A recent article highlighted the trend of the number of publicly traded companies shrinking and the rocketing number of private companies. Instead of looking for a big IPO payday, company founders and their private equity partners are choosing to stay private and keep profits to themselves.

This chart shows changes in public vs. private companies over the last 25 years.

(Click on image to enlarge)

Looking at the numbers, there were 6,917 publicly listed companies in 2000 and 4,772 at the end of 2023. Private equity-backed companies numbered 2,042 in 2000 and had grown to 11,567 as of June 30, 2024.

There is a way for ordinary investors to “get a piece” of the private equity-funded, private company game.

Congress created Business Development Companies (BDCs) to provide funding for small-to-medium-sized businesses. Private businesses tend to use debt to fund growth, and BDCs are one of the primary sources of capital for companies that cannot sell bonds into the public markets.

Individual BDCs serve a range of markets, from small private companies looking for capital to big-money, private equity-backed firms.

Hercules Capital (HTGC) is the largest BDC focused on venture lending and is the lender of choice for entrepreneurs and their venture capital partners.

The BDC business structure is pass-through, meaning these companies must pay out 90% of their net interest income as dividends. HTGC has steadily increased its dividend and currently yields 8.0%. With the exception of just two breaks near the beginning of COVID, HTGC has also regularly paid a supplemental – or bonus – dividend on a quarterly basis.

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