Trinity Capital CEO on Record Fundings, AI and Frontier Tech Growth

**SPEAKER_1** (0:00)
Kyle, really appreciate you taking the time to join us. Following your earnings report, I was just looking over your quarter. You had a record quarter here. You've got fundings up 69% year over year to 619 million. Your net asset value is at an all-time high. What is behind this level of demand, and are you seeing private companies turn to lenders like Trinity more than ever now?

**Kyle Brown** (0:23)
Yeah, thank you, and thanks for having me. It was a great quarter. The pipeline is as robust as it has ever been. It's really highlighted by a few of our verticals really exceeding in some interesting ways. You just listed out space stocks.
Two of those companies you just listed there are our customers right now. We're seeing a ton of activity in space, frontier tech, AI, etc. Really all in that late stage VC, pre-IPO, the lower middle market.
We have just dug out a great niche in that area. We see a lot of companies growing and building and doing quite well in the US right now, primarily in the US, and we're there to support them. The pipeline is robust and we're generating great returns for investors.

**SPEAKER_3** (1:08)
Kyle, your company does specialize in financing those pre-IPO companies. As you mentioned, a few in space. You've also talked about some of the manufacturing as well. Given the strength, we were just having a conversation with a previous guest about that as well. I mean, the strength we're seeing as far as that trickle down economics from the capex, and we're seeing it coming through in the PMI numbers. I mean, how much are you benefiting from some of that as far as the opportunities in the manufacturing sector?

**Kyle Brown** (1:38)
Yeah, I mean, most of the markets really focused on the upper middle market and the hyperscalers, and then of course the private credit firms that are supporting a lot of the capex spend there. But what lies underneath that is tens of thousands of companies who are considering on-preming their own compute and their own bare metal access to GPUs who don't wanna work on a cloud anymore and who are building their own proprietary systems. And we have been financing GPUs and AI infrastructure for four to five years now, which believe it or not in the AI world, we're OGs in that space now.
But we have solved a lot of problems there. We have figured out power. We have access to space. We can access ships and build GPUs and we're leasing them directly to lower middle market customers who want one to five megawatts of compute. And so I think we have, the story is big and it's really focused on hyperscalers, there's this developing story of lower middle market companies that want their proprietary tools and AI on their own GPUs. And so we've identified that and we're leaning into it and financing the GPUs, financing the power generation equipment that goes in there, the turbines, et cetera. And so it's a great niche and it's booming right now.

**SPEAKER_1** (2:54)
And overall Kyle, investors have been waiting for some sign that these higher rates are going to put pressure on credit quality, but I'm looking over your results. You have less than 1% of your portfolio on non accrual. What is that telling you about the health of the companies that you are lending to?

**Kyle Brown** (3:12)
Yeah. So I mean, I'll start with Trinity. We have seen, we're probably, our portfolio is the best quality it's ever been. Our companies raised over 2 billion in equity. Last quarter, our 100-plus portfolio companies, the majority of our portfolio was established post January 2025 So we do see a lot of turnover, and so we're investing into new companies. This is not some old legacy portfolio that we're just popping up and supporting. These are mostly new investments that we're making.
I haven't seen credit quality really decrease in private credit, whether it's lower middle market where we are or even the upper middle market. What's not talked about enough is that the majority of kind of upper middle market and private credit, it expanded greatly over the last four or five years because they had access to 2 to 3 percent bonds and rates went up. And so their margins were great. Rates have come down and now all of those bonds are having to be refinanced at 6 to 7 percent, increasing the cost of their capital by 2 to 3 times. And so there is more pain coming, but it's really not in credit quality so much as it is just in actual returns at the private credit level firm level.