FOURTH QUARTER 2017 INVESTOR PRESENTATION Financing the Growth of - - PowerPoint PPT Presentation

SLIDE 1

FOURTH QUARTER 2017 INVESTOR PRESENTATION

February 22, 2018

Financing the Growth of Tomorrow’s Companies Today

TM

SLIDE 2

This presentation may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act

• f 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section

21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under the Exchange Act. The information disclosed in this presentation is made as

• f

the date hereof and reflects Hercules’ current assessment of its financial performance for the period reported. Actual financial results filed with the Securities and Exchange Commission in the future may differ from those contained herein in the event of additional adjustments recorded prior to the filing of its financial statements. This presentation may contain “forward-looking statements.” These forward-looking statements include comments with respect to our financial objectives, loan portfolio growth, strategies and results of our operations. However, by their nature, these forward-looking statements involve numerous assumptions, uncertainties and risks, both general and specific. The risk exists that these statements may not be fulfilled. We caution readers of this presentation not to place undue reliance on these forward-looking statements as a number of factors could cause future Company results to differ materially from these statements. Forward-looking statements may be influenced in particular by factors such as fluctuations in interest rates and stock indices, the effects of competition in the areas in which we operate, and changes in economic, political and regulatory conditions. We caution that the foregoing list is not exhaustive. When relying on forward-looking statements to make decisions, investors should carefully consider the aforementioned factors as well as other uncertainties and events. Historical results discussed in this presentation are not indicative of future results. This presentation should be read in conjunction with our recent SEC filings.

2

IMPORTANT NOTICE: FORWARD LOOKING STATEMENTS

SLIDE 3

FOURTH QUARTER 2017 INVESTOR PRESENTATION

February 22, 2018

Company & Strategic Overview Financial Highlights Portfolio Highlights Venture Capital Market Opportunity Analyst Coverage Key Performance Highlights Supplemental Information

SLIDE 4

KEY PERFORMANCE HIGHLIGHTS

SLIDE 5

5

Q4 2017 HIGHLIGHTS

(1) Excludes one-time impact of $2.4M or $0.03 per share associated with the $75.0M 2024 Notes redemption plus the non-recurring interest overlap due to the 30-day notice redemption period (2) Based on NII, excludes realized and unrealized gains/losses (3) Net regulatory leverage is defined as regulatory leverage less cash balance at period end (4) As of February 20, 2018 (5) Source: S&P CapIQ as of 12/31/17

Robust Earnings

• Net Investment Income (“NII”) of $24.5M/Adj. NII of $26.9M(1)
• Total Investment Income of $50.2M
• NII per share of $0.29/Adjusted NII of $0.32(1)
• 50 consecutive quarters of distributions since IPO

Strong Shareholder Returns

• 1YR/5YR/7YR Total Shareholder Returns(5): 1.8%/165.8%/222.8%
• ROAE(2): 12.0%
• ROAA(2): 6.3%
• Net Interest Margin (“NIM”): 10.4%

High-Yield Portfolio of Earning Assets

• Total Debt Investments: $1.44B at cost
• Effective Yield: 14.2%

Industry-Leading Originations Platform

• $7.3B in total debt commitments since inception
• Cumulative Total Net Realized (Loss) since inception of ($29.0M)
• Total debt & equity commitments: $330.5M
• Gross debt & equity fundings: $277.4M

Strong Liquidity and Balance Sheet

• $286.3M available liquidity
• $228.3M additional leverage capacity
• Regulatory leverage and net regulatory leverage: 72.9% and 62.0%(3)

Strong Capital Raising Position

• Price-to-NAV: 1.24x(4)
• “ATM” Equity and Debt Distribution Agreements
• Investment Grade Credit Ratings: S&P: BBB- | KBRA: BBB+

SLIDE 6

1.8% 165.8% 222.8% 96.3% 0.9% 62.4% 101.1% 125.9% 0.1% 28.1% N/A N/A

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% 220% 240% 1- Year 5-Year 7-Year 10-Year HTGC Peer Group WF BDCS (3/31/16)

TOTAL SHAREHOLDER RETURN % (TSR)vs. BDCs & INDEXES

6 (a) Peer Group: AINV, ARCC, BKCC, OCSL, FSIC, GBDC, GSBD, KCAP, MAIN, MCC, NMFC, PNNT, PSEC, SLRC, TCAP, TCPC, TCRD, TICC,TSLX (b) TSR is defined as stock appreciation plus distributed dividend distributions Source: S&P Capital IQ as of December 31, 2017

(a)

(b)

SLIDE 7

$0.33 $1.23 $2.43 $3.75 $5.01 $5.81 $6.69 $7.64 $8.75 $9.99 $11.23 $12.47 $13.71 $14.02

$0 $5 $10 $15

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 Cumulative Distributions Declared (per Share) $14.02 per share or ~$702 million in Historical Cumulative Distributions Since June 2005 IPO 2018 YTD Distributions Paid: $0.31

12.9% 10.1% 11.7% 12.6% 12.0% 11.0% 10.8% 11.0% 9.6% 8.6%

0% 2% 4% 6% 8% 10% 12% 14% 2013 2014 2015 2016 Q4 2017

HTGC Peer Group

6.4% 5.2% 6.1% 7.2% 6.3% 6.9% 6.5% 6.0% 5.7% 5.4%

0% 1% 2% 3% 4% 5% 6% 7% 8% 2013 2014 2015 2016 Q4 2017

HTGC Peer Group

DELIVERING STRONG SHAREHOLDER RETURNS

Return on Average Assets % (ROAA)

7

Return on Average Equity % (ROAE)

(a) Peer Group: AINV, ARCC, BKCC, OCSL, FSIC, GBDC, GSBD, KCAP, MAIN, MCC, NMFC, PNNT, PSEC, SLRC, TCAP, TCPC, TCRD, TICC,TSLX

(a) (a)

Source: S&P Capital IQ as of 9/30/17 for Peer Group and 12/31/17 for HTGC. Return on Average Assets excluding cash. NII divided by average of beginning of period total assets excluding cash and end of period total assets excluding cash. Source: S&P Capital IQ as of 9/30/17 for Peer Group and 12/31/17 for HTGC. Return on Average Equity based

• n NII. NII divided by average of beginning of period equity and end of period equity.

(1) Q1 09 distribution was paid in 10% cash and 90% stock; (2) Includes special $0.04 distribution paid in December 2009 (2) Note: The Yield Calculation may include a potential tax return of capital. Any portion of a distribution that is ultimately deemed to be a tax return of capital should not be considered. The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of its distributions for a full year. The tax attributes of its distributions for the years ended December 31, 2008 through December 31., 2017 were paid 100% from earnings and profits; however, there can be no certainty to shareholders that this determination is representative of what the tax attributes of its 2017 distributions to shareholders will actually be.

(1, 2)

SLIDE 8

$9.75 $10.51 $10.18 $9.94 $9.90 $9.96 1.14 1.56 1.46 1.23 1.43 1.32 1.07 1.07 0.92 0.92 0.96 0.94

0.5 0.7 0.9 1.1 1.3 1.5 1.7

2012 2013 2014 2015 2016 Q4 2017

$8 $10 $12 $14 $16

Hercules NAV Hercules Price to NAV Peer Group Price to NAV

(a) Peer Group: AINV, ARCC, BKCC, OCSL, FSIC, GBDC, GSBD, KCAP, MAIN, MCC, NMFC, PNNT, PSEC, SLRC, TCAP, TCPC, TCRD, TICC,TSL Note: Source S&P CapIQ as of September 30, 2017 for Peer Group and December 31, 2017 for HTGC. Stock price based on closing price on last trading day of each calendar year or relative quarter.

(a)

HERCULES CONSISTENTLY MAINTAINS A PREMIUM TO NAV

8

Price to NAV

CREATES A STRONG CAPITAL RAISING POSITION TO SUPPORT GROWTH

SLIDE 9

$747.4 $1,123.6 $1,221.7 $1,299.2 $1,324.0 $1,464.2 $1,654.7

• $100

$100 $300 $500 $700 $900 $1,100 $1,300 $1,500 $1,700

2011 2012 2013 2014 2015 2016 2017

$39.6 $48.1 $73.1 $71.8 $73.5 $100.3 $96.4 $0 $20 $40 $60 $80 $100

2011 2012 2013 2014 2015 2016 2017

HERCULES KEY PERFORMANCE HIGHLIGHTS

Net Investment Income “NII”

($ in millions)

9

$79.9 $97.5 $139.7 $143.7 $157.1 $175.1 $190.9 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200

2011 2012 2013 2014 2015 2016 2017

Total Investment Income

($ in millions)

Total Assets

($ in millions)

$587.4 $914.3 $906.3 $1,035.3 $1,252.3 $1,511.5 $1,619.8

• $100

$100 $300 $500 $700 $900 $1,100 $1,300 $1,500 $1,700

2011 2012 2013 2014 2015 2016 2017

Total Investments at Cost

($ in millions)

(a) Amount includes the one-time benefit of a litigation settlement of $8.0 million

(a)

SLIDE 10

Cumulative Total Aggregate Net Realized Gains/(Losses), Since Inception 12/03

($50.1) ($50.1) ($47.0) ($32.1) ($12.0) ($6.9) ($39.9) $3.1 $14.9 $20.1 $5.1 $4.6 $10.9

($50.1) ($47.0) ($32.1) ($12.0) ($6.9) ($2.3) ($29.0)

• $60
• $50
• $40
• $30
• $20
• $10

$0 $10 $20 $30

2011 2012 2013 2014 2015 2016 2017

Net Realized Gains Net Realized Loss Carry Forward Cumulative Net Realized Loss, Since Inception 12/03

$ in millions $0.2 $0.5 $0.9 $1.4 $1.5 $2.1 $2.7 $3.4 $4.0 $4.9 $5.7 $6.5 $7.3 $0.2 $0.4 $0.7 $1.1 $1.2 $1.5 $1.9 $2.4 $2.9 $3.5 $4.2 $4.9 $5.6 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cumulative Commitments Cumulative Fundings $ in billions

Cumulative Debt Commitment and Fundings, Since Inception 12/03

PORTFOLIO GROWTH WITH UNDERWRITING DISCIPLINE

10

HTGC IPO

SLIDE 11

Illustration: A growing debt investment portfolio provides potential for future increased dividend payout(1)

PORTFOLIO GROWTH LEADS TO DIVIDEND COVERAGE GROWTH THROUGH NII

(1) Debt Investment portfolio at $1.4 billion, at cost, as of December 31, 2017. Assumes constant effective yield, NII margin of 52.0% and constant weighted average shares of 83.8

• million. Projections are subject to change due to impact from active participation in the Company’s equity ATM program.

$1,400 $1,500 $1,600 $1,700 $1.06 $1.14 $1.21 $1.29 $1.23 $1.32 $1.41 $1.50

$1.00 $1.10 $1.20 $1.30 $1.40 $1.50 $1.60 $1.70 $1.80 $1.90 $2.00 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 + $0 Million + $100 Million + $200 Million + $300 Million NII per share Debt Investment Balance at Cost ($ in millions)

Debt Investment Portfolio Balance at Cost NII P/S @ Core Yield of 12.2% NII P/S @ Effective Yield of 14.2%

11

SLIDE 12

$3,152

$6,368 $9,605 $12,937 $26,683 $40,322

+0.04 +0.08 +0.11 +0.15 +0.32 +0.48

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000

25 50 75 100 200 300

Earning per Share(1) Net Income ($ in thousands) Basis Point Increase in Prime Rate

Net Income EPS

We anticipate each 25 bps, or 0.25%, increase in the Prime Rate to contribute ~$3.2 million to Net Interest Income, or $0.04 per share annually

RISING INTEREST RATES & HIGH ASSET SENSITIVITY WILL BENEFIT HERCULES SIGNIFICANTLY

(1) EPS calculated on basic weighted shares outstanding of 83.8 million as of December 31, 2017. Estimates are subject to change due to impact from active participation in the Company’s equity ATM program. 12

SLIDE 13

COMPANY & STRATEGIC OVERVIEW

SLIDE 14

HERCULES AT-A-GLANCE

WARRANT & EQUITY PORTFOLIO

WARRANT HOLDINGS IN

137 Companies

WARRANT GAAP FAIR VALUE

$36.8 million

WARRANT GAAP COST

$43.6 million

EQUITY HOLDINGS IN

52 Companies

EQUITY GAAP FAIR VALUE

$89.4 million

EQUITY GAAP COST

$136.2 million

137

COMPANIES

LIQUIDITY & BALANCE SHEET

AVAILABLE LIQUIDITY TO INVEST(2)

$286.3 million

REGULATORY LEVERAGE

72.9% / 62.0% net of cash

ADDITIONAL DEBT CAPACITY

$228.3 million

INVESTMENT GRADE RATINGS

S&P: BBB- KBRA: BBB+

SECURITIZATION INVESTMENT GRADE RATINGS

KBRA: A(sf)

$286.3

MILLION

DEBT INVESTMENT PORTFOLIO

DEBT INVESTMENT COST BASIS

$1.44 billion

DEBT INVESTMENT FAIR VALUE

$1.42 billion

EFFECTIVE YIELD

14.2%

DEBT INVESTMENTS IN

85 Companies

SHORT TERM MATURITIES

36-42 months

INVESTMENT SIZE

$5 TO $100 MILLION

$1.44

BILLION

14

MARKET CAPITALIZATION

FOUNDED DECEMBER 2003

IPO: June 2005 “HTGC”

ENTERPRISE VALUE

$1.6 billion(1)

MARKET CAPITALIZATION

$1.05 billion(1)

NET ASSET VALUE PER SHARE

$9.96 as of 12/31/17

HISTORICAL PRICE/NAV

~1.3x to ~1.6x range

CURRENT PRICE/NAV

1.24x(1)

$1.05

BILLION

(1) As of February 20, 2018 (2) Subject to existing terms and covenants

LARGEST BUSINESS DEVELOPMENT COMPANY (BDC) FOCUSED ON PROVIDING FINANCING TO HIGH-GROWTH VENTURE CAPITAL-BACKED COMPANIES

SLIDE 15

What We Don’t Do and What We Are Not

▪ No oil and gas exposure ▪ No CLO exposure ▪ No CMBS or RMBS exposure ▪ No metals or minerals exposure

What We Do

▪ We focus primarily on pre-IPO and M&A, innovative high-growth venture capital backed companies at their

expansion (venture growth) and established stages in a broadly diversified variety of technology, life sciences and sustainable and renewable technology industries

▪ Highly asset sensitive debt investment portfolio – 96.4% floating rate loans and with interest rate floors(1) ▪ We are generally the only lender and 79.9% are "true" first lien senior secured(1) ▪ Substantially all of our debt investments include warrants for potential additional total return ▪ Substantially all of our debt investments have short term amortizing maturities (36-42 months) ▪ Focused on strong and sustainable shareholder returns ▪ Disciplined, proven investment philosophy with 14 years of strong credit performance history

WHY IS HERCULES DIFFERENT THAN OTHER BDCs

(1) As of December 31, 2017 15

WE INVEST IN INNOVATIVE VENTURE GROWTH-STAGE COMPANIES

SLIDE 16

Hercules’ At-the-Market “ATM” Equity and Debt Distribution Agreements

▪ Equity Distribution Agreement: Up to a total of 12 million shares of common stock ▪ Debt Distribution Agreement: Up to $150.0 million of 6.25% Notes due 2024

The Benefits and Competitive Advantages

▪ “Just-in-Time” access provides control on the timing, pricing and amount of capital raised, with full

control over leverage ratios

▪ Ideal for raising growth capital when needed, proceeds expeditiously invested in new investments ▪ Exceptionally low and cost effective access to capital markets ▪ Equity issuances are highly accretive to NAV; HTGC trades at a significant premium to NAV

The Results

▪ Equity ATM Capital Program 2017: sold ~4.9 million shares for total net proceeds of ~ $66.9 million ▪ Debt ATM Capital Program 2017: sold 225,457 notes in aggregate principal amount of ~ $5.6 million

STRATEGIC ACCESS TO EQUITY AND DEBT CAPITAL MARKETS

16

HERCULES’ SUCCESSFUL ATM DISTRIBUTION PROGRAMS

SLIDE 17

WE ARE AT CENTER STAGE OF THE INNOVATION ECONOMY

17

Technology Life Sciences Sustainable and Renewable Technology Special Situations

We Invest at the Expansion “Venture Growth” and Established Stage

HERCULES HAS DOMAIN EXPERTISE IN FOUR SPECIALIZED LENDING GROUPS “WE ARE NOT GENERALISTS”

Over $7.3 billion in total debt commitments to over 410 companies since inception Offices in key venture capital markets: CA | MA | NY | DC | IL | CT Over 1000 different VC & PE firms, financial investors Over 130 portfolio companies completed/announced an IPO or M&A event since inception

SLIDE 18

FINANCIAL HIGHLIGHTS

SLIDE 19

(1)

INCOME STATEMENT: Q4 2017 VS. Q4 2016 SUMMARY RESULTS

19

Interest Income $ 46,394 $ 42,680 9% Fee Income 3,804 4,792

• 21%

Total Investment Income 50,198 47,472 6% Interest and Loan Fees 13,039 10,055 30% General and Administrative 3,744 4,010

• 7%

Employee Compensation 8,897 8,290 7% Total Operating Expenses 25,680 22,355 15% Other Income 8,000 Pre-Tax Net Investment Income-NII 24,518 33,117

• 26%

Net Realized and Unrealized Gain / (Loss) (6,152) (18,996)

• 68%

Net Increase in Net Assets from Operations 18,366 14,121 30% NII - Net Investment Income per Share (Basic) $ 0.29 $ 0.43

• 33%

Adjusted NII $ 0.32 $ 0.33 DNOI - Distributable Net Operating Income per Share $ 0.31 $ 0.45

• 31%

Adjusted DNOI $ 0.34 $ 0.35 Weighted Average Shares Outstanding - Basic 83,843 76,931 9% Three Months Ended December 31,

(1)

(1) Excludes the one-time impact of $2.4 million, of $0.03 per share associated with the $75.0 million 2024 Notes redemption plus the non-recurring interest overlap due to the 30-day notice redemption (2) Amount excludes the one-time benefit of a litigation settlement of $8.0 million.

(2) (2)

SLIDE 20

(1) (1)

CURRENT & HISTORICAL INCOME STATEMENTS

20

Twelve Months Ended December 31, ($ in 000's, except per share amounts) 2017 2016 2015 2014 Interest Income $ 172,196 $ 158,727 $ 140,266 $ 126,618 Fee Income 18,684 16,324 16,866 17,047 Total Investment Income 190,880 175,051 157,132 143,665 Interest and Loan Fees 46,585 37,058 36,889 33,390 General and Administrative 16,105 16,106 16,658 10,209 Employee Compensation 31,746 29,543 30,083 26,165 Total Operating Expenses 94,436 82,707 86,630 70,334 Other Income

• 8,000

(1)

• Pre-Tax Net Investment Income - NII

96,444 100,344 73,501 71,750 Net Realized and Unrealized Gain / (Loss) (17,446) (31,641) (30,585) (562) Net Increase in Net Assets from Operations $ 78,998 $ 68,703 $ 42,916 $ 71,188 NII - Net Investment Income per Share (Basic) $ 1.16 $ 1.34 $ 1.04 $ 1.13 Adjusted NII $ 1.22 $ 1.24 DNOI - Distributable Net Operating Income per Share $ 1.26 $ 1.45 $ 1.19 $ 1.31 Adjusted DNOI $ 1.32 $ 1.35 Weighted Average Shares Outstanding - Basic 82,519 73,753 69,479 61,862

(1) Excludes the one-time impact of $2.4 million, of $0.03 per share associated with the $75.0 million 2024 Notes redemption and the one-time impact of $2.1 million, or $0.03 per share associated with the $110.4 million 2019 Notes redemption, plus the non-recurring interest overlap due to the 30-day notice redemption for both (2) Amount excludes the one-time benefit of a litigation settlement of $8.0 million.

(2) (2)

SLIDE 21

CURRENT & HISTORICAL BALANCE SHEET

($ in 000's, except per share amounts) 2017 2016 2015 2014 ASSETS

Investments $ 1,542,214 $ 1,423,942 $ 1,200,638 $ 1,020,737 Cash and cash equivalents 91,309 13,044 95,196 227,116 Restricted cash 3,686 8,322 9,191 12,660 Interest receivable 12,262 11,614 9,239 9,453 Other assets 5,244 7,282 9,720 13,774

Total Assets

$ 1,654,715 $ 1,464,204 $ 1,323,984 $ 1,283,740

LIABILITIES

Accounts Payable and Accrued Liabilites 26,896 21,463 17,241 14,101 Credit Facilities

• 5,016

50,000

• Convertible Note 2022

223,488

• 17,478

17,170 2021 Asset-Backed Notes 48,650 107,972 126,995 126,093 2019 Notes

• 108,818

108,179 166,012 2024 Notes 179,001 245,490 100,128 99,795 Long-term SBA Debentures 188,141 187,501 186,829 186,162 2022 Notes 147,572

Total Liabilites

$ 813,748 $ 676,260 $ 606,850 $ 624,876

Net Assets

$ 840,967 $ 787,944 $ 717,134 $ 658,864 Shares Outstanding 84,424 79,555 72,118 64,715

Net Assets per Share

$ 9.96 $ 9.90 $ 9.94 $ 10.18

December 31,

21

SLIDE 22

16.9% 16.7% 16.0% 12.9% 13.8% 16.4% 14.2% 13.2% 14.4% 14.6% 14.4% 13.4% 14.9% 14.1% 14.2% 13.9% 13.8% 13.0% 12.8% 13.2% 12.6% 13.3% 12.9% 13.4% 13.2% 12.9% 12.2% 12.1% 12.6% 12.5% 10.6% 10.7% 10.3% 10.2% 9.8% 9.4% 9.2% 9.1% 9.2% 9.2% 9.2% 8.9% 9.3% 9.6% 9.8% 6% 8% 10% 12% 14% 16% 18% 20%

Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Effective Yield

GAAP Effective Yield Core Yield Loan Coupon Rate

EFFECTIVE YIELD VS. CORE YIELD – LEADS TO STRONG EARNINGS

(1) Effective Yield is inclusive of all fees, including all realized unamortized fees and all realized transaction fees including but not limited to amendment fees and prepayment fees, and is calculated based on the weighted average principal balance of loans outstanding on a daily basis (2) Core Yield excludes Early Repayments and One-Time Fees, and includes income and fees from expired commitments (2) 22

MEDIAN CORE YIELD FROM Q2 2014 TO Q4 2017: 12.9%

(1)

SLIDE 23

$898.0 $907.9

$923.9 $1,058.0 $1,137.6 $1,077.6 $1,110.2 $1,205.7 $1,211.8 $1,224.1 $1,328.8 $1,311.9 $1,287.6 $1,300.1 $1,416.0

16.9% 16.7% 16.0% 12.9% 13.8% 16.4% 14.2% 13.2% 14.4% 14.6% 14.4% 13.4% 14.9% 14.1% 14.2% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

• $100

$100 $300 $500 $700 $900 $1,100 $1,300 $1,500 $1,700 $1,900

Effective Yield (%) Total Debt Investments, at value (millions)

Total Debt Investments at fair value Effective Yield

(1)

HIGH-YIELD PORTFOLIO OF EARNING ASSETS

23

MEDIAN EFFECTIVE YIELD FROM Q2 2014 TO Q4 2017 OF 14.4%

(1) Effective Yield is inclusive of all fees, including all realized unamortized fees and all realized transaction fees including but not limited to amendment fees and prepayment fees, and is calculated based

• n the weighted average principal balance of loans outstanding on a daily basis

SLIDE 24

$26,376 $28,137 $27,065 $23,127 $28,974 $38,242 $29,900 $30,933 $34,688 $34,953 $37,418 $33,920 $37,850 $35,366 $37,159

10.1% 10.4% 9.7% 8.2% 10.2% 13.4% 10.2% 10.1% 11.0% 11.1% 11.8% 10.1% 11.1% 10.4% 10.4% 0% 3% 6% 9% 12% 15% 18% 21% Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2 -17 Q3-17 Q4-17 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000

Net Interest Margin % Net Interest Margin (in thousands)

Net Interest Margin ($) Net Interest Margin (%)

STRONG, CONSISTENT NET INTEREST MARGIN - NIM

(1) Net Interest Margin = Net Interest Income/Average Yielding Assets excluding Equity Investments 24

(1)

SLIDE 25

EFFECTIVE YIELDS

Early Payoffs Lead to Higher Effective Yields and Earnings

IMPACT OF EARLY PAYOFFS ON EFFECTIVE YIELDS

UNSCHEDULED EARLY PAYOFFS -$1.58 BILLION FROM Q1 2014-TO-Q4 2017 ($ in millions)

1 25

16.9% 16.7% 16.0% 12.9% 13.8% 16.4% 14.2% 13.2% 14.4% 14.6% 14.4% 13.4% 14.9% 14.1% 14.2% 13.9% 13.8% 13.0% 12.8% 13.2% 12.6% 13.3% 12.9% 13.4% 13.2% 12.9% 12.2% 12.1% 12.6% 12.5% 10.6% 10.7% 10.3% 10.2% 9.8% 9.4% 9.2% 9.1% 9.2% 9.2% 9.2% 8.9% 9.3% 9.6% 9.8% 5% 10% 15% 20% Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 GAAP Effective Yield Core Yield Loan Coupon Rate

$88.6 $38.7 $84.0 $146.7 $46.5 $47.3 $189.2 $105.5 $55.0 $117.6 $84.2 $67.2 $100.3 $166.4 $114.7 $124.2

10.9% 4.2% 9.0% 15.4% 4.3% 4.0% 17.1% 9.2% 9.4% 9.4% 6.6% 4.9% 7.2% 12.7% 8.7% 8.7%

0% 5% 10% 15% 20% $0 $50 $100 $150 $200 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Early Payoffs Early Payoffs as % of Ending Total Debt Investment Balance at Cost

(2)

$388.5 $324.0 $358.0 $505.6

(1)

(1) Effective Yield is inclusive of all fees, including all realized unamortized fees and all realized transaction fees including but not limited to amendment fees and prepayment fees, and is calculated based on the weighted average principal balance of loans outstanding on a daily basis (2) Core Yield excludes Early Repayments and One-Time Fees, and includes income and fees from expired commitments

SLIDE 26

$95.3 $104.0 $147.7 $134.1 $159.1 $109.6 $75.4 $64.6 $71.2 $73.9 $59.7 $75.9 $57.6 $46.3 $73.6

10.4% 11.2% 15.5% 12.4% 13.6% 9.9% 6.5% 5.2% 5.7% 5.8% 4.3% 5.4% 4.4% 3.5% 5.1%

$0.0 $30.0 $60.0 $90.0 $120.0 $150.0 $180.0 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 0% 2% 4% 6% 8% 10% 12% 14% 16%

Available Unfunded Commitments (in millions) Unfunded Commitments as % of Ending Debt Investment Balance at Cost

Available Unfunded Commitments (in millions) Unfunded Commitments as % of Total Ending Debt Investment Balance at Cost

EFFECTIVE MANAGEMENT OF UNFUNDED COMMITMENTS AS A PERCENTAGE OF ENDING DEBT INVESTMENT PORTFOLIO BALANCE

(1) Amount represents available unfunded commitments, including undrawn revolving facilities, which are available at the request by the portfolio company.

(1)

26

SLIDE 27

NON-INTEREST AND FEE EXPENSE TO AVERAGE TOTAL ASSETS

RSU = Restricted Stock Units

27

$6,319 $8,454 $7,414 $9,925 $12,472 $7,559 $8,265 $9,732 $9,736 $10,874 $9,410 $10,667 $9,562 $11,023 2.1% 2.7% 2.3% 3.1% 3.9% 2.3% 2.4% 2.8% 2.8% 3.1% 2.6% 2.9% 2.6% 2.8% $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 0% 1% 2% 3% 4% 5% 6% 7% 8%

Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

OPEX (in thousands) OPEX as a % of Total Assets

OPEX (excluding interest, fees, employee RSU & option expense) OPEX as a % of Average Total Assets

SLIDE 28

$7,825 $9,142 $11,166 $10,134 $12,193 $14,651 $9,764 $10,836 $11,334 $11,178 $12,301 $11,242 $12,575 $11,393 $12,641

23.0% 24.7% 30.3% 31.2% 32.0% 31.1% 24.8% 27.8% 26.0% 24.8% 22.2% 24.2% 26.0% 24.8% 25.2% 0% 5% 10% 15% 20% 25% 30% 35% Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 $0 $5,000 $10,000 $15,000 $20,000

Non-Interest OPEX as a % of Total Investment Income Non-Interest OPEX (in thousands)

Non-Interest Expense Non-Interest Expense as a % of Total Investment Income

NON-INTEREST EXPENSE / TOTAL INVESTMENT INCOME

28

SLIDE 29

Credit Grading at Fair Value, Q4 2017 - Q4 2016 ($ in millions) Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 Grade 1 - High 345.2 $ 24.4% 190.0 $ 14.6% 267.1 $ 20.7% 260.2 $ 19.8% 275.8 $ 20.8% Grade 2 583.0 $ 41.2% 696.2 $ 53.6% 613.7 $ 47.6% 591.7 $ 45.1% 590.5 $ 44.4% Grade 3 443.8 $ 31.3% 370.9 $ 28.5% 315.2 $ 24.5% 356.9 $ 27.2% 329.4 $ 24.8% Grade 4 41.7 $ 2.9% 43.0 $ 3.3% 87.0 $ 6.8% 78.9 $ 6.0% 58.9 $ 4.4% Grade 5 - Low 2.3 $ 0.2%

• $

0.0% 4.6 $ 0.4% 24.2 $ 1.9% 74.2 $ 5.6% Weighted Avg. 2.17 2.24 2.27 2.43 2.41

Steady credit quality rating – no oil & gas or CLO exposure

(1) Debt only; based on fair value

$822.0 $923.9 $1,058.0 $1,137.6 $1,077.6 $1,110.2 $1,205.7 $1,211.8 $1,224.1 $1,224.1 $1,311.9 $1,287.6 $1,300.1 $1,416.0

2.20 2.24 2.26 2.25 2.33 2.16 2.17 2.11 2.32 2.41 2.43 2.27 2.24 2.17

1.0 2.0 3.0 4.0 5.0 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Q4-13 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17

Credit Rating Debt Portfolio Value ($ in millions) Debt Portfolio Value Weighted Investment Credit Rating

(1)

High Quality Low Quality

CREDIT DISCIPLINE AND CONSISTENT PORTFOLIO PERFORMANCE

29

SLIDE 30

Wells Fargo 12.1% Union Bank 7.5% Convertible Notes 23.1% July 2024 Notes 18.4% SBA License 1 - HTII 14.9% SBA License 2 - HTII 4.1% Asset Backed Notes 4.9% 2022 Notes 15.0%

$120.0 $75.0 $230.0 $183.5 $41.2 $149.0 $49.2

($ in millions)

$150.0

DIVERSIFIED SOURCES OF FUNDING: Q4 2017

30

Entity Capitalization

Capital Source as of 12/31/17 $ in Millions % of Total Equity $841.0 51.2% SBA Debentures $190.2 11.6% Asset-Backed Notes $49.2 3.0% Convertible Notes $230.0 14.0% 2024 Notes (Baby Bonds) $183.5 11.1% 2022 Notes 150.0 9.1% Credit Facilities $0.0 0.0% Total Capital $1,643.9 100.0%

Debt Capital Stack Total Corporate Capitalization

SBA Debentures 11.6% Equity 51.2% Asset-Backed Notes 3.0% Credit Facilities 0.0% Convertible Notes 14.0% 2024 Notes (Baby Bonds) 11.1% 2022 Notes 9.1%

SLIDE 31

(1) Interest rate range for the SBA debentures does not include annual fees

DIVERSIFIED SOURCES OF FUNDING (AS OF 12/31/17)

31

Wells Fargo Credit Facility Union Bank Credit Facility Notes SBA Debentures – Total debt of $190.2 million Securitization January 2022 Convertible Notes October 2022

• Inst. Notes

July 2024 Notes License 1 - HTII License 2- HTIII DATE ENTERED

• Aug. 2008
• Feb. 2010
• Jan. 2017
• Oct. 2017

July 2014

• Sept. 2006

May 2010

• Nov. 2014

FACILITY SIZE

($ in millions)

$120.0 $75.0 $230.0 $150.0 $183.5 $41.2 $149.0 $49.2 INTEREST RATE LIBOR + 325bps LIBOR + 325bps 4.375% unsecured 4.625% Unsecured 6.25% unsecured

Range(1) from 3.2% to 4.6% Range(1) from 2.2% to 4.1%

3.524% MATURITY August 2019 May 2020 February 2022 October 2022 July 2024 Mature ten years after borrowing April 2021 ADDITIONAL INFO (Expandable up to $300.0) (Expandable up to $200.0) S&P: BBB- KBRA: BBB+ S&P: BBB- KBRA: BBB+

NYSE: HTGX S&P: BBB- KBRA: BBB+

Set in March and September (range from 2.2% to 5.5%) Rated A(sf) by Kroll OUTSTANDING

($ in millions)

$0.0 $0.0 $230.0 $150.0 $183.5 $41.2 $149.0 $49.2

Well Managed Debt Maturity Schedule

$49.2 $230.0 $21.8 $29.4 $53.8 $60.5 $24.8 $183.5 $150.0 $0 $100 $200 $300 $400 2018 2019 2020 2021 2022 2023 2024

Securitization Convertible Notes SBA Bonds July 2024 Notes October 2022 Notes

($ in millions)

SLIDE 32

UNLEVERAGED BALANCE SHEET: PLENTY OF ROOM FOR GROWTH

62.0% Net Regulatory Leverage, excluding SBA and cash 72.9% Regulatory Leverage, excluding SBA

1:1

BDC Regulatory Limitation of Debt to Equity Ratio

$1,031M

Potential Max Debt of

1.23:1

Potential Max Debt to Equity Ratio of

Equity – $841.0 Million

Asset-Backed Notes – $49.2 Million Unsecured Notes – $563.5 Million SBIC Debenture – $190.2 Million December 31, 2017

Additional Debt Capacity – $228.3 Million

Credit Facilities 1) Revolving accordion credit facility for up to $300.0 million with Wells Fargo Capital Finance, $120.0 million expanded commitment. 2) Revolving accordion credit facility for up to $200.0 million with Union Bank, $75.0 million initial commitment. SBA Additional Leverage: 1st SBIC license issued in September 2006 by the SBA, 2nd SBIC license issued in May 2010 by the SBA. SEC exemptive order approved on April 5, 2007 rendering SBA licensees not subject to BDC 1:1 leverage restrictions. Leverage ratios determined using Principal Amount of Debt 32

SLIDE 33

PORTFOLIO HIGHLIGHTS

SLIDE 34

HERCULES’ INVESTMENT PORTFOLIO: Q4 2017

34

0.4% 1.3% 5.9% 23.9% 7.7% 4.7% 1.6% 10.0% 9.9% 6.1% 0.7% 23.4% 2.4% 1.0% 0.6% 0.4% Communications & Networking Consumer & Business Products Drug Delivery Drug Discovery & Development Sustainable & Renewable Technologies Healthcare Services, Other Information Services Internet Consumer & Business Services Media/Content/Info Medical Devices & Equipment Semiconductors Software Specialty Pharmaceuticals Diagnostic & Surgical Devices Electronics & Computer Hardware Biotechnology Tools

96.4% 3.6% Floating Fixed 73.2% 18.6% 5.8% 2.4% First Lien Second LIen Equity Investments Warrant Positions

Floating vs. Fixed Rate Investment Type Breakout Industry Breakout Hercules Investments by Geography 42% 11% 3% 38% 4% International: 6%

SLIDE 35

Two (2) Existing Portfolio Companies in IPO Registration – Q4 2017

▪ Quanterix Corp., Aquantia Corp. and ForeScout Technologies, Inc. complete IPOs ▪ Two (2) companies filed confidentially under the JOBS Act

Nineteen (19) Announced or Completed Portfolio Company M&A Liquidity Events – 2017 Current Warrant and Equity Portfolio – Q4 2017

HERCULES WARRANT & EQUITY PORTFOLIO: POTENTIAL FUTURE UPSIDE FOR SHAREHOLDERS TOTAL RETURN

▪ 137 warrant holdings

• GAAP fair value ~$36.8 million
• GAAP cost ~$43.6 million
• ~$87.6 million in nominal Exercise Value (as of 12/31/17)

▪ 52 equity holdings

• GAAP fair value ~$89.4 million
• GAAP cost ~$136.2 million

35

▪ Illustrative models of potential warrant gains (as of 12/31/17)

• Assumption: 50% of warrants will not monetize
• GAAP cost ~$43.6 million
• Based on 83.8 million weighted average shares

$43.8M x 2X multiple: $87.6M - $43.6M cost = $44.0M unrealized gain = $0.52/share $43.8M x 3X multiple: $131.4M - $43.6M = $87.8M unrealized gain = $1.05/share $43.8M x 4X multiple: $175.2M - $43.6M = $131.6M unrealized gain = $1.57/share

SLIDE 36

SELECT LIST OF DIVERSIFIED PORTFOLIO COMPANIES

36

Technology Life Sciences Sustainable & Renewable Technology Special Situations

36

* Equity-only Investments

* * *

SLIDE 37

24.1% 26.2% 23.7% 29.7% 23.9% 2.2% 5.1% 4.3% 2.7% 2.4% 11.4% 13.5% 7.5% 7.6% 6.1% 4.0% 6.0% 2.8% 1.3% 0.4% 5.2% 2.6% 6.8% 8.7% 13.7% 7.7% 5.9% 13.4% 6.8% 7.4% 6.8% 10.0% 2.9% 9.7% 9.9% 7.2% 12.3% 12.3% 15.4% 23.4% 18.1% 6.7% 13.3% 10.9% 7.7% 1.5% 2.0%

6.2%

3.0% 1.3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2013 2014 2015 2016 2017 % Total Investment Portfolio at Fair Value

Electronics & Computer Hardware Consumer & Business Products Diagnostic & Surgical Device Healthcare Services, Other Sustainable & Renewable Software Semiconductors Media/Content/Info Internet Consumer & Business Services Drug Delivery Information Services Communications & Networking Medical Devices & Equipment Specialty Pharmaceuticals Drug Discovery & Development Biotechnology Tools

$910.3 $1,020.7 $1,200.6

($M)

$1,423.9

A BROADLY DIVERSIFIED PORTFOLIO RE-BALANCED ACCORDING TO OUR ASSESSMENT OF ONGOING MARKET CONDITIONS MITIGATES RISK

37

8.0% 4.0%

$1,542.2

4.7%

SLIDE 38

DIVERSIFIED INVESTMENT APPROACH MITIGATES RISK

More than 1000 Venture Capital Firms & Investors Technology Life Sciences Sustainable & Renewable Special Situations Expansion or “Venture Growth” & Established Key VC Investment Centers

Palo Alto Boston New York Washington DC Chicago Hartford

FINANCIAL SPONSORS INDUSTRY SECTORS STAGES OF DEVELOPMENT GEOGRAPHIC LOCATION

Four Key Diversification Strategies

38

SLIDE 39

VENTURE CAPITAL MARKET OPPORTUNITY

SLIDE 40

$13.1

$17.9

$49.5 $94.1 $36.8 $22.6 $20.3 $23.6 $25.1 $31.2 $34.5 $33.3 $25.2 $28.9 $36.7 $34.8 $36.4 $58.5 $73.4 $50.5 $64.9

2,211 2,547 4,590 6,350 3,341 2,484 2,294 2,462 2,633 2,892 3,155 3,123 2,799 3,204 3,729 3,906 4,048 4,278 4,115 3,718 3,461

1,000 2,000 3,000 4,000 5,000 6,000 7,000 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 # of Deals Dollars Invested (billions) $ in billions # of deals

Venture Capital Investment Activity 1997 – Q4 2017

OVER $811.3 BILLION VENTURE CAPITAL INVESTMENT

Source: Dow Jones VentureSource Q4 2017 40

$26.9 $54.6 $85.5 $42.5 $12.5 $10.4 $18.9 $29.0 $31.9 $39.3 $29.8 $14.9 $17.9 $21.5 $23.3 $21.7 $35.5 $37.6 $44.1 $36.9 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Funds Raised (billions)

Venture Capital Fundraising Activity 1997 – Q4 2017

SLIDE 41

0% 20% 40% 60% 80% 100% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

IPOs M&A

2.0 2.8 3.8 4.6 5.4 6.0 6.5 5.8 5.5 5.3 5.3

5.2

5.0 5.0 4.7 5.2 4.9 4.5 6.5 5.7 5.6 5.6 6.2 6.8 8.7 7.9 8.1 6.4 7.3 6.8 7.1 6.7 7.2 7.5

2 4 6 8 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

IPOs M&A

Venture Debt Complements Equity Financing and Optimizes Capital Structure

WHY VENTURE BACKED COMPANIES USE VENTURE DEBT?

41

As Time to Exit has Increased... … M&A Remains the Exit of Choice

1

Less dilutive than new VC round

2

Lengthens time before next equity round

3

Provides negotiating leverage for higher valuations

4

Leverages returns

• f equity investors

Source: Dow Jones VentureSource Q4 2017

Median Time from Initial Equity Funding Breakdown of Venture Backed Liquidity Events

Source: Dow Jones VentureSource Q4 2017

SLIDE 42

$0.6 $0.9 $3.3 $5.4 $11.2 $8.3 $9.4 $6.5 $2.9 $8.3 9 8 48 47 51 76 108 70 38 57 20 40 60 80 100 120 $0 $2 $4 $6 $8 $10 $12

08 09 10 11 12 13 14 15 16 17

# of IPOs Amount Raised (billions)

$ in billions # of IPOs $26.5 $22.8

$44.8 $50.2 $45.0 $43.9 $86.6 $53.3 $88.0 $76.4 456 440 612 603 538 533 601 560 613 600 100 200 300 400 500 600 700 800 $0 $20 $40 $60 $80 $100

08 09 10 11 12 13 14 15 16 17

# of Deals Amount Paid (billions)

$ in billions # M&A Deals

EXITS OF VENTURE CAPITAL-BACKED COMPANIES

Source: Dow Jones VentureSource Q4 2017 42

Mergers & Acquisitions Initial Public Offerings

SLIDE 43

Commitments as % of VC Dollars Invested

0.9% 0.8% 1.4% 1.2% 0.8% 1.8% 1.7% 1.8% 1.9% 1.6% 1.0% 1.6% 1.4%

HERCULES’ TOTAL COMMITMENTS VS. VC DOLLARS INVESTED

VENTURE CAPITAL INVESTMENT ACTIVITY 2005 –Q4 2017

Source: Dow Jones VentureSource Q4 2017

▪ Hercules’ uncompromising yield and credit underwriting standards drives commitments ▪ Market conditions determine commitment activity more than pure VC investment activity ▪ Hercules’ 13-year historical average: 1.4%

43

$25.1 $31.2 $34.5 $33.3 $25.2 $28.9 $36.7 $34.8 $36.4 $58.5 $73.4 $50.5 $64.9 $215 $243 $494 $413 $186 $523 $630 $637 $705 $905 $745 $807 $882

$0 $10 $20 $30 $40 $50 $60 $70 $80 05 06 07 08 09 10 11 12 13 14 15 16 17 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000

VC Dollars Invested (billions) Hercules Debt and Equity Commitments (millions) VC Dollars Invested Hercules Debt & Equity Commitments

SLIDE 44

HERCULES’ PORTFOLIO COMPANY IPOs

Source: Dow Jones VentureSource Q4 2017 44

48 47 51 76 108 70 38 2 2 7 5 8 7 1 3 1 2 3 4 5 6 7 8 9 20 40 60 80 100 120

10 11 12 13 14 15 16 17

Hercules’ Portfolio Company IPOs Venture Backed IPOs

VC-backed IPOs Hercules' PoCo IPOs

Participation as % of Total VC-Backed IPOs

4% 4% 14% 7% 7% 10% 3% 5% PROVIDING INVESTOR ACCESS TO SOME OF AMERICA’S MOST PROMISING COMPANIES

▪ M&A represents on average 91% of venture capital investment exits since 2010

57

SLIDE 45

INVESTMENT HIGHLIGHTS

45

Large Market Opportunity Attractive Yields and Equity Upside from Warrant Portfolio Focused on strong and sustainable shareholder returns Experienced Management Team Platform in Place to Grow Portfolio Strong Balance Sheet and Diverse Funding Sources Strong Venture Capital and Private Equity Relationships Strict Focus on Credit Underwriting Process

SLIDE 46

ANALYST COVERAGE

SLIDE 47

BROAD INDUSTRY ANALYST COVERAGE – 12 FIRMS

47

Jonathan Bock (Initiated Coverage 4/25/2011) Ryan Lynch (Re-initiated Coverage 2/19/2013) Jason Arnold (Initiated Coverage 12/14/2007) Robert Dodd (Initiated Coverage 7/26/2012) Aaron James Deer (Initiated Coverage 9/29/2011) John Hecht (Initiated Coverage 6/30/2015) Casey Alexander (Initiated Coverage 6/23/15) Mitchel Penn (Initiated Coverage 1/14/2015) Chris York (Initiated Coverage 10/24/2012) Tim Hayes (Re-initiated Coverage 10/2/2017) Henry Coffey (Initiated Coverage 10/24/17) Christopher Nolan (Initiated Coverage 11/20/2017)

SLIDE 48

SUPPLEMENTAL INFORMATION

SLIDE 49

Business Development Company (BDC)

▪ Regulated by the SEC under the Investment Company Act of 1940 ▪ Leverage limited to approximately 1:1 debt/equity, unless an SEC exemptive order exists to exclude SBA

debt

▪ Investments are required to be carried at fair value ▪ Majority of Board of Directors must be independent ▪ Offer managerial assistance to portfolio companies

Regulated Investment Company (RIC)

▪ Distribute taxable income as dividends to shareholders ▪ Mandates asset diversification ▪ Eliminates corporate taxation ▪ Allows for the retention of capital gains and/or spillover of taxable income

Small Business Investment Company (SBIC)

▪ Two Small Business Investment Company (“SBIC”) licenses granted through the U.S. Small Business

Administration (“SBA”)

▪ Currently, $190.2 million exemption from SEC leverage restrictions for BDCs, excludes all SBIC debt from

BDC 1:1 leverage test

Hercules is an Internally Managed BDC under the 1940 Act and a RIC for Tax Purposes

REGULATION AND STRUCTURE

49

SLIDE 50

▪ Rapidly amortizing principal balance

and current cash-pay interest

▪ “Security interest” – generally first

security interest in all assets of borrower

▪ Simultaneous or recent equity round;

in addition sponsor commitment for continued financial support

▪ Generally expect sufficient capital at

time of investment to support

• perations and debt service for at least

9 -18 months

▪ Diversification across industry

sub-sectors, development stages and financial sponsors

50

INVESTMENT STRUCTURE MITIGATES CAPITAL RISK

Note: Capital at risk reduced by fees, principal payments and interest payments. Assumes 36 month term, 1% origination fee, 11% interest, and a level payment schedule.

Reduction of Invested Capital at Risk

94% 71% 48% 25% 79% 60% 40% 20% 99% 0% 20% 40% 60% 80% 100% 3 6 9 12 15 18 21 24 27 30 33 36 Term of Loan (Months) % of Remaining HTGC's Capital at Risk Level Payment w/ 6-mo I/O Level Payment

Nearly 1/3 of invested capital returned in 12-months

SLIDE 51

PRIMARILY INVEST AT STAGES OF HIGH GROWTH

51

Expansion Stage Established

Type of Company

Follow-on Rounds

• f Growth Capital

(Series B-Liquidity Event) Private Late Stage/ Select Public Companies

Equity Capital Provider

Venture Capital/ Private Equity Public Markets/ Private Equity

Expectation for Additional Sponsor Support

1–3 Additional Rounds 0–2 Additional Rounds

Targeted Warrant Gain Potential

3–7 x 2–4 x

Potential Time to Liquidity

4–6 years 2–4 years