SECOND QUARTER 2020 INVESTOR PRESENTATION...Structure Internally Managed Business Development...

SECOND QUARTER 2020 INVESTOR PRESENTATION

July 30, 2020

Financing the Growth of Tomorrow’s Companies TodayTM

This presentation may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Actof 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the “safe harbor” provisions of the PrivateSecurities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under theExchange Act.

The information disclosed in this presentation is made as of the date hereof and reflects Hercules’ current assessment of itsfinancial performance for the period reported. Actual financial results filed with the Securities and Exchange Commission in thefuture may differ from those contained herein in the event of additional adjustments recorded prior to the filing of its financialstatements.

This presentation may contain “forward-looking statements.” These forward-looking statements include comments with respectto 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 generaland specific. The risk exists that these statements may not be fulfilled. We caution readers of this presentation not to place unduereliance on these forward-looking statements as a number of factors could cause future Company results to differ materially fromthese statements.

Forward-looking statements may be influenced in particular by factors such as fluctuations in interest rates and stock indices, theeffects of competition in the areas in which we operate, and changes in economic, political and regulatory conditions. We cautionthat the foregoing list is not exhaustive.

When relying on forward-looking statements to make decisions, investors should carefully consider the aforementioned factorsas well as other uncertainties and events. Historical results discussed in this presentation are not indicative of future results. Thispresentation should be read in conjunction with our recent SEC filings.

2

IMPORTANT NOTICE: FORWARD LOOKING STATEMENTS

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• 4.77% Notes due 2024• 4.28% Notes due 2025• 4.31% Notes due 2025

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) 12.2% as of June 30, 2020

Distributions Declared $0.32 per share for Q2 2020

Price to NAV 1.08x - July 22, 2020~1.1x to ~1.5x historical range

3

HERCULES CAPITAL

(1) Annualized based on the $0.32 distribution declared for Q2 2020 and a closing stock price of $10.47 as of June 30, 2020

SECOND QUARTER 2020 INVESTOR PRESENTATION

Company & Strategic Overview

Financial Highlights

Portfolio Highlights

Venture Capital Market Opportunity

Analyst Coverage

Key Performance Highlights

Supplemental Information

KEY PERFORMANCE HIGHLIGHTS

6

Q2 2020 HIGHLIGHTS

(1) Source: S&P CapIQ as of 6/30/20(2) Based on NII, excludes realized and unrealized gains/losses(3) Regulatory leverage is defined as GAAP leverage excluding SBA debentures(4) As of July 22, 2020

Robust Earnings• Net Investment Income (“NII”) of $35.7M, up 1.2% Y-Y• Total Investment Income of $68.0M, down 1.9% Y-Y• NII per share of $0.32 and 100% distribution coverage

Strong Shareholder Returns• 1YR/3Yr/7YR Total Shareholder Returns(1): -8.3%/7.6%/37.5%• ROAE(1,2,): 12.7%• ROAA(1,2,): 6.0%• Net Interest Margin (“NIM”): 9.5%

High-Yield Portfolio of Earning Assets• Total Debt Investments (at cost): $2.28B• Total Investments (at cost): $2.50B• Effective Yield: 12.2%

Industry-Leading Originations Platform• $10.5B in total debt commitments since inception• Cumulative Total Net Realized (Loss) since inception of ($16.5M)• Total debt & equity commitments: $266.2M• Debt & equity fundings: $132.3M

Strong Liquidity and Balance Sheet • $510.9M available liquidity (subject to existing terms and covenants)

• GAAP and regulatory leverage: 110.0% and 100.5%(3)

Strong Capital Raising Position• Price-to-NAV: 1.08x(4)

• “ATM” Equity Distribution Agreement• Investment Grade Credit Ratings: DBRS: BBB | KBRA: BBB+

-8.3%

7.6% 44.8% 37.5%

-23.8% -17.9%

6.9% 7.4%

-22.4% -17.6%

1.1% 4.3%

-40%

-20%

0%

20%

40%

60%

80%

100%

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, FCRD, TSLX(b) TSR is defined as stock appreciation plus distributed dividend distributions

Source: S&P Capital IQ as of June 30, 2020

(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$16.22

$17.18

$0.04 $0.02

$0.06$0.08

$0.00

$0.10

$0.20

$0.30

$0.40

$0$2$4$6$8

$10$12$14$16$18

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3 2020

Cum

ulat

ive

Dist

ribut

ions

Pai

d(p

er S

hare

)

Base Distribution Supplemental Distribution

$17.34 per share or ~$1.03 Billion in Historical Cumulative Distributions Since June 2005 IPO

11.7

%

12.6

%

12.0

% 13.6

% 15.4

%

12.7

%

11.3

%

10.4

%

9.6%

10.2

%

8.5%

8.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2015 2016 2017 2018 2019 Q2 2020HTGC Peer Group

6.1%

7.2%

6.3% 6.

8% 7.3%

6.0%

6.1%

5.8%

5.7%

5.7%

4.3%

4.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2015 2016 2017 2018 2019 Q2 2020HTGC Peer Group

DELIVERING STRONG SHAREHOLDER RETURNSReturn 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, FCRD, TSLX

(a) (a)

Source: S&P Capital IQ as of 6/30/20 for HTGC and Peer Group. 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 6/30/20 for HTGC and Peer Group. 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% stockNote: 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 June 30, 2020 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 2020 full year distributions to stockholders.

(1) Supp

lem

enta

l Dis

trib

utio

ns P

aid

(per

Sha

re)

12.6% 12.0% 13.6% 15.4% 12.7%

84.7%

95.5%102.6%

115.0%110.0%

84.7%

72.9%

87.0%

101.8% 100.5%

60.6% 62.0%

83.4%

96.2% 97.4%

0%

20%

40%

60%

80%

100%

120%

140%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2016 2017 2018 2019 Q2 2020

ROAE GAAP Leverage Regulatory Leverage Net Regulatory Leverage

AVAILABLE LEVERAGE FOR POTENTIAL EARNINGS GROWTH

9

Leverage to Return on Average Equity % (ROAE)

(1) Source: S&P Capital IQ as of 6/30/20. 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

(1)

(2) (3)

$9.94 $9.90 $9.96 $9.90 $10.55 $10.19

1.23

1.43

1.32

1.11

1.33

1.02

0.92

0.96

0.86 0.86

0.96

0.78

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

2015 2016 2017 2018 2019 Q2 2020 $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, FCRD, TSLXPrice to NAV Source: S&P CapIQ as of 6/30/20 for HTGC and for Peer Group. 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

Pric

e to

NAV

Mul

tiple

(x)

CREATES A STRONG CAPITAL RAISING POSITION TO SUPPORT GROWTH

Net

Ass

et V

alue

(N

AV)

$747

.4

$1,1

23.6

$1,2

21.7

$1,2

99.2

$1,3

24.0

$1,4

64.2

$1,6

54.7

$1,9

45.2

$2,4

62.0

$2,4

68.5

$0$200$400$600$800

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

2011 2012 2013 2014 2015 2016 2017 2018 2019 Q22020

$39.

6

$48.

1

$73.

1

$71.

8

$73.

5

$100

.3

$96.

4

$108

.7

$143

.3

$76.

3

$0

$20

$40

$60

$80

$100

$120

$140

2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Q22020

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

$267

.9

$141

.6

$0

$50

$100

$150

$200

$250

2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Q22020

Total Investment Income($ in millions)

Total Assets ($ in millions)

$587

.4

$914

.3

$906

.3

$1,0

35.3

$1,2

52.3

$1,5

11.5

$1,6

19.8

$1,9

80.5

$2,4

02.0

$2,5

01.4

$0$200$400$600$800

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

2011 2012 2013 2014 2015 2016 2017 2018 2019 Q22020

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) ($23.6) ($16.5)

-$60

-$50

-$40

-$30

-$20

-$10

$0

$10

$20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q2 2020

$ in

mill

ions

$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

$9.9$10.5

$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$7.6 $7.9

$0$1$2$3$4$5$6$7$8$9

$10$11$12

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q2 2020

Cumulative Commitments Cumulative Fundings

$ in

bill

ions

Cumulative Debt Commitment and Fundings, Since Inception

PORTFOLIO GROWTH WITH UNDERWRITING DISCIPLINE

12

HTGCIPO

Effective Annualized Loss Rate of 1.0bps or 0.01%

COMPANY & STRATEGIC OVERVIEW

WARRANT HOLDINGS IN103 companies

EQUITY HOLDINGS IN53 companies

TOTAL WARRANT AND EQUITY GAAP COST $222.4 million

TOTAL WARRANT AND EQUITY FAIR VALUE$147.2 million

AVAILABLE LIQUIDITY TO INVEST(2)

$510.9 million

GAAP LEVERAGE110.0% / 100.5% ex. SBA

INVESTMENT GRADE RATINGSDBRS: BBBKBRA: BBB+

SECURITIZATION INVESTMENT GRADE RATINGSKBRA: A(sf)

DEBT INVESTMENT COST BASIS$2.28 billion

DEBT INVESTMENT FAIR VALUE$2.22 billion

EFFECTIVE YIELD12.2%

DEBT INVESTMENTS IN102 companies

SHORT TERM MATURITIES36-42 months

INVESTMENT SIZE$5 to $200 million

FOUNDED DECEMBER 2003IPO: June 2005 “HTGC”

ENTERPRISE VALUE$2.46 billion(1)

MARKET CAPITALIZATION$1.21 billion(1)

NET ASSET VALUE PER SHARE$10.19 as of 6/30/20

HISTORICAL PRICE/NAV~1.1x to ~1.5x range

CURRENT PRICE/NAV1.08x(1)

HERCULES AT-A-GLANCE

WARRANT & EQUITYPORTFOLIO

103COMPANIES

LIQUIDITY & BALANCE SHEET

$510.9MILLION

DEBT INVESTMENT PORTFOLIO

$2.28BILLION

14

MARKET CAPITALIZATION

$1.21BILLION

(1) Source for Enterprise Value and Market Capitalization is S&P Capital IQ as of July 22, 2020 (2) Subject to existing terms and covenants

LARGEST BDC FOCUSED ON PROVIDING FINANCING TO HIGH-GROWTH VENTURE CAPITAL-BACKED COMPANIES

What We Don’t Do and What We Are Not

No direct 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 – 97.9% floating rate loans and with interest rate floors(1)

We are generally the only lender and 83.5% are "true" first lien senior secured(1)

The majority 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 over 15 years of strong credit performance history

WHY IS HERCULES DIFFERENT THAN OTHER BDCs

(1) As of June 30, 2020

15

WE INVEST IN INNOVATIVE VENTURE GROWTH-STAGE COMPANIES

Hercules’ At-the-Market “ATM” Equity Distribution Agreement Equity Distribution Agreement: Up to a total of 16.5 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 can be highly accretive to NAV when HTGC trades at a premium to NAV

The Results Equity ATM Program YTD 2020: sold ~ 5.97 million shares for total net proceeds of ~ $73.9 million

Equity ATM Program FY 2019: sold ~ 4.6 million shares for total net proceeds of ~ $62.7 million

STRATEGIC ACCESS TO EQUITY AND DEBT CAPITAL MARKETS

16

HERCULES’ SUCCESSFUL ATM DISTRIBUTION PROGRAM

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 FIVE SPECIALIZED LENDING GROUPS“WE ARE NOT GENERALISTS”

$10.5 billion in total debt commitments to over 500 companies since inception

Offices in key venture capital markets: CA | MA | NY | DC | IL | CT

Over 1000 different VC & PE firms, financial investors

Over 170 portfolio companies completed/announced an IPO or M&A event since inception

SaaSFinancing

FINANCIAL HIGHLIGHTS

INCOME STATEMENT: Q2 2020 VS. Q2 2019 SUMMARY RESULTS

19

2020 2019 Year/Year

($ in 000's, except per share amounts) (unaudited) (unaudited) Change

Interest Income $ 63,555 $ 61,710 3%

Fee Income 4,413 7,554 -42%

Total Investment Income 67,968 69,264 -2%

Interest and Loan Fees 16,726 15,161 10%

General and Administrative 5,863 5,795 1%

Employee Compensation 9,695 13,041 -26%

Total Operating Expenses 32,284 33,997 -5%

Other Income

Pre-Tax Net Investment Income-NII 35,684 35,267 1%

Total Net Realized and Unrealized Gain/Loss 26,081 12,864

Net Increase(Decrease) in Net Assets from Operations 61,765 48,131 28%

NII - Net Investment Income per Share (Basic) $ 0.32 $ 0.36 -11%

Weighted Average Shares Outstanding - Basic 111,558 98,223 14%

Three Months Ended June 30,

CURRENT & HISTORICAL INCOME STATEMENTS

20

Six Months Twelve Months Ended June 30, Ended December 31,

($ in 000's, except per share amounts) 2020 2019

Interest Income $ 129,759 $ 247,513

Fee Income 11,828 20,361

Total Investment Income 141,587 267,874

Interest and Loan Fees 33,052 61,674

General and Administrative 11,922 19,183

Employee Compensation 20,349 41,519

Total Operating Expenses 65,323 124,602

Other Income - -

Pre-Tax Net Investment Income - NII 76,264 143,272

Net Realized and Unrealized Gain / (Loss) (43,222) 30,326

Net Increase(Decrease) in Net Assets from Operations $ 33,042 $ 173,598

NII - Net Investment Income per Share (Basic) $ 0.69 $ 1.41

Weighted Average Shares Outstanding - Basic 110,256 101,132

CURRENT & HISTORICAL BALANCE SHEET

21

June 30, December 31,

($ in 000's, except per share amounts) 2020 2019

ASSETS

Total Investments $ 2,363,521 $ 2,314,526

Cash and cash equivalents 35,884 64,393

Restricted cash 33,599 50,603

Interest receivable 19,458 20,207

Other assets 16,039 12,239

Total Assets $ 2,468,501 $ 2,461,968

LIABILITIES

Accounts Payable and Accrued Liabilites 39,340 41,844

Credit Facilities - 103,919

2022 Convertible Notes 227,395 226,614

2027 Asset-Backed Notes 197,448 197,312

2028 Asset-Backed Notes 247,511 247,395

2033 Notes 38,555 38,501

February 2025 Notes 49,465 -

June 2025 Notes 69,217 -

Long-term SBA Debentures 109,808 148,165

2025 Notes 73,161 72,970

July 2024 Notes 103,795 103,685

2022 Notes 148,776 148,514

Total Liabilites $ 1,304,471 $ 1,328,919

Net Assets $ 1,164,030 $ 1,133,049

Shares Outstanding 114,230 107,364

Net Assets per Share $ 10.19 $ 10.55

13.4%

14.9%

14.1% 14.2% 14.3%

13.5% 13.5% 13.5%13.0%

14.3%

13.4%13.0%

13.6%

12.2%

12.2% 12.1%12.6% 12.5%

11.9%

12.7% 12.7% 12.9% 12.7% 12.7% 12.4% 12.3%11.8% 11.5%

8.9%9.3% 9.6% 9.8% 9.5%

10.1% 10.4% 10.4% 10.3% 10.3% 10.2% 10.1%9.5% 9.3%

6%

8%

10%

12%

14%

16%

18%

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1 -19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Effe

ctiv

e Yi

eld

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 Q1 2017 TO Q2 2020: 12.5%

(1)

$1,3

11.9

$1,2

87.6

$1,3

00.1

$1,4

16.0

$1,3

36.3

$1,5

46.0

$1,6

03.3

$1,7

33.5

$1,8

97.1

$2,0

61.6

$2,0

79.9

$2,1

48.6

$2,1

95.6

$2,2

16.4

13.4%

14.9%14.1% 14.2% 14.3%

13.5% 13.5% 13.5% 13.0%

14.3%

13.4%13.0%

13.6%12.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

$0

$500

$1,000

$1,500

$2,000

$2,500

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Effe

ctiv

e Yi

eld

(%)

Tota

l Deb

t Inv

estm

ents

, at v

alue

(m

illio

ns)

Total Debt Investments at Fair Value Effective Yield(1)

HIGH-YIELD PORTFOLIO OF EARNING ASSETS

23

MEDIAN EFFECTIVE YIELD FROM Q1 2017 TO Q2 2020 OF 13.5%


13.5%

$33,

920

$37,

850

$35,

366

$37,

159

$38,

140

$36,

322

$41,

650

$44,

946

$43,

321

$54,

103

$54,

243

$54,

623

$57,

293

$51,

243

10.1%

11.1%

10.3% 10.4% 10.5%

9.5%

10.8% 11.0%10.3%

11.8% 11.6%11.0% 11.1%

9.5%

0%

2%

4%

6%

8%

10%

12%

14%

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Net I

nter

est M

argi

n (%

)

Net I

nter

est M

argi

n (i

n th

ousa

nds)

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

STRONG, CONSISTENT NET INTEREST MARGIN - NIM

24

MEDIAN NIM FROM Q1 2017 TO Q2 2020 OF 10.6%

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

10.6%

EFFECTIVE YIELDS

Early Payoffs Lead to Higher Effective Yields and Earnings

IMPACT OF EARLY PAYOFFS ON EFFECTIVE YIELDS

UNSCHEDULED EARLY PAYOFFS ($ in millions)

1

25

13.4%14.9%

14.1% 14.2% 14.3%13.5% 13.5% 13.5% 13.0%

14.3%13.4% 13.0% 13.6%

12.2%12.2% 12.1% 12.6% 12.5% 11.9%

12.7% 12.7% 12.9% 12.7% 12.7% 12.4% 12.3% 11.8% 11.5%

8.9% 9.3% 9.6% 9.8% 9.5% 10.1% 10.4% 10.4% 10.3% 10.3% 10.2% 10.1% 9.5% 9.3%

5%

10%

15%

20%

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

GAAP Effective Yield Core Yield Loan Coupon Rate

$100.3 $166.4 $114.7 $124.2 $243.5 $114.3 $64.9 $63.9 $47.5 $178.3 $140.1 $160.8 $150.5 $85.4

7.2%

12.7%

8.7% 8.7%

17.8%

7.4%

4.0% 3.6%9.4%

8.6%6.7% 7.4% 6.7%

3.7%

0%

5%

10%

15%

20%

$0

$50

$100

$150

$200

$250

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

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

(2)

$505.6

(1)


(2) Core Yield excludes Early Repayments and One-Time Fees, and includes income and fees from expired commitments

$486.6 $526.7 $235.9

$9,4

10

$10,

667

$9,5

62

$11,

023

$9,7

69

$10,

692

$10,

389

$12,

414

$12,

025

$16,

248

$12,

465

$13,

430

$15,

078

$13,

882

2.6%

2.9%

2.5%

2.8%

2.4%2.5%

2.4%

2.8%

2.6%

3.2%

2.4% 2.4%

2.7%

2.3%

0%

1%

2%

3%

4%

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

OPE

X as

a %

of T

otal

Ass

ets (

%)

OPE

X (i

n th

ousa

nds)

OPEX (exc. Interest, fees, RSU, PSU and option expense) OPEX as a % of Average Total Assets

NON-INTEREST AND FEE EXPENSE TO AVERAGE TOTAL ASSETS

26

MEDIAN ADJ. OPEX TO AVERAGE TOTAL ASSETS FROM Q1 2017 TO Q2 2020 OF 2.6%

2.6%

$75.

9

$57.

6

$46.

3

$73.

6

$51.

9

$129

.7

$171

.9

$139

.0

$154

.2

$177

.2

$167

.5

$133

.7

$134

.7

$165

.1

4.8%

3.6%

2.9%

4.4%3.2%

7.2%

9.4%

7.1%7.2%

7.7%7.2%

5.4% 5.6%6.7%

$0

$30

$60

$90

$120

$150

$180

$210

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-200%

2%

4%

6%

8%

10%

12%

14%

16%

Avai

labl

e Un

fund

ed C

omm

itmen

ts (

in m

illio

ns)

Avai

labl

e Un

fund

ed C

omm

itmen

ts a

s % T

otal

Ass

ets

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

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

Credit Grading at Fair Value, Q2 2020 - Q2 2019 ($ in millions)

Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019

Grade 1 - High 443.6$ 20.1% 390.4$ 17.7% 387.3$ 18.0% 237.9$ 11.4% 256.2$ 12.4%

Grade 2 877.9$ 39.6% 818.1$ 37.3% 1,180.5$ 55.0% 1,331.2$ 64.0% 1,317.7$ 63.9%

Grade 3 849.7$ 38.3% 917.2$ 41.8% 509.9$ 23.7% 479.0$ 23.1% 413.0$ 20.1%

Grade 4 25.0$ 1.1% 54.3$ 2.5% 69.0$ 3.2% 29.7$ 1.4% 67.8$ 3.3%

Grade 5 - Low 20.1$ 0.9% 15.5$ 0.7% 1.8$ 0.1% 2.1$ 0.1% 6.9$ 0.3%

Weighted Avg. 2.30 2.34 2.15 2.17 2.18

Disciplined credit underwriting standards deliver consistent long-term results

(1) Debt only; based on fair value

$1,3

11.9

$1,2

87.6

$1,3

00.1

$1,4

16.0

$1,3

36.3

$1,5

46.0

$1,6

03.3

$1,7

33.5

$1,8

97.1

$1,2

24.1

$2,0

79.9

$2,1

48.6

$2,1

95.6

$2,2

16.4

2.43 2.27 2.24 2.172.43

2.21 2.23 2.18 2.19 2.18 2.17 2.15 2.34 2.30

1.0

2.0

3.0

4.0

5.0$0

$500

$1,000

$1,500

$2,000

$2,500

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20

Cred

it Ra

ting

Debt

Por

tfol

io V

alue

($ in

mill

ions

)

Debt Portfolio Value Weighted Investment Credit Rating(1)

High Quality

Low Quality

CONSISTENT AND DISCIPLINED UNDERWRITING STANDARDS

28

DIVERSIFIED SOURCES OF FUNDING: Q2 2020

29

Entity Capitalization Capital Sources as of 6/30/20 $ in Millions % of TotalEquity $1,164.0 47.6%SBA Debentures $110.3 4.5%2027 Asset-Backed Notes $200.0 8.2%2028 Asset-Backed Notes $250.0 10.2%2022 Convertible Notes $230.0 9.4%2022 Notes (Institutional) $150.0 6.2%2024 Notes (Institutional) $105.0 4.3%2025 Notes (Baby Bonds) $75.0 3.1%2033 Notes (Baby Bonds) $40.0 1.6%2025 Notes (Institutional) $120.0 4.9%Credit Facilities $0.0 0.0%Total Capital $2,444.3 100.0%

Debt Capital Stack Total Corporate Capitalization

SBA Debentures4.5%

Equity47.6%

2027 Asset-Backed Notes8.2%

Credit Facilities0.0%

2022 Convertible Notes9.4%

2028 Asset-Backed Notes10.2%

2025 Notes (Baby Bonds)3.1%

2033 Notes (Baby Bonds)1.6%

2024 Notes (Institutional)4.3%

2025 Notes (Institutional)4.9% 2022 Notes (Institutional)

6.1%

$75.0

2024 Institutional Notes6.0%

Wells Fargo4.3%

Union Bank22.8%

2022 Convertible Notes13.1%

2027 Asset Backed Notes11.3%

2028 Asset Backed Notes14.3%

2033 Notes2.3%

SBA License 2 - HTIII6.3%

2025 Notes4.3%



$75.0

$400.0

$230.0

$110.3

$200.0

($ in millions)

$150.0

$40.0

$250.0

$105.0

$75.0

$120.0

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

DIVERSIFIED SOURCES OF FUNDING (AS OF 6/30/20)

30

Wells FargoCredit Facility

Union Bank Credit Facility

Notes SBA Debentures

SecuritizationsJanuary 2022Conv. Notes

October 2022Inst. Notes

April 2025 Notes

October 2033 Notes

July 2024Inst. Notes

February 2025 Inst. Notes

June 2025Inst. Notes

License 2HTIII

DATEENTERED Aug. 2008 Feb. 2020 Jan. 2017 Oct. 2017 April 2018 Oct. 2018 July 2019 Feb. 2025 June 2025 May 2010 Nov. 2018 Jan. 2019

FACILITY SIZE($ in millions) $75.0 $400.0 $230.0 $150.0 $75.0 $40.0 $105.0 $50.0 $70.0 $110.3 $200.0 $250.0

INTERESTRATE

LIBOR +300bps

LIBOR +250bps

4.375% unsecured

4.625%unsecured

5.25% unsecured

6.25%unsecured

4.77%unsecured

4.28%Unsecured

4.31%Unsecured

Range(1) from2.2% to 5.5% 4.605% 4.703%

MATURITY January 2022

February 2023

February 2022

October 2022

April 2025

October 2033

July 2024

February 2025

June 2025

Mature 10 years after borrowing

November 2027

February 2028

ADDITIONALINFO

(Expandable up to $125.0)

(Expandable up to $600.0)

DBRS: BBBKBRA: BBB+

DBRS: BBBKBRA: BBB+

NYSE: HCXZDBRS: BBB

KBRA: BBB+

NYSE: HCXYDBRS: BBB

KBRA: BBB+KBRA: BBB+ KBRA: BBB+ KBRA: BBB+

Set in March & Sept.

(range: 2.2% to 5.5%)

KBRA: A(sf) KBRA: A(sf)

OUTSTANDING($ in millions) $0.0 $0.0 $230.0 $150.0 $75.0 $40.0 $105.0 $50.0 $70.0 $110.3 $200.0 $250.0

Well Managed Debt Maturity Schedule

($ in

mill

ions

)

(2)$200.0

$250.0$230.0

$0.0 $25.3

$60.5

$24.8 $40.0

$150.0

$105.0 $75.0

$50.0

$70.0

$0

$100

$200

$300

$400

2020 2021 2022 2023 2024 2025 2027 2028 2033

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

$0.00 $0.00 $0.00$0.01

$0.02$0.04

$0.06

$0.15

$0.00

$0.04

$0.08

$0.12

$0.16

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

-75 -50 -25 25 50 75 100 200

Earn

ing

per S

hare

(1)

Net I

ncom

e ($

in th

ousa

nds)

Basis Point Movement in Prime Rate

Net IncomeEPS

INTEREST RATES & ASSET SENSITIVITY

(1) EPS calculated on basic weighted shares outstanding of 111.6 million and a static debt investment portfolio as of June 30, 2020. Estimates are also subject to change due to impact from potential participation in the Company’s equity ATM program and future equity offerings.

31

PORTFOLIO HIGHLIGHTS

HERCULES’ INVESTMENT PORTFOLIO: Q2 2020

33

0.4%0.0%

1.9%

31.1%3.3%

4.6%

2.3%

22.1%

0.9%

1.8%

1.1%

28.2%

0.0%

0.2%0.1%0.0% 2.0%

Communications & NetworkingConsumer & Business ProductsDrug DeliveryDrug Discovery & DevelopmentSustainable & Renewable TechnologiesHealthcare Services, OtherInformation ServicesInternet Consumer & Business ServicesMedia/Content/InfoMedical Devices & EquipmentSemiconductorsSoftwareSpecialty PharmaceuticalsSurgical DevicesElectronics & Computer HardwareBiotechnology ToolsDiversified Financial Services

97.9%

2.1%

Floating

Fixed

93.8%

5.3%

0.9%

Debt Investments

Equity Investments

Warrant Positions

Floating vs. Fixed Rate Investment Type Breakout

Industry Breakout Hercules’ Investments by Geography

43% 5%

1%

41%

5%

International: 5%

(Portfolio Companies as of December 31, 2019)

6 Portfolio Companies completed IPOs or in Registration – YTD Q2 2020 Metuchen Pharmaceuticals (reverse merger)

Oak Street Health and 4 confidential JOBS Act filers

8 Portfolio Company M&A Liquidity Events – YTD Q2 2020 Quid, CareCloud, Elenion Technologies, TAS Energy, Metuchen Pharma, Machine Zone, Lastline,

Postmates

Current Warrant and Equity Portfolio – Q2 2020

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

103 warrant holdings• GAAP fair value ~$21.5 million

• GAAP cost ~$30.8 million

• ~$70.3 million in nominal Exercise Value (as of 6/30/20)

53 equity holdings• GAAP fair value ~$125.7 million


34

Illustrative models of potential warrant gains (as of 6/30/20)• Assumption: 50% of warrants will not monetize


• Based on ~111.5 million weighted average shares

$35.2M x 2X multiple:$70.4M - $15.4M cost =

$55.0M unrealized gain = $0.49/share


$90.2M unrealized gain = $0.81/share


$125.4 unrealized gain = $1.12/share

Life Sciences

SELECT LIST OF WARRANT AND EQUITY PORTFOLIO HOLDINGS

35

Technology

35

26.2% 23.7%29.7%

23.9%28.7% 32.2% 31.1%

5.1%4.3%

2.7%

2.4%

13.5%

7.5%

7.6%

6.1%6.5% 3.2%

1.8%

2.6%

2.6% 2.6%2.3%

8.7%

13.7% 7.7%

5.9% 2.2% 2.0%1.9%

6.8%

7.4%6.8%

10.0%17.5%

21.4%22.1%

8.0%

9.9%1.2%

0.9%0.9%

12.3%12.3% 15.4%

23.4% 29.2%25.2% 28.2%

6.7% 13.3% 10.9% 7.7%5.9% 3.3% 3.3%

2.0%2.1%

1.3% 2.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016 2017 2018 2019 Q2 2020

% T

otal

Inve

stm

ent P

ortf

olio

at F

air V

alue

Diversified Financial Services

Electronics & Computer Hardware

Consumer & Business Products

Surgical Devices

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

$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

9.7%

6.2%

$1,542.2

3.2%

$1,880.4

4.5%3.4%

$2,314.52.0%

6.0%

$2,363.5

2.9%

1.5%

3.0%4.7% 4.6%

2.2%

2.2%

1.6%1.6%

1.3%

SaaS FinancingLife Sciences Sustainable & Renewable Technology

Special Situations

SELECT LIST OF DIVERSIFIED PORTFOLIO COMPANIES

37

Technology

37

DIVERSIFIED INVESTMENT APPROACH MITIGATES RISK

More than1000 VentureCapital Firms

&Investors

TechnologySaaS Financing

Life SciencesSustainable &

RenewableSpecial

Situations

Expansion or“Venture Growth”

& Established

Key VC Investment

CentersPalo AltoBoston

New YorkWashington DC

ChicagoHartford

FINANCIALSPONSORS

INDUSTRYSECTORS

STAGES OFDEVELOPMENT

GEOGRAPHICLOCATION

Four Key Diversification Strategies

38

VENTURE CAPITAL MARKET OPPORTUNITY

Venture Capital Investment Activity 1997 – Q2 2020

OVER $1.0 TRILLION IN VENTURE CAPITAL INVESTMENTS

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 $22.4

$21.7

$37.3$39.6

$46.1$39.7

$56.5 $58.7

$42.7

$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 2019 YTD Q22020

Fund

s Rai

sed

(bill

ions

)

Venture Capital Fundraising Activity 1997 – Q2 2020

$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

$80.

2

$108

.5

$103

.3

$69.

1

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

3,2043,729 3,906 4,048 4,278 4,379 4,295 4,649

4,9954,341 5,058

-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 2019 YTD Q22020

# of

Dea

ls

Dolla

rs In

vest

ed (b

illio

ns)

$ in billions # of dealsNote: Represents VC investments only

Source: Dow Jones VentureSource Q4 2019 PitchBook-NVCA Venture Monitor Q2 2020


EXITS OF VENTURE CAPITAL-BACKED COMPANIES

41

Mergers & Acquisitions

Initial Public Offerings

$26.5 $22.8 $55.6 $56.7 $69.3 $67.8 $133.0 $84.7 $120.5 $89.0 $129.5 $123.4 $24.4

456 440

667 663 632 645742

675703 730

759 708

291

0100200300400500600700800900

$0

$20

$40

$60

$80

$100

$120

$140

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Q22020

# of

Dea

ls

Amou

nt P

aid

(bill

ions

)

$ in billions # M&A Deals

$0.6 $0.9 $3.9 $7.1 $12.1 $9.6 $12.0 $8.0 $2.8 $9.9 $11.2 $25.0 $18.19 8

53 5258

87

126

79

4160

82 79

26

0

20

40

60

80

100

120

140

$0

$5

$10

$15

$20

$25

$30

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Q22020

# of

IPO

s

Amou

nt R

aise

d (b

illio

ns)

$ in billions # of IPOs



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% 1.1% 1.1% 1.4%

HERCULES’ TOTAL COMMITMENTS VS. VC DOLLARS INVESTED

VENTURE CAPITAL INVESTMENT ACTIVITY 2005 – 2019

Source: Dow Jones VentureSource Q4 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: 1.3%

42

Note: Represents VC investments only

$25.

1

$31.

2

$34.

5

$33.

3

$25.

2

$28.

9

$36.

7

$34.

8

$36.

4

$58.

5

$84.

7

$60.

2

$80.

2

$108

.5

$103

.3

$215$243

$494$413

$186

$523$630 $637

$705

$905

$745$807

$882

$1,213$1,475

$0

$20

$40

$60

$80

$100

$120

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

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

VC D

olla

rs In

vest

ed (b

illio

ns)

Her

cule

s Deb

t and

Equ

ity C

omm

itmen

ts

(mill

ions

)

VC Dollars Invested

Hercules Debt & Equity Commitments

INVESTMENT HIGHLIGHTS

43

Large MarketOpportunity

Attractive Yields andUpside from Equity and

Warrant Portfolio

Focused on Strong and Sustainable

Shareholder Returns

ExperiencedManagement Team

Platform in Place to Grow Portfolio

Strong BalanceSheet and DiverseFunding Sources

Strong Venture Capital and Private

Equity Relationships

Strict Focus on Credit Underwriting

Process

ANALYST COVERAGE

BROAD INDUSTRY ANALYST COVERAGE – 10 FIRMS

45

Finian O’Shea(Transferred Coverage 7/13/2018)

Ryan Lynch (Re-initiated Coverage 2/19/2013)

Crispin Love (Re-initiated Coverage 7/20/2020)

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 or concurrence with such information, conclusions or recommendations.

SUPPLEMENTAL INFORMATION

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, $110.3 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

47

PRIMARILY INVEST AT STAGES OF HIGH GROWTH

48

Expansion Stage Established

Type of CompanyFollow-on Roundsof 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

1–3Additional 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

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