net unrealized gains on the investments for the first quarter were $18.6 million or $0.60 per share, resulting primarily from the reversal and recognition of previously recorded unrealized losses associated with Knotel as well as net unrealized gains on fair value adjustments to the existing portfolio and was partially offset by $1.4 million of unrealized losses due to changes in foreign exchange rates.

As of the end of the quarter, the company's total net assets were $401.8 million or $13 per share compared to $400.4 million or $12.97 per share at December 31. I'm pleased to announce that our Board of Directors has declared a distribution of $0.36 per share from ordinary income on April 29 to stockholders of record as of June 16 to be paid on June 30. We have significant spillover income, totaling approximately $14 million or $0.45 per share at the end of the quarter to support additional distributions in the future.

Before I share an update on commitments and availability of capital for investing, I would like to remind everyone that while prepayments are a natural part of our venture lending model, it does come with a great deal of uncertainty. We've previously shared with you that portfolio company liquidity events, such as IPOs or M&A events, we will often get very little advanced notice of loan prepayments. Having said that, one of the other aspects of prepayment activity is that the origination vintage of a loan that prepays really does matter. Given the nature of income acceleration when a loan prepays, the characteristics of income changes the longer the loan remains outstanding.

For example, should a loan repay or prepay in its first year, we would generally recognize a comparatively higher level of income acceleration as compared to a loan prepaid in, say, its second or third year outstanding. For example, Sajal mentioned earlier that we had already had $46 million of loan prepayments in Q2, generating more than $2 million of accelerated income. This compares to $36 million of prepayments in Q1, which generated approximately $2.2 million in income.

Now let's move to our commitments. We reported unfunded commitments totaling $168 million based on our success, increasing commitments by $90 million for the quarter. $122 million of this total will expire during 2021 if not drawn prior to expiration. In addition, all of our unfunded commitments have a primary floor now set to 3.25% or higher.

The company ended the quarter with a record level of investment funding capacity resulting from successful debt raises and strong cash flows from the portfolio. We continue to see the ongoing amortization of principal and loan prepayments as a natural and a very good aspect of high quality and diversified venture lending portfolio. As of quarter end, the company increased its total liquidity to $466 million compared to $252 million as of December 31. Our total liquidity consisted of $116 million in cash and $350 million of availability under our credit facility.

As previously reported, as of year-end, we increased our total commitments under the credit facility to $325 million and extended the revolving period to November of 2022 and further extended the scheduled maturity date to May of 2024. This amendment enhanced the effective borrowing capacity for us during the extended term of the credit facility. In January, we further increased total commitments under the credit facility to $350 million and added an additional lender to the bank syndicate. We continue to also have the flexibility to increase the line further to $400 million under the existing accordion feature.

In March, we completed a $200 million private institutional notes offering. These notes are unsecured and bear interest at a rate of 4.5% per year, payable semiannually and mature in March of 2026. DBRS issued an investment-grade credit rating in connection with the transaction. Recall that we completed our first investment-grade institutional notes offering in March of 2020 for a total of $70 million, which remains outstanding today. With the proceeds from the offering, we immediately paid down $118 million outstanding on our credit facility. And on April 5, we fully redeemed at par our traded baby bonds, which carried a higher interest rate at 5.75%. With this redemption complete, we expect to lower our cost of capital going forward.

During the month of March, we incurred approximately $360,000 in interest expense from the date we closed the 2026 notes to the date we were permitted to redeem the baby bonds. In connection with the redemption, we do expect to record a realized loss on repayment of debt of approximately $660,000 in the second quarter. We will reborrow under our credit facility over the remainder of the year to grow the portfolio with accretive debt financing to benefit our shareholders. We expect that we will have sufficient available capital to execute on the funding estimates that had been previously provided by Sajal during his remarks.

Aggregate outstanding borrowings at the end of the quarter were $345 million and consisted of $270 million of private debt notes and $75 million of baby bonds. As of the quarter end, there were no debt outstanding under our credit facility. We ended the quarter with 0.86x leverage ratio or an asset coverage ratio of 217%. But with the baby bond redemption completed just a few days after the end of the quarter, we note that the leverage ratio is 0.57x on a pro forma basis.

During the first quarter, DBRS maintained its investment-grade rating on TPVG given the strength and diversity of the portfolio and reasonable level of leverage we maintain. And in April, DBRS confirmed the company's investment-grade BBB long-term issuer rating and upgraded TPVG's trend outlook to stable.

This completes our prepared remarks. And at this time, we'd like to take your questions. And so operator, if you could please open the line for questions at this time.

(Operator Instructions) Our first question today comes from Finian O'Shea from Wells Securities (sic) [Wells Fargo Securities].

Just a couple of higher level questions on, first, with the SPACs or exits in general. There were a couple -- Sajal, you said a couple were announced recently, and Jim said there was a lot of active dialogue. Can you give us just at a high level portfolio wide how these valuation discussions compare to, I suppose, both your portfolio marks and where -- yes, just how they compare to your portfolio marks?

Sure, Fin. This is Sajal here. So generally speaking, most of the SPAC mergers have been at premiums to the valuations for us when we received our warrants. As I explained during my prepared remarks, the challenge is when they announce the SPACs, they'll put out a number of enterprise value but they don't actually disclose the exchange ratios. And so we don't actually mark up our warrant or equity investments until more information is known, for example, when the merger ratios or exchange ratios are actually filed publicly. And then when they do that, we then further discount given the uncertainty associated with the SPACs being completed, not that we judge them individually, but just in general, a liquidity discount. And so that's why we don't see the significant accretion in value of our warrants and equity investments until the successful close of the SPAC merger.

Okay. That's helpful. And also, Sajal, can you sort of recap, you had some interesting commentary on the demand for debt being very robust paired with the very robust equity fundraising environments that would logically tell us perhaps the opposite was at risk that equity would be overtaking the demand for debt. So I guess just to summarize, what's the main driver? Are there companies staying private for longer? Are there more companies [where] they want more debt in their stack? Just how would you sort of simply outline that to us?

Yes, I'd look at it a couple of ways. So I'd say, first, it's just given venture capital investment activity, so there are more companies out there. So the market opportunity continues to grow based on VC fundraising and VC investment activity in general. And then I think the other key element, which Jim remarked on, is we're now at the other end of the pendulum. We're in growth mode. Everyone's growing, and they're growing fast and faster. And so in order to finance that growth, they're using a combination of equity and debt -- or some are using combinations of equity and debt, some are using debt only and some are using equity only. And so I think we're seeing all of the above. And so we're focused on quality of companies that reach out, but I'd say that's generally what we're seeing. We're seeing all 3.

Our next question comes from Casey Alexander from Compass Point.

Was there -- was the quarter kind of exacerbated? Was there a mismatch in terms of the timing of repays versus the timing of originations? Did repays come early in the quarter? And were originations stacked towards the back of the quarter?

Chris, do you want to take that?

Yes, I will. Yes, so I think generally, that is what happens, Casey. Fundings tend to occur towards the end of the quarter and usually in the last month of a quarter, in particular. And prepays, I think we had announced on our year-end results that we had already had some prepay. So that was definitely the case for Q1, and I would argue that that's pretty typical where fundings tend to average towards the latter half of a quarter and prepays can happen in the early part as well.

Okay. The prepays came in investments that were later in their maturity cycle so they had less accelerated income associated with them. I just want to make sure that I understood correctly what you said.

Yes. So I misunderstood. I thought your question was the timing of prepay in a quarter specific to...

No. That's correct. That's what the first question was. My second question is now the repays that you did have, they were also later in the maturity cycle of those investments, and so they had less in terms of accelerated income.

I would say directionally, that is true. It was not significant. But yes, directionally, that was true.

Yes. Okay. You didn't -- I do want to understand, make sure that I understand, because you've had so many transactions that involve SPACs, right? Your positions, in general, when a SPAC deal closed, you get paid off on the debt. But the stock -- the clock doesn't start ticking on your ability to monetize the equity until generally 6 months after the SPAC deal closes. So it's similar to the way the treatment that you get for an IPO. Is that correct?

So it's actually -- it's a mix -- oh, sorry, Chris. I'd say it's a combination of the 2, Casey. So I'd say in certain situations where we have a direct equity investment alongside warrants, we're more likely to be subject to the lockup. And then in scenarios where we're just generally a warrant holder, we're less likely to be subject to the lockup.

That's interesting. I didn't realize that. Okay. And -- okay. I think that's all of my questions. I'll step back in the queue. If I have any more, I'll hop back in.

Our next question comes from Christopher Nolan from Ladenburg Thalmann.

On the equity investments that Jim was referring to in his prepared statements, equity investments are roughly 7% of the portfolio now. What percentage are you looking to increase them going forward?

Yes. So this is Jim answering. I would say we're not managing the business by a certain percentage. Equity investments are opportunistic. We're being very selective with them. And it's only because of this environment and some of the, let's say, better, high-quality companies we're seeing that having a small slice of participation in them alongside of our debt financing lines, we think, is beneficial to all. So we're -- it's always going to be a smaller percentage of our business, and it's more of an enhancement to yields and returns and opportunistic in today's environment than it is some kind of managed, controlled percentage business.

Right. And so it would be, side-by-side, equity and debt that would be the type of structure that you'd be looking in those type of instances?

Generally. Generally. In some rare cases, equity may start, and then we do the debt, other cases. Most cases, debt starts, and then we'll have the right to invest some equity as part of the deal.

Great. And as a follow-up and as a more general venture capital question, can you -- how would you characterize the venture capital equity environment? Is the terms that VCs are able to secure from companies similar to what they would have been a year ago? Or are they more in favor of the company? Just trying to get a sense as to where the leverage is in terms of the venture capital equity funding environment.

Yes. Sajal may want to add to this as well. But for sure, we always hate using the word robust, but it's -- there's an awful lot of equity capital out there. There's a lot of participation by some of the, call it, nontraditional participants. And look, there's record valuations. There's record amounts of equity, and $100 million or so is the new norm for venture growth stage companies in equity raising. But in the long term, is it some -- it's all great drivers for our debt. And acquisitions, by the way, are another very good use of our debt financings these days opportunistically.

But in the long run, I would say equity has gotten more competitive, if anything, because of the amounts of equity not really affecting venture lending. This is more in the equity world. But we're focused on working with just our select venture capital investors, and they pretty much are associated with the best, call it, tech and life science deals over the last several decades. And in the venture ecosystem, the best deals continue to go to the best venture capital funds, in our opinion, and that's kind of what we focus and concentrate on. So kind of a long answer to your question. But in this environment, yes, there's a lot of equity. It's a little more competitive among the venture capital funds at large.

Our next question comes from Ryan Lynch from KBW.

I just wanted to talk about kind of the environment for deploying capital. Looks like quarter-to-date, you guys have received net repayments due to the strong prepayments you guys had so far quarter-to-date. Based on everything you said, it sounds like the venture capital equity markets are going to continue to be strong. You announced several SPAC mergers. It sounds like exit activity could potentially be pretty robust, which is good for your equity investments as well as some of your warrants. But it seems like that could potentially put pressure on net growth in the portfolio. So can you talk about growing your portfolio on a net basis given the robust exit opportunities in the environment today?

Ryan, Sajal here. So I would say I think it's a function of pipeline and portfolio management. So as we look to the existing unfunded commitments that we have, right, so we would look to the robust equity and M&A activity or exit activity impacting utilization and -- actual utilization or timing of utilization of existing unfunded commitments. But then I'd say it's the new originations, the new pipeline, the new opportunities where we have more certainty of utilization.

And so I'd say it's just a, again, a portfolio mix question. And so we're going through a rebalancing of sorts of, again, given just the strong equity investment activity of the portfolio, those with significant amount of cash reserves and unfunded commitments either delaying or not going to draw, and then we're replenishing the pipeline and the commitments with -- new unfunded commitments with either draws at close or higher likelihood of utilization given where we're entering -- attaching from our commitment perspective.

Okay. Understood. And then let me know if I'm mischaracterizing this, but I believe you said you made $2.3 million -- you deployed $2.3 million in direct equity investments into 4 companies this quarter that did not have any associated debt investments that you had previously made, which I believe is something that is sort of a new focus of yours going forward, making just the sole equity investments. So correct me if I'm wrong with that.

But if I'm correct in that, why -- sort of why make that strategy shift, not a complete strategy shift, but the why kind of tilt that a little bit more in this environment? What are you seeing there? And then can you just provide kind of a framework that you guys use to identify and how you guys choose? Because I'm assuming you guys get those opportunities a lot. What is the framework that you guys are using to specifically choose those companies that you're willing to just make direct equity investment into without debt?

Sure. Let me start. And then Jim, it may make sense for you to jump in as well. So Ryan, let me first comment, of the 4 equity investments made during the quarter, all were existing portfolio companies. So it's not -- but I do think that there is a timing. So there are scenarios where, again, given the robust equity environment, given the relationships we have, where we're talking to a portfolio company about a debt financing, we may be in term sheet stage, and then an equity round potentially preempts.

And so again, the benefit of the TriplePoint relationship and the connection and their desire to want to build a partnership with us despite the fact that they're raising large, huge equity rounds, we say, well, let's use this as an opportunity to build partnership and build a relationship earlier. And so we'll say, great. We see the knowledge of who's leading the round, the valuation. We knew it was something attractive to us from a debt perspective. And so we use the fact that we have access, that we have the knowledge to say, great, actually let's, in this scenario, write a check in the equity rounds, establish ourselves into the company, into the cap table, develop that rapport with the team, get the knowledge and the learning, see how they perform. And then when the debt opportunity arises, we can preempt or potentially even drive a premium because of the fact that we're already in the cap table.

So I'd say that's the nuance here is because of the robust equity environment, there are scenarios now where we're seeing the equity may go in sooner rather than lend first, see an equity round happen and then write an equity check. I think that is also a piece, and that's what some of this quarter was. But I think the other comment we're saying is historically, these were smaller checks that we're writing. And I think because of the robust exit environment, because of the quality of the companies that we're seeing, we're also proposing to take these transaction sizes up before they were -- again, we said $2.3 million in 8 companies last year versus $2.3 million in 4 companies this year.

So we're saying we think it moves the needle more to make the check sizes slightly larger, not huge. We're not leading rounds, and that's another key thing to point out. We're not -- these are not rounds where we're taking warranties or ownership or continue to be a minority shareholder participating along -- this is not a PE model where we're saying we want to be a controlling investor. This is us taking advantage of the access, the unique kind of relationships we have to get into a round when plenty of other VCs have tried to lead that round or co-invest and they couldn't and because of our position, we're able to do so.

Okay. I can only add, we're not in the stand-alone, and never will be, stand-alone venture capital equity business. There's plenty of good folks we work with that are well known for that. And in addition, there's a number of cases out there. I mean we're pretty proud that our written proposals outstanding has doubled this quarter over last quarter. You started to hear about the backlog and sizable pipeline. But in some of these cases, we'll be talking to the companies on debt. Along will come the equity round. Haven't yet finalized our debt, and so we'll have a small piece of the equity and then put our debt together. But they're always generally associated, and we're not in the stand-alone equity business.

Okay. Understood. I just had one kind of quick modeling one. Chris, you mentioned $2 million of accelerated income in this quarter -- excuse me, in Q2 already versus $2.2 million that you received all of Q1. Do you, by any chance, have the accelerated income you guys received in the fourth quarter of 2020? If you don't have that, you can always follow up.

Yes. I can follow up. I think we have that in the earnings release. We would have had that in there. I can follow up with you on that.

And our next question comes from Devin Ryan from JMP.

Really, most of my questions have been asked. But I'll start with just a higher level one on the SPAC market since you guys touched on it and it's impacting the business a bit. So clearly, a recent slowdown in new IPOs, but there was a record number of IPOs announced in the first quarter. I think there's 400 SPACs or more are looking for a deal, and I think you noted maybe another dozen firms in the portfolio exploring SPACs.

And so I'm just curious, with some of the recent maybe indigestion in the market, is that changing appetite? Or at least are you hearing that at all from some of the portfolio companies around their appetite to go public via SPAC and maybe that changes kind of the trajectory here? Or on the flip side, is there just so much money [but it] still is looking to do a deal that this is going to take at least a few quarters or more to kind of work through the system even if we don't see another kind of IPO quarter like the first quarter?

Devin, this is Sajal. So I'd say the dozen or so portfolio companies pursuing exits this year, it's actually not all SPACs. And so it's actually -- it's all 3 forms. It's SPACs. It's traditional or old-school IPOs and M&A. And so I'd say, definitely, we have portfolio companies exploring, actively looking at -- working on traditional IPOs. And so I think it's, again, it's a function of the entrepreneur, the investors in terms of what path of exit they'd like to pursue. I think there's no doubt that there's -- the SPAC market has been impacted by some of the accounting and regulatory changes. But again, we're still continuing to see existing SPAC sponsors continue to be active in terms of reaching out and exploring conversations with companies.

So I don't think it's necessarily slowed down existing SPAC sponsors, although it may have slowed down new SPAC sponsors' ability to raise capital. And then I think, again, as I've said before, our perspective is SPACs are empowering for portfolio companies, right? It enables them to make a decision if they want to go public versus a traditional investment bank and then deciding [with respect] to investment banks. And so we think they're generally positive, but the ultimate kind of self-governing aspect of a pipe is -- of a SPAC is the pipe and your ability to raise the pipe. And so I think that's what keeps the sanity in the SPAC market is the quality of the pipe market and the standards that's required for companies to raise the incremental capital.

Okay. Great color. And then maybe as a follow-up, appreciate all the commentary just around kind of how strong kind of both debt and equity markets are at the moment, and clearly, a lot of optimism. I'm curious, if you look at it more from a subsector perspective, are there any areas where the risk rewards are standing out? I'm not sure how much you want to share, but where maybe there's a little bit more interesting opportunity where it's somewhat differentiated versus another area of the market from a subsector perspective.

A key element of our model is to invest where our select VC -- or to lend to those subsectors of tech where our select sponsors are investing their capital. So I'd say our model isn't to second-guess or to say that we want to go in this sector because everyone's going that way. I would generally say that across the board, all sectors, subsectors are performing well. But I think fundamentally, we want to lend to those sectors where the equity dollars are flowing into because that validates enterprise value. It validates investor support. It generates significant liquidity for those companies. And so those are all kind of key characteristics for us from a credit perspective.

And so I think that's kind of what ultimately governs us. I do think there are some sectors where you can argue equity valuation multiples are super robust. And so as you look to your upside potential from the warrant, you're sort of making sure that you are not getting too aggressive in terms of assumptions from upside return because valuations may be particularly robust. But I'd say generally, we want to be in those sectors that are attracting the equity dollars.

And our next question is a follow-up from Casey Alexander from Compass Point.

Yes. I just wanted to clarify one thing that Chris said. You said that the effective leverage ratio pending the repayment of the baby bond was 0.57x. Was that correct?

That's right. Yes. So basically, just take the leverage as of the end of the quarter, use cash to pay down the bonds and you get to 0.57x.

Yes. Okay. I got it. Just wanted to double-check, make sure that I heard that right.

And ladies and gentlemen, I'm showing no additional questions. I'd like to turn the conference call back over to Mr. Labe for any closing remarks.

Thank you, operator, and thanks to everyone for joining our call today. As you can tell, we're pretty bullish for our prospects for the remainder of the year as the fundamentals are there, the demand is robust and we have a healthy backlog pipeline and the liquidity now in order to achieve our goals in 2021. Thanks for your continued support, and we look forward to talking to you on our next earnings call. Have a good day, everyone.

And ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending. You may now disconnect your lines.