TriplePoint Venture Growth BDC (TPVG) risk factors, FY2024 10-K

Other

1. 01The following is a summary of the principal risk factors associated with an investment in the Company. Further details regarding each risk included in the below summary list can be found further below

Risks Relating to our Business and Structure

1. 02A failure on our part to maintain our status as a BDC may significantly reduce our operating flexibility
2. 03Our success depends on the ability of TPC and our Adviser to attract and retain qualified personnel in a competitive environment
3. 04We may not replicate the historical results achieved by TPC or members of its senior investment team
4. 05The nature of our approach to our business may lead to volatility and variability from period to period with respect to new originations. Our financial condition and results of operations depend upon our ability to effectively manage credit, deploy capital and grow our business
5. 06We operate in a highly competitive market for investment opportunities, and we may not be able to compete effectively
6. 07We will be subject to U.S. federal corporate-level income tax and may default under our current or future borrowing arrangements if we are unable to maintain our qualification and tax treatment as a RIC under Subchapter M of the Code
7. 08We may need to raise additional capital to grow. If additional capital is not available or not available on favorable terms, our ability to grow will be impaired
8. 09We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income
9. 10The amount and frequency of any distributions we may make is uncertain. You may not receive distributions or our distributions may not grow over time
10. 11Incurring additional leverage could increase the risk of investing in the Company. The use of leverage may increase the likelihood of our defaulting on our obligations
11. 12We finance certain of our investments with borrowed money, which magnifies the potential for gain or loss on amounts invested and increases the risk of investing in us
12. 13Based on our outstanding indebtedness of $400.0 million as of December 31, 2024, our investment portfolio would have been required to experience an annual return of at least 3.2% to cover annual interest payments on the outstanding debt
13. 14Provisions in our current debt obligations or any future indebtedness may limit our discretion in operating our business
14. 15Adverse developments in the credit markets may impair our ability to enter into any other future borrowing facility
15. 16If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy
16. 17Our investment portfolio is recorded at fair value, with our Board having final responsibility for overseeing, reviewing and approving, in good faith, such fair value and, as a result, there is uncertainty as to the value of our portfolio investments, which may impact our net asset value
17. 18Our Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse
18. 19Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock
19. 20Our Adviser or our Administrator can resign upon 60 days’ notice and we may not be able to find a suitable replacement within that time, or at all, resulting in a disruption to our operations that could materially and adversely affect our financial condition, results of operations and cash flows
20. 21The failure in cyber security systems, as well as the occurrence of events unanticipated in our Adviser’s disaster recovery systems and management continuity planning or a support failure from external providers during a disaster could impair our ability to conduct business effectively
21. 22We are subject to risks associated with artificial intelligence and machine learning technology
22. 23If we are unable to manage our growth, our results of operations could suffer

Risks Relating to our Conflicts of Interest

1. 24Our ability to enter into transactions with our affiliates and to make investments in venture capital-backed companies along with our affiliates is restricted by the 1940 Act which may limit the scope of investment opportunities available to us
2. 25Our Adviser may be subject to conflicts of interest with respect to taking actions regarding investments in which TPC or its affiliates may also have an interest
3. 26The advisory fee structure we have with our Adviser may create incentives that are not fully aligned with the interests of our stockholders
4. 27Our incentive fee may induce our Adviser to pursue speculative investments and to use leverage when it may be unwise to do so
5. 28We may pay our Adviser an incentive fee on certain investments that include a deferred interest feature
6. 29The valuation process for certain of our investments may create a conflict of interest
7. 30There are conflicts related to our other arrangements with TPC and our Administrator
8. 31The Investment Advisory Agreement was not negotiated at arm’s length and may not be as favorable to us as if it had been negotiated with an unaffiliated third party
9. 32Our Adviser’s liability is limited under the Investment Advisory Agreement and we have agreed to indemnify our Adviser against certain liabilities, which may lead our Adviser to act in a riskier manner on our behalf than it would when acting for its own account

Risks Relating to our Investments

1. 33Our investments are concentrated in technology and other high growth industries, some of which involve significant risks, including highly volatile markets and extensive government regulation, which expose us to the risk of significant loss if any of these industry sectors experiences a downturn
2. 34Our portfolio may lack diversification among portfolio companies which may subject us to a risk of significant loss if one or more of these companies default on their obligations under any of their debt instruments
3. 35Our financial condition, results of operations and cash flows would be negatively affected if a significant portfolio investment fails to perform as expected
4. 36Some of our portfolio companies may need additional capital, which may not be readily available
5. 37Our existing and/or future portfolio companies may not draw on any of our unfunded obligations or may draw our outstanding unfunded obligations at a time when our capital is not readily available
6. 38If our portfolio companies are unable to protect their intellectual property rights, our business and prospects could be harmed. If our portfolio companies are required to devote significant resources to protecting their intellectual property rights, then the value of our investment could be reduced
7. 39Our relationship with certain portfolio companies may expose us to our portfolio companies’ trade secrets and confidential information which may require us to be parties to non-disclosure agreements and restrict us from engaging in certain transactions
8. 40Our financial condition, results of operations and cash flows could be negatively affected if we are unable to recover our principal investment as a result of a negative pledge or lack of a security interest on the intellectual property of our portfolio companies
9. 41If the assets securing the loans that we make decrease in value, then we may lack sufficient collateral to cover losses
10. 42Our portfolio companies may have limited operating histories and financial resources
11. 43We make debt investments in venture capital-backed companies that generally do not have sufficient cash resources to repay our loans in full at the time of their origination
12. 44There may be circumstances when our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims
13. 45The lack of liquidity in our investments may materially and adversely affect our ability to meet our investment objectives
14. 46Publicly traded securities involve significant risks that differ from those associated with non-traded securities
15. 47Any unrealized losses we experience on our investment portfolio may be an indication of future realized losses, which could reduce our funds available for distribution and could have a material adverse effect on our ability to service our outstanding borrowings
16. 48Our stockholders do not have any input in our Adviser’s investment decisions
17. 49Because we generally do not hold controlling equity interests in our portfolio companies, we are not able to exercise control over our portfolio companies or prevent decisions by their management that could decrease the value of our investment
18. 50Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies
19. 51The disposition of our investments may result in contingent liabilities
20. 52Our equity related investments are highly speculative, and we may not realize gains from these investments
21. 53Investments in foreign companies may involve significant risks in addition to the risks inherent in investment in U.S. companies
22. 54We may expose ourselves to risks resulting from our use of hedging transactions
23. 55Our failure to make protective or follow-on investments in our portfolio companies could impair the value of our portfolio
24. 56The effect of global climate change may impact the operations of our portfolio companies

Risks Relating to our Common Stock and Securities

1. 57Our common stock may trade below our net asset value per share, which limits our ability to raise additional equity capital
2. 58Our stockholders will experience dilution in their ownership percentage if they opt out of our dividend reinvestment plan and participating stockholders can experience dilution in the value of their shares if we distribute shares through our dividend reinvestment plan at a price below the then-current NAV
3. 59You may receive shares of our common stock through our dividend reinvestment plan, and we may otherwise choose to pay dividends in our common stock, in which case you may be required to pay tax in excess of the cash you receive
4. 60Investing in our common stock may involve an above average degree of risk
5. 61The market price of our common stock may fluctuate significantly
6. 62Our business and operation could be negatively affected to the extent we are subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price
7. 63Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock
8. 64Terms relating to redemption may have a material adverse effect on the return on any debt securities that we may issue
9. 65We may not be able to prepay our outstanding unsecured notes upon a change in control
10. 66Our outstanding notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future
11. 67Our outstanding unsecured notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries
12. 68Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations
13. 69A lack of IPO or merger and acquisition opportunities may cause companies to stay in our portfolio longer, leading to lower returns, unrealized depreciation, or realized losses
14. 70The capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect the debt and equity capital markets, which may have a negative impact on our business and operations
15. 71We may experience fluctuations in our quarterly operating results
16. 72Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy
17. 73Worldwide economic conditions, economic recessions or downturns, as well as political and economic conditions, could impair our venture capital-backed companies and harm our operating results
18. 74Uncertainty about U.S. federal initiatives could negatively impact our business, financial condition and results of operations
19. 75Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, harm us
20. 76Inflation has adversely affected and may continue to adversely affect the business, results of operations and financial condition of our portfolio companies