FIRST QUARTER 2019 INVESTOR PRESENTATION Financing the Growth of - - PowerPoint PPT Presentation

FIRST QUARTER 2019 INVESTOR PRESENTATION

May 2, 2019

Financing the Growth of Tomorrow’s Companies Today

TM

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 of 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

3

HERCULES CAPITAL

(1) Annualized based on the $0.32 distribution declared for Q1 2019 and a closing stock price of $12.66 as of March 29, 2019

Structure

Internally Managed business development company (BDC)

IPO Date

June 9, 2005

Investment Options

HTGC (NYSE) – Common Stock Institutional Notes PAR $1000.00

• 4.625% Notes due 2022

Retail Notes (Baby Bonds) PAR $25.00

• HCXY (NYSE) 6.25% Notes due 2033
• HCXZ (NYSE) 5.25% Notes due 2025

Convertible Notes

• 4.375% Notes due 2022

Securitization Notes

• 4.605% Asset-backed Notes due 2027
• 4.703% Asset-backed Notes due 2028

Annualized Dividend Yield

(1)

10.1% as of March 31, 2019

Distributions Declared

$0.32 per share for Q1 2019 $0.01 per share supplemental for Q1 2019

Price to NAV

1.27x - as of April 29, 2019 ~1.3x to ~1.6x historical range

FIRST QUARTER 2019 INVESTOR PRESENTATION

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

KEY PERFORMANCE HIGHLIGHTS

6

Q1 2019 HIGHLIGHTS

(1) Source: S&P CapIQ as of 3/31/19 (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 April 29, 2019 (5) Excludes the one-time impact of $1.6 million, or $0.02 per share, associated with the full 2024 Notes Redemption (6) Includes the one-time impact associated with the 2024 Notes Redemption

Robust Earnings

• Net Investment Income (“NII”) of $29.0M, up 11.4% Y-Y
• Total Investment Income of $58.8M, up 20.7% Y-Y
• NII per share of $0.30, Adj. NII per share of $0.32(5)
• 55 consecutive quarters of distributions since June 2005 IPO

Strong Shareholder Returns

• 1YR/3Yr/7YR Total Shareholder Returns(1): 14.9%/36.4%/89.5%
• ROAE(1,2,6): 12.8%
• ROAA(1,2,6): 6.2%
• Net Interest Margin (“NIM”): 10.3%

High-Yield Portfolio of Earning Assets

• Total Debt Investments (at cost): $1.91B
• Total Investments (at cost): $2.15B
• Effective Yield: 13.0%

Industry-Leading Originations Platform

• $8.9B in total debt commitments since inception
• Cumulative Total Net Realized (Loss) since inception of ($35.5M)
• Total debt & equity commitments Q1 2019: $414.8M
• Gross debt & equity fundings Q1 2019: $239.6M

Strong Liquidity and Balance Sheet

• $247.2M available liquidity
• Regulatory leverage and net regulatory leverage: 99.9% and 98.2%(3)

Strong Capital Raising Position

• Price-to-NAV: 1.27x(4)
• “ATM” Equity Distribution Agreement
• Investment Grade Credit Ratings: DBRS: BBB | KBRA: BBB+

14.9% 36.4% 34.0% 89.5% 10.7% 32.3% 18.2% 41.5% 9.7% 27.2% 18.6% 63.0% 0% 20% 40% 60% 80% 100% 120% 140% 160%

1- Year 3-Year 5-Year 7-Year HTGC Peer Group Wells Fargo BDCS Index

TOTAL SHAREHOLDER RETURN (TSR)vs. BDCs & WELLS FARGO INDEX

7

(a) Peer Group: AINV, ARCC, BKCC, OCSL, FSK, GBDC, GSBD, MAIN, NMFC, OXSQ, PNNT, PSEC, SLRC, BBDC, TCPC, TCRD, TSLX (b) TSR is defined as stock appreciation plus distributed dividend distributions Source: S&P Capital IQ as of March 31, 2019

(a)

(b)

$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 $14.95 $15.58 $0.04 $0.02 $0.01 $0.00 $0.10 $0.20 $0.30 $0.40 $0 $2 $4 $6 $8 $10 $12 $14 $16

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q2 2019

Cumulative Distributions Declared (per Share)

Base Distribution Supplemental Distribution

$15.61 per share or ~$849.0 million in Historical Cumulative Distributions Since June 2005 IPO 2019 YTD Distributions Declared: $0.64

10.1% 11.7% 12.6% 12.0% 13.6% 12.8% 10.8% 11.0% 9.6% 9.6% 9.7% 9.6% 0% 2% 4% 6% 8% 10% 12% 14%

2014 2015 2016 2017 2018 Q1 2019

HTGC Peer Group

5.2% 6.1% 7.2% 6.3% 6.8% 6.2% 6.5% 6.0% 5.7% 5.4% 5.4% 5.6% 0% 1% 2% 3% 4% 5% 6% 7% 8%

2014 2015 2016 2017 2018 Q1 2019

HTGC Peer Group

DELIVERING STRONG SHAREHOLDER RETURNS

Return on Average Assets % (ROAA)

8

Return on Average Equity % (ROAE)

(a) Peer Group: AINV, ARCC, BKCC, OCSL, FSK, GBDC, GSBD, MAIN, NMFC, OXSQ, PNNT, PSEC, SLRC, BBDC, TCPC, TCRD, TSLX (b) Hercules’ ROAA and ROAE calculations include the one-time impact associated with the 2024 Notes Redemption (a) (a) Source: S&P Capital IQ as of 3/31/19 . 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 3/31/19. Return on Average Equity based on 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 March 31, 2019 were paid 100% from earnings and profits; however, there can be no certainty to shareholders that this determination is representative of the tax attributes of the Company’s 2019 full year distributions to stockholders.

(1, 2)

Supplemental Distributions Declared (per Share)

(b) (b)

12.9% 10.1% 11.7% 12.6% 12.0% 13.6% 12.8%

85.8% 95.1% 83.7% 84.7% 95.5% 102.6% 114.9% 51.2% 66.2% 70.4% 84.7% 72.9% 87.0% 99.9% 44.5% 60.6% 43.9% 60.6% 62.0% 83.4%

0% 20% 40% 60% 80% 100% 120% 140% 0% 2% 4% 6% 8% 10% 12% 14%

2013 2014 2015 2016 2017 2018 Q1 2019

ROAE GAAP Leverage Regulatory Leverage Net Regulatory Leverage

98.2%

AVAILABLE LEVERAGE FOR POTENTIAL EARNINGS GROWTH

9

Leverage to Return on Average Equity % (ROAE)

(1) Source: S&P Capital IQ as of 3/31/19. Return on Average Equity based on NII. NII divided by average of beginning of period equity and end of period equity. (2) Excludes SBA (3) Excludes SBA and cash (4) ROAE calculation include the one-time impact associated with the 2024 Notes Redemption (1) (2) (3) (4)

$9.75 $10.51 $10.18 $9.94 $9.90 $9.96 $9.90 $10.26 1.14 1.56 1.46 1.23 1.43 1.32 1.11 1.23 1.07 1.07 0.92 0.92 0.96 0.86 0.86 0.96

0.5 0.7 0.9 1.1 1.3 1.5 1.7

2012 2013 2014 2015 2016 2017 2018 Q1 2019

$8 $10 $12 $14 $16

Hercules NAV Hercules Price to NAV Peer Group Price to NAV

(a) Peer Group: AINV, ARCC, BKCC, OCSL, FSK, GBDC, GSBD, MAIN, NMFC, OXSQ, PNNT, PSEC, SLRC, BBDC, TCPC, TCRD, TSLX Source: S&P CapIQ as of 3/31/19. 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

10

Price to NAV Multiple (x)

CREATES A STRONG CAPITAL RAISING POSITION TO SUPPORT GROWTH

Net Asset Value (NAV)

$747.4 $1,123.6 $1,221.7 $1,299.2 $1,324.0 $1,464.2 $1,654.7 $1,945.2 $2,138.6

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 2011 2012 2013 2014 2015 2016 2017 2018 YTD Q1 2019

$39.6 $48.1 $73.1 $71.8 $73.5 $100.3 $96.4 $108.7 $29.0

$0 $20 $40 $60 $80 $100 2011 2012 2013 2014 2015 2016 2017 2018 YTD Q1 2019

HERCULES KEY PERFORMANCE HIGHLIGHTS

Net Investment Income “NII”

($ in millions)

11

$79.9 $97.5 $139.7 $143.7 $157.1 $175.1 $190.9 $207.8 $58.8

$0 $50 $100 $150 $200 2011 2012 2013 2014 2015 2016 2017 2018 YTD Q1 2019

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 $1,980.5 $2,153.3

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 2011 2012 2013 2014 2015 2016 2017 2018 YTD Q1 2019

Total Investments at Cost

($ in millions)

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

$0.5 ($1.1) $1.7 $4.3 ($26.5) ($52.9) ($50.1) ($47.0) ($32.1) ($12.0) ($6.9) ($2.3) ($29.0) ($40.1) ($35.5)

• $60
• $50
• $40
• $30
• $20
• $10

$0 $10 $20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 $ 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 $8.5

$8.9

$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 $6.5

$6.7 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Q1 2019 Cumulative Commitments Cumulative Fundings $ in billions

Cumulative Debt Commitment and Fundings, Since Inception

PORTFOLIO GROWTH WITH UNDERWRITING DISCIPLINE

12

HTGC IPO

Effective Annualized Loss Rate of 3bps or 0.03%

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

PORTFOLIO GROWTH LEADS TO DIVIDEND GROWTH THROUGH NII

(1) Assumes Debt Investment portfolio of $1.9 billion, at cost, constant effective yield, NII margin of 52.0% and constant weighted average shares of 96.2 million, as of March 31, 2019. Projections are subject to change due to impact from active participation in the Company’s equity ATM program and any future equity offerings.

$1,900 $2,000 $2,100 $2,200 $2,300 $1.30 $1.37 $1.44 $1.51 $1.58 $1.38 $1.46 $1.53 $1.60 $1.67

$1.00 $1.10 $1.20 $1.30 $1.40 $1.50 $1.60 $1.70 $1.80 $1.90 $2.00 $0 $500 $1,000 $1,500 $2,000 + $0 Million + $100 Million + $200 Million + $300 Million + $400 Million NII per share Debt Investment Balance at Cost ($ in millions)

Debt Investment Portfolio Balance at Cost NII P/S @ Core Yield of 12.7% NII P/S @ Effective Yield of 13.5%

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COMPANY & STRATEGIC OVERVIEW

WARRANT HOLDINGS IN

126 companies

EQUITY HOLDINGS IN

57 companies

TOTAL WARRANT AND EQUITY GAAP COST

$239.9 million

TOTAL WARRANT AND EQUITY FAIR VALUE

$183.9 million

AVAILABLE LIQUIDITY TO INVEST(2)

$247.2 million

REGULATORY LEVERAGE

99.9% / 98.2% net of cash

INVESTMENT GRADE RATINGS

DBRS: BBB KBRA: BBB+

SECURITIZATION INVESTMENT GRADE RATINGS

KBRA: A(sf)

DEBT INVESTMENT COST BASIS

$1.91 billion

DEBT INVESTMENT FAIR VALUE

$1.90 billion

EFFECTIVE YIELD

13.0%

DEBT INVESTMENTS IN

93 companies

SHORT TERM MATURITIES

36-42 months

INVESTMENT SIZE

$5 to $200 million

FOUNDED DECEMBER 2003

IPO: June 2005 “HTGC”

ENTERPRISE VALUE

$2.18 billion(1)

MARKET CAPITALIZATION

$1.27 billion(1)

NET ASSET VALUE PER SHARE

$10.26 as of 3/31/19

HISTORICAL PRICE/NAV

~1.3x to ~1.6x range

CURRENT PRICE/NAV

1.27x(1)

HERCULES AT-A-GLANCE

WARRANT & EQUITY PORTFOLIO

126

COMPANIES

LIQUIDITY & BALANCE SHEET

$247.2

MILLION

DEBT INVESTMENT PORTFOLIO

$1.91

BILLION

15

MARKET CAPITALIZATION

$1.27

BILLION

(1) As of April 29, 2019, and source for Enterprise Value and Market Capitalization is S&P Capital IQ (2) Subject to existing terms and covenants

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

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 – 97.5% floating rate loans and with interest rate floors(1)
• We are generally the only lender and 82.0% 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 15 years of strong credit performance history

WHY IS HERCULES DIFFERENT THAN OTHER BDCs

(1) As of March 31, 2019 16

WE INVEST IN INNOVATIVE VENTURE GROWTH-STAGE COMPANIES

Hercules’ At-the-Market “ATM” Equity Distribution Agreement

• Equity Distribution Agreement: Up to a total of 12 million shares of common stock

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 premium to NAV

The Results

• Equity ATM Program YTD as of 4/29/19: sold ~ 679,000 shares for total net proceeds of ~ $8.5 million
• Equity ATM Program FY 2018: sold ~ 5.1 million shares for total net proceeds of ~ $63.3 million

STRATEGIC ACCESS TO EQUITY AND DEBT CAPITAL MARKETS

17

HERCULES’ SUCCESSFUL ATM DISTRIBUTION PROGRAM

WE ARE AT CENTER STAGE OF THE INNOVATION ECONOMY

18

Technology Life Sciences Sustainable and Renewable Technology Special Situations

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

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

$8.9 billion in total debt commitments to over 460 companies since inception Offices in key venture capital markets: CA | MA | NY | DC | IL | CT Over 1000 different VC & PE firms, financial investors Over 150 portfolio companies completed/announced an IPO or M&A event since inception

SaaS Financing

FINANCIAL HIGHLIGHTS

INCOME STATEMENT: Q1 2019 VS. Q1 2018 SUMMARY RESULTS

20

2019 2018 Year/Year ($ in 000's, except per share amounts) (unaudited) (unaudited) Change Interest Income $ 55,473 $ 42,981 29% Fee Income 3,322 5,719

• 42%

Total Investment Income 58,795 48,700 21% Interest and Loan Fees 15,564 10,561 47% General and Administrative 4,153 4,009 4% Employee Compensation 10,045 8,067 25% Total Operating Expenses 29,762 22,637 31% Other Income Pre-Tax Net Investment Income-NII 29,033 26,063 11% Total Net Realized and Unrealized Gain/Loss 32,552 (20,117) Net Increase in Net Assets from Operations 61,585 5,946 936% NII - Net Investment Income per Share (Basic) $ 0.30 $ 0.31

• 3%

DNOI - Distributable Net Operating Income per Share $ 0.34 $ 0.34 0% Weighted Average Shares Outstanding - Basic 96,218 84,596 14% Three Months Ended March 31,

(1) Includes the one-time impact of $1.6 million, or $0.02 per share, associated with the full 2024 Notes Redemption

(1)

CURRENT & HISTORICAL INCOME STATEMENTS

21

Three Months Twelve Months Ended March 31, Ended December 31, ($ in 000's, except per share amounts) 2019 2018 Interest Income $ 55,473 $ 190,636 Fee Income 3,322 17,117 Total Investment Income 58,795 207,753 Interest and Loan Fees 15,564 46,695 General and Administrative 4,153 15,488 Employee Compensation 10,045 36,841 Total Operating Expenses 29,762 99,024 Other Income

• Pre-Tax Net Investment Income - NII

29,033 108,729 Net Realized and Unrealized Gain / (Loss) 32,552 (32,233) Net Increase in Net Assets from Operations $ 61,585 $ 76,496 NII - Net Investment Income per Share (Basic) $ 0.30 $ 1.19 DNOI - Distributable Net Operating Income per Share $ 0.34 $ 1.32 Weighted Average Shares Outstanding - Basic 96,218 90,929

(1) Includes the one-time impact of $1.6 million, or $0.02 per share, associated with the full 2024 Notes Redemption

(1)

CURRENT & HISTORICAL BALANCE SHEET

22

March 31, December 31, ($ in 000's, except per share amounts) 2019 2018 ASSETS Debt Investments $ 1,897,064 $ 1,733,492 Equity Investments $ 157,045 $ 120,212 Warrant Investments $ 26,933 $ 26,669 Cash and cash equivalents 16,465 34,212 Restricted cash 10,149 11,645 Interest receivable 18,366 16,959 Other assets 12,609 2,002 Total Assets $ 2,138,631 $ 1,945,191 LIABILITIES Accounts Payable and Accrued Liabilites 27,112 25,961 Credit Facilities 44,266 52,956 2022 Convertible Notes 225,441 225,051 2027 Asset-Backed Notes 197,102 197,265 2028 Asset-Backed Notes 247,352

• 2033 Notes

38,420 38,427 2024 Notes

• 81,852

Long-term SBA Debentures 147,783 147,655 2025 Notes 72,685 72,590 2022 Notes 148,121 147,990 Total Liabilites $ 1,148,282 $ 989,747 Net Assets $ 990,349 $ 955,444 Shares Outstanding 96,543 96,501 Net Assets per Share $ 10.26 $ 9.90

13.2% 14.4% 14.6% 14.4% 13.4% 14.9% 14.1% 14.2% 14.3% 13.5% 13.5% 13.5% 13.0% 12.9% 13.4% 13.2% 12.9% 12.2% 12.1% 12.6% 12.5% 11.9% 12.7% 12.7% 12.9% 12.7% 9.1% 9.2% 9.2% 9.2% 8.9% 9.3% 9.6% 9.8% 9.5% 10.1% 10.4% 10.4% 10.3% 6% 8% 10% 12% 14% 16% 18% Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1 -19

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)

23

MEDIAN CORE YIELD FROM Q1 2016 TO Q1 2019: 12.7%

(1)

$1,205.7 $1,211.8 $1,224.1 $1,328.8 $1,311.9 $1,287.6 $1,300.1 $1,416.0 $1,336.3 $1,546.0 $1,603.3 $1,733.5 $1,897.1 13.2% 14.4% 14.6% 14.4% 13.4% 14.9% 14.1% 14.2% 14.3% 13.5% 13.5% 13.5% 13.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19

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

Total Debt Investments at Fair Value Effective Yield

(1)

HIGH-YIELD PORTFOLIO OF EARNING ASSETS

24

MEDIAN EFFECTIVE YIELD FROM Q1 2016 TO Q1 2019 OF 14.1%

(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

14.1%

$30,933 $34,688 $34,953 $37,418 $33,920 $37,850 $35,366 $37,159 $38,140 $36,322 $41,650 $44,946 $43,321

10.1% 11.0% 11.1% 11.8% 10.1% 11.1% 10.3% 10.4% 10.5% 9.5% 10.8% 11.0% 10.3%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000

Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19

Net Interest Margin (%) Net Interest Margin (in thousands)

Net Interest Margin (in thousands) Net Interest Margin %(1)

STRONG, CONSISTENT NET INTEREST MARGIN - NIM

25

MEDIAN NET INTEREST MARGIN FROM Q1 2016 TO Q1 2019 OF 10.5%

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

10.5%

EFFECTIVE YIELDS

Early Payoffs Lead to Higher Effective Yields and Earnings

IMPACT OF EARLY PAYOFFS ON EFFECTIVE YIELDS

UNSCHEDULED EARLY PAYOFFS ($ in millions)

1 26

13.2% 14.4% 14.6% 14.4% 13.4% 14.9% 14.1% 14.2% 14.3% 13.5% 13.5% 13.5% 13.0% 12.9% 13.4% 13.2% 12.9% 12.2% 12.1% 12.6% 12.5% 11.9% 12.7% 12.7% 12.9% 12.7% 9.1% 9.2% 9.2% 9.2% 8.9% 9.3% 9.6% 9.8% 9.5% 10.1% 10.4% 10.4% 10.3% 5% 10% 15% 20% Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19

GAAP Effective Yield Core Yield Loan Coupon Rate

$55.0 $117.6 $84.2 $67.2 $100.3 $166.4 $114.7 $124.2 $243.5 $114.3 $64.9 $63.9 $47.5

4.4% 9.4% 6.6% 4.9% 7.2% 12.7% 8.7% 8.7% 9.4% 7.4% 4.0% 3.6% 2.5%

0% 5% 10% 15% 20% $0 $50 $100 $150 $200 $250 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19

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

(2)

$324.0 $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

$486.6

$64.6 $71.2 $73.9 $59.7 $75.9 $57.6 $46.3 $73.6 $51.9 $129.7 $171.9 $139.0 $154.2

4.8% 5.1% 5.2% 4.1% 4.8% 3.6% 2.9% 4.4% 3.2% 7.2% 9.4% 7.1% 7.2% $0 $30 $60 $90 $120 $150 $180 $210 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 0% 2% 4% 6% 8% 10% 12% 14% 16%

Available Unfunded Commitments (in millions) Available Unfunded Commitments as % Total Assets

Available Unfunded Commitments (in millions) Unfunded Commitments as % of Total Assets

EFFECTIVE MANAGEMENT OF UNFUNDED COMMITMENTS AS A PERCENTAGE OF TOTAL ASSETS

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

(1)

27

NON-INTEREST AND FEE EXPENSE TO AVERAGE TOTAL ASSETS

RSU = Restricted Stock Units PSU = Performance Stock Units

28

MEDIAN ADJ. OPEX TO AVERAGE TOTAL ASSETS FROM Q1 2016 TO Q1 2019 OF 2.6%

$8,265 $9,732 $9,736 $10,874 $9,410 $10,667 $9,562 $11,023 $9,769 $10,692 $10,389 $12,414 $12,025 2.4% 2.8% 2.8% 3.1% 2.6% 2.9% 2.5% 2.8% 2.4% 2.5% 2.4% 2.8% 2.6%

$- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 0% 1% 2% 3% 4% 5% 6% 7% 8% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

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

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

2.6%

Disciplined credit underwriting standards deliver consistent long-term results

(1) Debt only; based on fair value

$1,205.7 $1,211.8 $1,224.1 $1,328.8 $1,311.9 $1,287.6 $1,300.1 $1,416.0 $1,336.3 $1,224.1 $1,603.3 $1,733.5 $1,897.1 2.17 2.11 2.32 2.41 2.43 2.27 2.24 2.17 2.43 2.21 2.23 2.18 2.19 1.0 2.0 3.0 4.0 5.0

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000

Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19

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

Credit Grading at Fair Value, Q1 2019 - Q1 2018 ($ in millions) Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Grade 1 - High 299.2 $ 15.8% 311.6 $ 18.0% 150.2 $ 9.4% 247.5 $ 16.0% 141.8 $ 10.6% Grade 2 1,056.4 $ 55.7% 885.1 $ 51.1% 987.5 $ 61.6% 791.9 $ 51.2% 599.8 $ 44.9% Grade 3 469.7 $ 24.7% 474.9 $ 27.3% 420.2 $ 26.2% 463.7 $ 30.0% 548.0 $ 41.0% Grade 4 66.5 $ 3.5% 60.3 $ 3.5% 44.5 $ 2.7% 42.0 $ 2.7% 33.6 $ 2.5% Grade 5 - Low 5.3 $ 0.3% 1.6 $ 0.1% 0.9 $ 0.1% 0.9 $ 0.1% 13.2 $ 1.0% Weighted Avg. 2.19 2.18 2.23 2.21 2.43

Wells Fargo 5.5% Union Bank 14.6% 2022 Convertible Notes 16.8% 2027 Asset Backed Notes 14.6% 2028 Asset Backed Notes 18.2% 2033 Notes 2.9% SBA License 2 - HTII 10.9% 2025 Notes 5.5% 2022 Notes 11.0%

$75.0 $200.0 $230.0 $149.0 $200.0 ($ in millions) $150.0 $40.0 $250.0

DIVERSIFIED SOURCES OF FUNDING: Q1 2019

30

Entity Capitalization

Capital Sources as of 3/31/19 $ in Millions % of Total Equity $990.4 46.5% SBA Debentures $149.0 7.0% 2027 Asset-Backed Notes $200.0 9.4% 2028 Asset-Backed Notes $250.0 11.8% 2022 Convertible Notes $230.0 10.8% 2022 Notes (Institutional) $150.0 7.1% 2025 Notes (Baby Bonds) $75.0 3.5% 2033 Notes (Baby Bonds) $40.0 1.9% Credit Facilities $44.3 2.0% Total Capital $2,128.7 100.0%

Debt Capital Stack Total Corporate Capitalization

SBA Debentures 7.0% Equity 46.5% 2027 Asset-Backed Notes 9.4% Credit Facilities 2.0% 2022 Convertible Notes 10.8% 2028 Asset-Backed Notes 11.8% 2025 Notes (Baby Bonds) 3.5% 2033 Notes (Baby Bonds) 1.9% 2022 Notes (Institutional) 7.1%

$75.0

Well Managed Debt Maturity Schedule

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

DIVERSIFIED SOURCES OF FUNDING (AS OF 3/31/19)

31 ($ in millions)

(2)

Wells Fargo Credit Facility Union Bank Credit Facility Notes SBA Debentures – Total debt of $149.0M Securitizations January 2022

• Conv. Notes

October 2022

• Inst. Notes

April 2025 Notes October 2033 Notes License 2 HTIII DATE ENTERED

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

April 2018 October 2018 May 2010

• Nov. 2018

January 2019 FACILITY SIZE

($ in millions)

$75.0 $200.0 $230.0 $150.0 $75.0 $40.0 $149.0 $200.0 $250.0

INTEREST RATE LIBOR + 300bps LIBOR + 275bps 4.375% unsecured 4.625% unsecured 5.25% unsecured 6.25% unsecured Range(1) from 2.2% to 5.5% 4.605% 4.703% MATURITY January 2022 February 2022 February 2022 October 2022 April 2025 October 2033 Mature ten years after borrowing November 2027 February 2028 ADDITIONAL INFO (Expandable up to $125.0) (Expandable up to $300.0) DBRS: BBB KBRA: BBB+ DBRS: BBB KBRA: BBB+ NYSE: HCXZ DBRS: BBB KBRA: BBB+ NYSE: HCXY DBRS: BBB KBRA: BBB+ Set in March & Sept. (range: 2.2% to 5.5%) Rated A(sf) by KBRA Rated A(sf) by KBRA OUTSTANDING

($ in millions)

$4.6 $39.7 $230.0 $150.0 $75.0 $40.0 $149.0 $200.0 $250.0

$200.0 $250.0 $230.0 $10.0 $53.8 $60.5 $24.8 $40.0 $150.0 $75.0 $0 $100 $200 $300 $400 2020 2021 2022 2023 2025 2027 2028 2033

Securitization Convertible Notes SBA Bonds October 2033 Notes October 2022 Notes July 2024 Notes April 2025 Notes

PORTFOLIO HIGHLIGHTS

HERCULES’ INVESTMENT PORTFOLIO: Q1 2019

33

0.2% 0.3% 2.0% 29.3% 6.2% 3.2% 1.6% 18.0% 1.0% 5.9% 0.5% 28.5% 0.0% 0.2% 0.8% 0.2% 2.1% 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 Diversified Financial Services

97.5% 2.5% Floating Fixed 74.8% 16.4% 7.5% 1.3%

• Sr. Secured First Lien
• Sr. Secured Last Out

Equity Investments Warrant Positions

Floating vs. Fixed Rate Investment Type Breakout Industry Breakout Hercules Investments by Geography 42% 6% 4% 37% 5% International: 6%

As of December 31, 2018

12 Companies completed IPOs or in Registration – YTD 2019

• Stealth Bio Therapeutics, Avedro, Lightspeed POS, Lyft, X4 Pharmaceuticals, Pinterest, TransMedics and

Fastly completed IPOs

• Four (4) confidential JOBS Act filers

Four (4) Announced or Completed Portfolio Company M&A Liquidity Events – YTD 2019

• Labcyte , Art.com, Aquantia and Microsystems Holding (a.k.a. Litera Microsystems)

Current Warrant and Equity Portfolio – Q1 2019

HERCULES WARRANT & EQUITY PORTFOLIO: POTENTIAL FUTURE UPSIDE FOR SHAREHOLDER'S TOTAL RETURN

• 126 warrant holdings
• GAAP fair value ~$26.9 million
• GAAP cost ~$34.3 million
• ~$74.8 million in nominal Exercise Value (as of 3/31/19)
• 57 equity holdings
• GAAP fair value ~$157.0 million
• GAAP cost ~$205.6 million

34

• Illustrative models of potential warrant gains (as of 3/31/19)
• Assumption: 50% of warrants will not monetize
• GAAP cost ~$17.2 million
• Based on ~96.2 million weighted average shares

$37.4M x 2X multiple: $74.8M - $17.2M cost = $57.6M unrealized gain = $0.60/share $37.4M x 3X multiple: $112.2M - $17.2M cost = $95.0M unrealized gain = $0.99/share $37.4M x 4X multiple: $149.6M - $17.2M cost = $132.4 unrealized gain = $1.38/share

Life Sciences

SELECT LIST OF WARRANT AND EQUITY PORTFOLIO HOLDINGS

35

Technology

35

Warrant Holdings in 126 Portfolio Companies

24.1% 26.2% 23.7% 29.7% 23.9% 28.7% 29.3% 2.2% 5.1% 4.3% 2.7% 2.4% 11.4% 13.5% 7.5% 7.6% 6.1% 6.5% 5.9% 5.2% 2.6% 1.6% 1.6% 6.8% 8.7% 13.7% 7.7% 5.9% 2.2% 2.0% 13.4% 6.8% 7.4% 6.8% 10.0% 17.5% 18.0% 2.9% 9.7% 9.9% 1.2% 1.0% 7.2% 12.3% 12.3% 15.4% 23.4% 29.2% 28.5% 18.1% 6.7% 13.3% 10.9% 7.7% 5.9% 6.2% 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 2018 Q1 2019 % Total Investment Portfolio at Fair Value

Diversified Financial Services 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

36

8.0% 4.0%

$1,542.2

4.7%

$1,880.4

3.2%

2.1%

$2,081.0

2.1%

3.2% 4.0% 6.0% 2.8%

SaaS Financing Life Sciences Sustainable & Renewable Technology Special Situations

SELECT LIST OF DIVERSIFIED PORTFOLIO COMPANIES

37

Technology

37

Equity-only Investments

DIVERSIFIED INVESTMENT APPROACH MITIGATES RISK

More than 1000 Venture Capital Firms & Investors Technology SaaS Financing 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

VENTURE CAPITAL MARKET OPPORTUNITY

Venture Capital Investment Activity 1997 – Q1 2019

OVER $975.5 BILLION VENTURE CAPITAL INVESTMENT

Source: Dow Jones VentureSource Q1 2019 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 $21.0 $23.4 $21.8 $37.1 $39.0 $44.9 $38.2 $55.5 $15.5 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2016 2014 2015 2016 2017 2018 Q1 2019

Funds Raised (billions)

Venture Capital Fundraising Activity 1997 – Q1 2019

$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 $84.7 $60.2 $78.9 $104.6

$24.6 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 4,379 4,295 4,515 4,745 965

• 500

500 1,500 2,500 3,500 4,500 5,500 6,500 $0 $20 $40 $60 $80 $100 $120

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019

# of Deals Dollars Invested (billions) $ in billions # of deals

Note: Represents VC investments only Source: Dow Jones VentureSource Q1 2019

0% 20% 40% 60% 80% 100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

IPOs M&A

2.0 2.8 3.8 4.6 5.4 6.0 6.5 5.8 5.5 5.2 5.2 5.2 5.0 5.2 4.8 5.1 5.0 5.0 5.1 4.5 6.5 5.7 5.6 5.6 6.2 6.8 8.7 7.9 7.4 6.2 7.1 6.6 6.8 6.1 7.2 7.4 5.2 4.4

2 4 6 8 10

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

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 Q1 2019

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

Source: Dow Jones VentureSource Q1 2019 YTD YTD

EXITS OF VENTURE CAPITAL-BACKED COMPANIES

Source: Dow Jones VentureSource Q1 2019 42

Mergers & Acquisitions Initial Public Offerings

$26.5 $22.8 $55.6 $58.2 $76.3 $65.5 $132.0 $93.9 $121.7 $89.4 $130.2 $30.7

456 440 667 652 608 604 687 633 655 677 722 173

100 200 300 400 500 600 700 800 900 $0 $20 $40 $60 $80 $100 $120 $140 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019

# of Deals Amount Paid (billions)

$ in billions # M&A Deals

$0.6 $0.9 $3.9 $7.1 $12.1 $9.6 $12.0 $8.0 $0.6 $4.3 $2.4 $2.3

9 8 53 52 58 87 126 79 41 60 82 10

20 40 60 80 100 120 140 $0 $2 $4 $6 $8 $10 $12 $14 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019

# of IPOs Amount Raised (billions)

$ in billions # of IPOs

Source: Dow Jones VentureSource Q1 2019

$25.1 $31.2 $34.5 $33.3 $25.2 $28.9 $36.7 $34.8 $36.4 $58.5 $84.7 $60.2 $78.9 $104.6 $24.6

$215 $243 $494 $413 $186 $523 $630 $637 $705 $905 $745 $807 $882 $1,213 $415 $0 $20 $40 $60 $80 $100 $120 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400

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

VC Dollars Invested Hercules Debt & Equity Commitments

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% 1.2% 1.7%

HERCULES’ TOTAL COMMITMENTS VS. VC DOLLARS INVESTED

VENTURE CAPITAL INVESTMENT ACTIVITY 2005 –Q1 2019

Source: Dow Jones VentureSource Q1 2019

• Hercules’ uncompromising yield and credit underwriting standards drives commitments
• Market conditions determine commitment activity more than pure VC investment activity
• Hercules’ 15-year historical average: 1.4%

43 Note: Represents VC investments only

HERCULES’ PORTFOLIO COMPANY IPOs

Source: Dow Jones VentureSource Q1 2019 44

53 52 58 87 126 79 41 60 2 2 7 5 8 7 1 3 3 5 1 2 3 4 5 6 7 8 9 20 40 60 80 100 120 140

2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019

Hercules’ Portfolio Company IPOs Venture Backed IPOs

VC-backed IPOs Hercules' PoCo IPOs

Participation as % of Total VC-Backed IPOs

4% 4% 12% 6% 6% 9% 3% 5% 4% 50%

PROVIDING INVESTOR ACCESS TO SOME OF AMERICA’S MOST PROMISING COMPANIES

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

10 82

INVESTMENT HIGHLIGHTS

45

Large Market Opportunity Attractive Yields and Upside from Equity and 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

ANALYST COVERAGE

BROAD INDUSTRY ANALYST COVERAGE – 10 FIRMS

47

Finian O’Shea (Transferred Coverage 7/13/2018) Ryan Lynch (Re-initiated Coverage 2/19/2013) 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)

Hercules Capital is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding Hercules Capital’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Hercules Capital or its management. Hercules Capital does not by its reference above or distribution imply its endorsement of

• r concurrence with such information, conclusions or recommendations.

SUPPLEMENTAL INFORMATION

$4,405

$9,034 $13,714 $18,394 $37,150 $55,920

+0.05 +0.09 +0.14 +0.19 +0.39 +0.58

0.00 0.10 0.20 0.30 0.40 0.50 0.60 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

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 ~$4.4 million to Net Interest Income, or $0.05 per share annually

RISING INTEREST RATES & HIGH ASSET SENSITIVITY BENEFITS HERCULES

(1) EPS calculated on basic weighted shares outstanding of 96.2 million and a static debt investment portfolio as of March 31, 2019. Estimates are also subject to change due to impact from potential participation in the Company’s equity ATM program and future equity offerings. 49

Business Development Company (BDC)

• Regulated by the SEC under the Investment Company Act of 1940
• Leverage limited to approximately 2:1 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 dividend distributions 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)

• One Small Business Investment Company (“SBIC”) license granted through the U.S. Small Business

Administration (“SBA”)

• Currently, $149.0 million exemption from SEC leverage restrictions for BDCs, excludes all SBIC debt from

BDC 2:1 leverage test

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

REGULATION AND STRUCTURE

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

51

VENTURE GROWTH 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

PRIMARILY INVEST AT STAGES OF HIGH GROWTH

52

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