Animal Spirits Podcast - Talk Your Book: The Private Credit Opportunity Set

Episode Date: January 27, 2025

On this episode of Animal Spirits: Talk Your Book, Michael Batnick and Ben Carlson are joined by Kyle Brown, CEO, President, and CIO of Trinity Capital to discuss valuations in the VC market, what advisors should be asking about when investing in this space, issues with crowding within the private credit space, and much more! Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by Trinity Capital. Go to trinitycapital.com where they have different investment offerings for institutional investors, wealth professionals, and public shareholders. Check all their different alternative asset. Funds at trinitycapital.com. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael

and Ben. We've spoken a lot about private credit, venture debt, and we're going to continue to speak about it because it's becoming a bigger and bigger part of the financial ecosystem. And one of the things that we spoke about on this podcast that was interesting was I was of the opinion, or I am of the opinion, I think, that if you're going to be in some of these deals, scale is a huge advantage. The space that Trinity Capital plays is a little bit downstream. It's not like these mega-cap private deals. So scale is an advantage for the larger deals, but it's also where a lot of the competition is, right? It's the same, I don't know, six to eight firms that are competing with each other. Right.

Yeah, because those huge private equity behemists are. are all in this space now. I thought it was interesting. So we talked to Kyle Brown today for Trinity Capital. He's the president and CEO and CIO. And I thought it was interesting to hear him talk about the fact that the businesses actually probably prefer to work with some of the different companies as opposed to the banks. There's probably a little bit more wiggle room there, right? And I think the idea is that like, oh, if the banks ever came back into this space, it would totally change. And maybe it would change parts of it. But I'm guessing a lot of the businesses probably prefer to work with these direct deals as opposed to going through banks

and their different credit standards. Yeah. Interesting conversation. Definitely a space that we're going to keep a close eye on over the next couple of years. So you and I are learning about this, too, as we go. And I think this is definitely a different part of the private lending space as well. So it's interesting to hear this from the tech side of things and late state growth companies, that sort of thing. Yeah. All right. Here's our conversation with Kyle Brown of Trinity Capital. Kyle, this year has been, or last year, I guess, has been the year of private credit. Ben and I have said a lot in the show that if you look at my inbox, it's hot.

It is hot. And so the question that I have for you is, are you seeing more competition? You must be seeing more competition for some of the deals. Are you seeing any sloppy investing behavior? Is this favoring the borrowers because there's so much capital coming in? Like, how is the environment different today than it was, say, I don't know, you've been doing this for a while a couple years ago? So you hear a lot of money. is flowing into private credit. You hear kind of as a result of that, spreads have been tightening,

right? Spreads are tight everywhere. Spreads are tight everywhere. This is mostly true, though, in middle market and upper middle market. So sorry to cut it. I've not caught you off two times in the first minute of you speaking, but for our listeners, what are those terms? Because we hear them often, but I think most people don't know what those terms mean. So these are going to be mostly private companies that are more at scale. So there's going to be a larger company. upper middle market. This is where, you know, Blackstone, Carlisle, this is where they're trying to lend a billion dollars for a P.E. Buyout deal. Okay. So mega cap private companies? Mega cap. Yeah, kind of mid to mega cap companies. And a lot of private credit, you know,

the attention has been primarily focused on, I'd just say, a dozen large private credit firms. And if you're a pension fund and you're a manager of pension fund, you have to deploy a billion dollars in a private credit, you want to sleep at night. And so the idea, at least over the last few years has been, let's put that with long-term established firms who've been doing this a long time. And, you know, that mindset has worked. But the problem is those dozen or so large firms have been chasing the same deals. They have a lot of money to deploy. And it's turned into really beta returns, which is why you see those compressed spreads. And so that's not the area we deal. And we deal in the lower middle market, sub one billion dollar valuation companies. And that, those spreads have not.

been squashed, the same as the middle market to upper middle market. So it's just private credit now, you're having to, if you're an allocator of money or a high net worth family office, you're thinking, all right, where is the money, where are the spreads, where are the returns? And you're having to get a little more creative. You're having to start looking outside of, you know, the 15th Blackstone Fund. And so there are lots of opportunities out there, but you're having to do a little bit more work to figure it out if you're an investor. With all the capital flowing in here from advisors and retail and institutional investors, what is the actual capacity here?

Are there enough deals and companies and they need to borrow to go around? There's significant, significant capacity from here. In the upper middle market, middle market, I think you have a lot of firms who are just crossing their fingers hoping that private equity dollars start to flow, big transactions and M&A activity picks up. I don't know if that's going to happen or not. I think that sometimes perception matters more than reality. And right now, everyone perceives 2025 and 26 are going to be good years for business and finance. And so that might happen. What's really happened, though, is banks are lending

less. They have more regulations on them. They have less deposits. And they have to lend, they have to lend less. And so what that's opening the door for are for private credit firms who focus on lower middle market. And there are thousands, thousands of companies who raise money, who need to find an exit, who need to find a new home, and the banks are just not there to fund those transactions like they used to.

So that's where the private credit opportunity really is exciting. I'm sure you're hearing this question a lot. Given the rate environment, all right, awesome. There's a spread to which you lend companies and the income, the rates are healthy for the investor. But is there a point in which, like, if the pendulum swings too far into an area where it's now dangerous in terms of the rates that the borrower is paying?

Well, I mean, companies have certainly been challenged, right, the last couple years. And if they're highly leveraged or over leveraged, they're filling a pinch, right? For companies in the lower middle market, they were taking on less debt, that has been less of an issue. And so rates have decreased a bit, even if they stay steady. we have seen our portfolio really stay strong. That coverage for debt service payments has continued to stay strong. So I don't think, you know, when I'm talking about a lower middle market, I'm talking about, you know, think 100 to 200 million ARR companies, a billion dollars

or less kind of valuation, they have the ability to service that debt and they're doing fine. So barring some economic macro changes that really reduce revenues, the debt service is sustainable right now. Let me ask you a new well question. So I was talking to a friend of mine and he's in the industry. I'm like, what does LTV mean within the context of these companies? Like I know I know what it means, but like what does the denominator actually mean?

So let's say that the LTV is, whatever it is, 30%, 40%, whatever it is, to assess the ability of the borrower to repay their debt, what are you guys looking at to feel confident that they're going to be able to make good. So it's just, it's one metric. So I'll give you one example. Let's say you're a 100 million ARR enterprise software company. You might be valued today at 500 to 600 million, right? Five to six times ARR.

And so if you're at a, if you're at a 20% loan to value, that means you've got somewhere around 100 to 120 million of debt. Yikes. So loan to enterprise value. And that would be high, that would be on the higher end, I think. we typically average around 10 to 15% kind of loan to enterprise value. So why use market cap? Like why use enterprise value instead of like a cash flow metric?

You will. That's why I said. It's kind of it's one metric, right? And if you are, so we deal a lot on kind of late stage venture towards PE backed five to 50 million of EBITDA. And so if you are still growing rapidly and still burning some cash, then we might look at you and think about your ARR. loan to value a little bit more than we would if you were a cash flow positive company where

we're really focused on, really focused on, you know, debt coverage ratios, right? So it does flip. What is the state of the late state venture industry at this point? Because as you mentioned, there's not been a ton of activity on the IPO front and M&A and that sort of stuff has kind of calmed down. Where do we stand there? Are they needing to tap the debt markets more because of that? So we have not seen a massive increase in like loan to value for venture back company. it's a robust market. You have not a record, but close to a record amount of dry powder sitting on the sidelines for venture. And the money is flowing. If you take out 2020 and 2021, which were just wild years during the ZERP policy, it's just a vibrant, robust market.

So money's flowing, deals are happening. The key, though, is that the deals are happening at greatly reduced valuations. Because the venture money, they don't care. They're looking for a 3 to 10x return. So if they can deploy money into a company at a much lower valuation, it doesn't matter if they've raised a lot of money to date. So they're looking for the right deals. And what you're seeing as a result of this is companies that have, we're hoping and praying that they can work into that valuation that they set in 2021. They have, they've had to come to Jesus moment. And they're taking the money. And they're taking in a much lower valuation. So for a lender, we don't necessarily care about the valuation as much.

right, but for the equity, the money's flowing. And it's, it is a pretty robust market right now. When you all are looking at companies to lend money to, how much of it is balance sheet cash flow versus, all right, we got to know the industry. We have to know the players because, yeah, things might be good tomorrow, but there's this risk over there that this could go to zero if X, Y, and Z were to happen. So how familiar are you with the business, not just the the financials? So, you know, when you're talking about lending to late stage venture back companies, it's 75% science, 25% art, right? So you are getting into the financials. You are looking at past performance and how that might mean future performance. But you're looking at the technology.

We've got multiple engineers on staff who can get in, underwrite a technology, make sure that we're not taking tech risk. Because when you're late stage VC, you should not be taking technology risk. So that's one of the things you have to underwrite. That's different than what banks or private credit firms have to do, right? So we're getting in, make sure you're not taking technology risk, making sure there's a moat around that technology so that you know that the peers and the competitors are a couple years behind you. And then the art is, who's the management? Have they done this before? Have they had to go through difficult times? Who are the investors? Do they have the ability to continue supporting these companies? That means like underwriting down at a

granular level, the fund that they're investing out of and what metrics they have in place to support this company in an ongoing basis. So that's less science. That's a little bit more art and relationships. But it is a combination of the two. But what is your your opportunities that looked like? I got to imagine over the past, I don't know, five, 10, 15 years, this late stage venture market has changed appreciably for you. It's got to be a ton more opportunity than it was in the past. There's a lot more opportunity. Part of that is a function of banks in the whole Silicon Valley Bank mess a couple years ago. There's a lack of liquidity. Banks are lending less. So there's that. But then the market's been growing, right? Companies stay long,

private longer. And then there's just a lot of innovation happening right now. AI, right? For example, you have tens of billions of dollars now flowing to an industry that wasn't receiving that type of capital just a few years ago. It creates new opportunities. So every three years, every five years, something new happens, a new market opens up, and then there's a lot of CAPEX needs or financing needs that has to happen. So, you know, right now I'd say two of the biggest things that we're financing that are really interesting are certainly AI. The revenues do not justify the amount of CAPX spend that's happening there. And as such, we're really focused on picks and shovel type financing. We've been for the last 18 months financing, NVIDIA servers,

AMD servers, the power generation equipment that goes into the data centers. This is, This is equipment that has value, whether or not the particular cloud computing company we're working with survives or not, right? So we think about that as like picks and shovel financing. And then we're doing a lot of frontier tech, just think space tech. I mean, I think our largest hold right now is with Rocket Lab, where we're providing a lot of manufacturing equipment for them to build the different machines that they're putting up in the space.

And so space and frontier technology and AI is for us right now just become a really big and interesting sector, as well as our legacy kind of enterprise SaaS. You know, that still receives more financing and funding, equity funding than any other industry. How important are the terms of the deal? Like, all right, if this goes bad, who gets paid when? Like, what does that, what does that process look like? Yeah, so we have to be senior secured, right? We need to be in front of the equity in any other financing that's in there. You know, the terms of in front of, in front of like, would there be Would there be bondholders or not in the case of a private company? No, no, we're going to be senior.

We're going to be first out. It's really important to structure these so that you can get off risk. So, you know, about a third of our deployment is just straight equipment financing. These fully amortized right out of the gate so we get repaid right away and we're typically off risk within 20 to 24 months. So you do structure it to get off risk quickly, right? What does off risk mean? It means we're going to get our principal back if things don't go right for the company. That's one way to think about it.

And then the rest of our term deals, term loan deals, they're interest only for some period of time, and then they fully amortized after that. So we're in these deals for three to four years. We're helping them achieve like a milestone that they have in front of them so they can achieve a higher valuation as they head towards another fundraise or IPO M&A type activity. Let me throw a hypothetical out to you. So we've heard the story from a lot of different private credit funds that, yeah, the reason there's such a big opportunity here is because following the GFC, there was all these rules and regulations. is in place, and banks can't lend as much anymore. So we have a new administration coming in. Deregulation is the big theme of the day. I don't know how realistic it would be to roll back all those provisions from the great financial crisis, but let's say they could, and banks

were opened up again to lend in this space. Is beyond maybe, you know, spread compression, is the current situation better than it was in the past for these borrowers? Do you think if banks were, if the floodgates opening in and banks come into this space, would the borrowers prefer to go through the lenders that are out there today? Is there a better, is there a better mousetrap there than what the banks were offering? Yeah, I mean, a couple of things. Let's say regulation changes significantly tomorrow or rules have been put in place tomorrow. It's going to be two years before things trickle down to, through the banks and to borrowers. So there's that. Like, banks do not move overnight. That's not going to happen. The second piece of it,

I think, I think companies realized over the last couple of years that a bank is high, highly leveraged, right? They're leveraged 8 to 10x on the deposits they have. And there's two problems. One, banks can only lend as much as they have capacity to do so, and that's dependent upon deposits. Deposits are down. They have less capacity regardless of what happens with regulation. So there's that. And then you have companies that have finally realized or have realized yet again that there can be bankrupts. There are things outside of their control that can limit their availability of capital from the banks that they might have borrowed from. And we're talking about private credit or a company like Trinity. We're permanent capital. There is no bank run that can

happen with us. We manage a permanent capital vehicle. And when we make commitments, we're making them based on the amount of capacity that we have available to us. And that doesn't go away. And so there is a increased cost of capital when you're dealing with a private credit firm like hours. We have a higher cost of capital, but for a lot of these companies, it's going to be worth paying that extra two to 300 basis points to know that you are going to have that money when you need it and when the company that you borrowed from said you could have it. So Silicon Valley Bank was a good thing for your business, at least from a reputational perspective. They were good. Yeah, well, yeah, banks lending less certainly good for our business

and we still do a ton of business with Silicon Valley Bank. I mean, they're still out there doing what they were doing before, they're doing it more in the form of receivable type financing and providing bank services and then providing back leverage, which is what banks have always historically done because it's less risky, right? These are people's deposits. And so we're seeing more of that traditional banking than term debt financing and taking more risk. Any concern or should investors be concerned, there's been a lot of noise about the payment and kind deals. Is that like a canary and a coal mine or explain what's going on there? Absolutely. If you're a private credit firm and you have seen in your pick interest is going up 10, 20, 30 percent, that is, in a lot of cases, that is companies working something out on the back end with a company where it just has, things have not gone to plan. They maybe cannot cover that debt service. And so they're hiding it in the form of pick. So can you explain what that means for the listener, please?

So let's say that you have a company whose revenues down, maybe they're struggling with the increase in their rates. they might come back to you and say, hey, we cannot service this debt under the original terms we had agreed to, and we cannot pay you your 12% interest rate anymore. We can only afford to pay you 8%. So what a firm might do in that scenario, if they're trying to keep the credit in good standing, they will take what they can get. So they'll take the 8% they can get from the company. And then they'll create 4% pick, which is essentially just accruing 4% each quarter. each month. It's like an IOU on the back end? It's an IOU on the back end. If you see that ticking up significantly, that's bad. But a counterpoint, isn't that better? Like, how would that have been resolved back in the day if this was just like a bank syndicate? You would have extended interest-only payments or the amortization over a longer period of time to reduce the payment structure. Or you would just write it down and write down the value of that instrument. So I think there is, there probably is some of that happening right now. Pick can be great if it's built,

and structured up front. But if you're trying to work out a deal, you're going to see, you're going to see, you're going to see that tick up with private credit firms. That can be a red flag for sure. What kind of, remind us what kind of investors are coming to you, because Michael and I have been talking for months now about the opportunity that private funds see in the advisor space in that a lot of the institutions are already pretty topped out, right? A lot of the big pensions and endowments or whatever are already at their 20, 30, 40 percent in alternatives. And advisors are the really big next opportunity set. So where are you seeing new flows coming from? Yeah, it's a lot of high net worth family office. It doesn't have to be. Like our public company,

TRIN, you know, these are a lot of retail investors who are who want some exposure to private credit and they love the dividend yield. So they're getting into the public stock. We have and manage a private funds as well. And that's going to be primarily high net worth family office wealth advisory firms who are looking to clip a nice coupon for a long period of time. And so, yeah, I think the next year to five years, you're going to see a lot of wealth management who are adjusting some of their allocations to private credit or alternative investments. They're looking for good income, consistent dividends, and quality portfolios.

So if somebody's listening and they say, okay, this sounds interesting. I want to learn more about Trinity Capital. what do they get if they invest in the equity, which, and you're a NASDAQ listed company, versus if they get involved in some of the private placements? So the public company is a, it invests across every vertical that we offer. So when you buy the public stock, you are buying into all five of our different lending businesses. So you get exposure to multiple different industries and sectors. And then you're also buying into the management company.

So, you know, we don't have a, we don't have a, we don't. charge of management fee or incentive fee, it's all part of the same company. So you're buying into an actual management company that has the ability to generate income above and beyond just the loans that we issue, which is why you've consistently seen our dividend and our company growing. We're not just a stagnant pool of assets like most BDCs out there. That would be the benefit, and it's also liquid. You can buy it and sell it, right, on the NASDAQ. Our private funds are a little bit unique in that you can, A, you're buying in at NAV, so you might end up with a little bit higher current return. There is some liquidity options available to you, but it's not as

liquid as the public stock. And then those are more thematic-based, meaning if you just want to invest in equipment financing, we're going to give you an opportunity to just invest in equipment financing. If you just want to do PE-back software deals, you're going to have an opportunity to just get into those types of credits. So we give investors a little more optionality on the private side, so they can invest in specifically what it is they're looking for. Are there tickers for investors to buy or are these private placements? The only ticker available to buy is TRIN on the NASDAQ, which gives you access to everything. I would love to do a perform a study of your more private illiquid funds versus the public

in terms of investor behavior and turnover. Do you get a sense, though, for that public, that T-R-I-N, people still look at it as more like all they care about is the dividend and the yield because that's really the, I always tell Michael, this is a selling point for private credit, especially for investors where a little nervous is just the yield. If I can bank in that yield, I am good. Do they look at the yield for that public entity as well, do you think? Because that's pretty high yield, obviously. It's a high yield because the stock's too low. But yes, it is a high yield. They are buying it for the yield. Most investors don't quite understand. We're still new. We've been trading for four years.

They don't quite understand that this is not something to compare to any other BDC. You're buying into an operating entity that also lends money. How is that different from other BDCs? So you took Ares BDC, right? All that is is a stagnant. It's a pool of assets of loans that co-invest and is managed by their management company. So almost all other BDCs are simply a pool of assets that co-invest with the ownership interest, main entity and whatever they happen to be investing into. So we're not a co-in, our public stock is not

a co-invest vehicle to management company. It should be more compared to Ares, the actually management company. Understood. Okay. So let me, sorry, Michael. So if you own the TRN, you're getting a piece of the management fees from your funds essentially then? 100% of our management fees and incentive fees flow to the public company. That's right. Gotcha. So one of the things that I've been discussing a lot is that most advisors, and I would include myself in this category, we're not experts in this space. And so I understand everything you're saying, but if you're showing me your fund or your investment vehicle versus, you know, several others, how do I, like, how do I really

diligence other than like, yeah, I like Kyle, I trust him, I, you know, track record. You pick the one with the highest yield, right? But I think that's how a lot of advisors do it probably, right? But seriously, I don't know that there's a great answer. here because I'm not going to all of a sudden become an expert on this stuff. It doesn't matter how much time in the day I have. So how do you, how do advisors or clients or whoever get comfortable with with with this? So I mean, for me, if I'm looking at BDCs, first thing I'm looking at is NAV, net asset value as a reflection of the portfolio. If it's going down, that means that

they are valuing their portfolio lower and lower each quarter. There's something negative happening in the portfolio, right? So you start with NAV because that's the health of the portfolio. And then you look at dividend. Have they been able to keep the dividend steady? If they have, that's a reflection of their ability to collect on all of those assets consistently, right? It means that their income is not going down or they're not having more negative and deterioration in the portfolio. So dividend consistency, if you can see that, hey, they've been paying this 50-something cent dividend for a few years and NAV hasn't changed. There's not a lot of reasons for it to go down, right? You can actually look at that and say, I can expect that to

continue on. So you look past, you know, past couple years' trends. They should reflect what's going forward. And then, you know, for public companies like ours, I mean, we have to value each of our loans on a quarterly basis. So you get transparency into exactly what's going on in the portfolio. And these are third-party valuations. It's done the same every single quarter, right? So there's no hiding the eight ball with the publicly traded stuff. Third party. I'm just kidding. If we looked out like five, seven, ten years in the future and thinking about, some of your competitors, and maybe some of them that you look and say, they don't have as strong of quality metrics as we do, whatever, what would be the risk for investors in some of

your competitors of, like, what is the downside where these things go wrong? And I'm not talking about they completely go bust, but just they don't meet investor expectations. I mean, you touched on a little bit. The pick is really important. If you see a significant portion in the portfolio move to pick, you know that they're hoping and praying that things work out for these companies. This is this is not a stable fund to be investing into. They're having deterioration and they're they're fixing it now, hoping that it gets figured out later. So I would say you're watching pick interest, you're looking at nav. If nav is going down and has consistently gone down, you know that there are some issues in the portfolio and that it might be makes sense

to exit before the price starts to reflect what's happening with the nav of the business. you know, the next three to five years should be really interesting. You have a lot of companies who were working with banks before, who are now moving to private credit because the options and the availability is just not there. And they have debt that's maturing and they have to find a new home for it. So you should see portfolios growing. You should see new investments being made. And there should be growth, not just of the portfolios, but you should see growth of the earnings as well. And if you don't see that, in this environment, something is, something is wrong. What do you think are some of the, so Michael asked, like, a lot of advisors aren't experts

in this space. What are the good questions that they should be asking in terms of investment process and fund structure when they're trying to figure out what to invest in and what to be in this space? Sure. I mean, I think the incentives for the manager should align with the upside for investors, right? I don't think you always see that. But, you know, I don't think a management company should continue to generate significant management fees and centa fees if they are not performing for investors. And so, you know, I think that you've seen those spreads kind of tighten up a little bit on just management fees and centa fees, and that should happen, right? There's more and more demand for it. There's more money flowing into it. Management, I mean, you should have a long

performance of this right now. There are a lot of, somebody mentioned at the beginning, there's a lot of new competition, there's a lot of groups trying to get into it. You know, if you're trying to get into late stage venture debt or growth-oriented PE-back deals, if you don't have a large portfolio that can handle some ups, some swings, who doesn't have some maybe warrant upside, you know, getting into a new fund manager right now, that could be problematic unless they have some great niche and maybe they came from some other competitor where they were already doing this.

So I think there's a lot of firms trying to get into private credit right now because it offers a great risk reward. But maybe not all these groups have been doing this for some period of time. So I think expertise and track record are probably really important right now. Liquidity. So a lot of these, I think you see a lot of larger firms are trying to raise as much permanent capital as they can. And listen, they're doing that because that means their management company is going to get more value because they're managing permanent capital, right? That is not necessarily a good thing for an investor. So whether it's a public stock that you can get in and out of, or whether it's a non-traded BDC that has quarterly

liquidity options, if I was an investor, I wouldn't want to be locked into something for the next eight years right now. How diversified of these funds? How many loans are you making? We deployed $1.2 billion last year. That is on the upswing. That would be 50 to 60 new investments to private companies just last year. I'm going to throw you a softball. You talk about the importance of management and time in. What is the background of you and your partners in terms of how many guys have been doing this for?

So we have a 17-year history doing just what we're doing right now. We have technical and engineering expertise to get in and underwrite technology to granular level. That is a big differentiator for us. We do not want to take technology risk. We want to get in and make sure

we're taking execution risk. These are private companies. These are not, for the most part, these are not public companies. And so we do need to have a really clear and good understanding as to what these companies are building, how they're building it, what the milestones are out in front of them. We've got a tenured history. And our investment committee and an executive team has been together for nearly a decade now. I've got the same team that we took this company public with.

So the record stands for itself. delivering mid-to-high teens returns for investors on a gross basis since 2008. And, you know, spreads have saved relatively consistent during that time. So I think that's a good, I think that's a good track record for investors. We've got a lot of happy, a lot of happy investors. Kyle, for people that want to learn more about your offerings, where do we send them? Trinity Capital.com. Easy enough. All right, man. Appreciate the time. Guys, thank you. Okay, thanks again to Kyle. Remember if you want to check out more, go to trinitycapital.com. Email us, Animal Spirits, at the compound news.com.