Venture Lender Hercules Technology Pulls Out of San Diego

Hercules Technology Growth Capital (NASDAQ: [[ticker:HTGC]]), a specialty finance company based in Palo Alto, CA, has closed its San Diego office—roughly a year and a half after announcing its expansion into the San Diego venture market.

The public company, which issues loans to startup technology companies and also makes venture investments, had three employees in San Diego, including managing directors Kim Davis King and Killu Sanborn. Hercules disclosed the layoffs as part of a staff reduction of five individuals, or approximately 11 percent of its total workforce, in financial results reported last week for its fourth-quarter and year ended Dec. 31.

The company did not specify where the layoffs occurred and Hercules’ offices were closed for the holiday yesterday. So it was not possible to determine where the other two layoffs occurred. Most of Hercules’ venture lending and investment activity is focused in Silicon Valley, although the company also maintains offices in Boston, Boulder, CO, and Chicago.

While Hercules reported a 39 percent gain in fourth-quarter revenue, compared to the same period in 2007, Hercules co-founder, chairman, and CEO Manuel Henriquez described the economic environment as “unprecedented” in a conference call transcribed by the web site, Seeking Alpha. “In my 20 years as an investor, I have never seen such a dramatic and quickly deteriorating market as we are currently witnessing today,” Henriquez said.

“Hercules expects a significant and continued downturn of venture capital activities in 2009, where we are predicting for a modeling point of view to see anywhere between $20 to $22 billion of (nationwide) venture capital activities,” Henriquez told analysts. That’s a 24- to 31-percent decline from the $29 billion the venture industry invested last year.

Henriquez said during the conference call that Hercules faces a $70 million payment in April on a major line of credit, which has prompted the company to both conserve its cash and seek additional financing. “Liquidity is suddenly the Holy Grail of the financial services community, followed by a heightened and continued awareness of credit concerns,” Henriquez said. “Despite the government’s attempt to unlock the credit and capital markets, we have seen little to no activity in terms of gaining access to these credit facilities.”

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.