Discussion with the co-founder of Triple Dragon Pieter van der Pijl:
We are glad to present our newest discussion online with one of the co-founders of Triple Dragon Pieter van der Pijl. We believe that this interview will help you to have a better picture of how this loan originator is working and why you should invest in their assets.
Martins: Firstly maybe you can tell something about yourself? About your background and role in Triple Dragon?
Pieter: My background was always been in finance, I am also really passionate about video games and investing in them for a long time. The co-founders of Triple Dragon are also Charlie and Diederik, so we combined mutual interest and passion in gaming industry and experience in finance and that’s how Triple Dragon was created.
Martins: So, there are three guys doing it, right?
Pieter: Three founders, but our team is currently 6 people.
Martins: Can you tell a bit about Triple Dragon? What exactly do you do?
Pieter: We finance video game companies, and we finance them on the stage when they have products, which are life and generating revenue, so we could reduce the risk by taking security over the store receivables. So video games or all companies especially mobile games are usually making their revenue trough app store, especially companies like Google that are collecting all the revenue from consumers and then paying to video games companies. It obviously takes time before revenue which is being generated, and then it takes time and it also takes like 30-45 days before the app store payout to these video games companies. So, they have receivables, the cash which they can’t use, and we are lending against those receivables. Its Apple, Google for mobile, Microsoft Nintendo for console gaming and Steam and Epic for PC.
Martins: As I understand you mentioned that approximately term is when collected plus 30-45 days but at the same time you manage to do loans that are around one year and even longer? How is that structured?
Pieter: Yes, so the payment terms what the app stores are usually from 30 to 45 days, but what we would like to do is, we are financing video games companies that are really at the growth stage so that the product is live. What they need is advertising and marketing for, their games. And if we can finance those companies, we would rather finance them for a longer period of time than just one kind of invoice discounting of the app store receivables. It’s a lot more trusting for video gaming companies to have access to financing, to grow their business, over the next 6-12 months, that it is currently like for 2-3 months. And the same thing for us, if we can finance company for 12 months, and the cost of doing this is the same, and it means the return that we are able to make is higher if we lend for a longer period, and that means a better return for our investors.
Martins: Structure means that. Throughout all that period your financing amount is less than receivables, or how does it work?
Pieter: Yes, we always want to be very conservative and make sure that we are fully secured, so as a requirement for a borrower is that there should be store receivables over at least 120 % of the amount we are lending. So, we are always overcolletarized.
Martins: Okay, it sounds great, but everyone is interested in what happens if your borrower, the game developer goes bankrupt? How do you ensure that your fund is getting back?
Pieter: Well, we are in so-called fairly fortune position that in most cases we are collecting the app store receivables, either ourselves or in the accounts of the major banks. So, the store payments are going directly to those accounts, if borrow would get into trouble financially, we basically are able to collect those funds. So, bankruptcy is not going to affect us, because we are overcollertarized, we are secured, and we have control of cash flows. So even in those scenarios, we are getting fully repaid including interest and penalty.
Martins: So, in essence, it means that even if everything goes bad, everyone who has invested in the loans you are providing, you believe that in any way they will be able to get all the funds back.
Pieter: The only scenario we would potentially occur a loss if the underlying payer of those receivables would go out of business, so for example if Apple or Google would go bankrupt, then yes, there would be a problem, but if the borrower goes out of business, it is not going to affect us or investors because of overcolletarizatin. So, we really look at how secure is our collateral, are we sufficiently overcolletarized, and do we have control over those cash flows, and if that is the case, we feel super comfortable lending to a particular borrower.
Martins: But if Google and Apple go out of business and most likely there is no business at all on theirs?
Pieter: Yes, then it would be out of things, more worrying going on in the world I would say.
Martins: Okay, it sounds very good, as I said it is the very beginning what you are doing in the niche of lending for the game industry, which is booming at the moment, as I understand many countries are quarantined I would assume that there are more and more users of those games, right?
Pieter: Yes, I mean it’s not a secret, that people are forced to stay at home, so they need to find indoor entertainment. Yes, we see the spike in demand for mobile games. That has been mentioned in the press of Microsoft Xbox live service going down because of a sudden so many people because so many people are tuning in Steam, which runs the biggest PC store have the biggest ever occurring a number of users, a lot of players at the same time, so yes, clearly there is an increase in demand. The thing that we sort of looking at coronavirus aspect, for us it’s not so much increase in demand, which is a fortune for the gaming sector which is not going to directly affect us, but we like about it that we are not exposed to supply chain risk, I mean video games are transmitted digitally to Apple and Google app stores, that will keep continuing running, that’s not going to destroy the business. So, yes, in this perspective we are in a fortunate position.
Martins: I believe that’s it for this quick Q&A I think it gave a lot of insights for everyone who will watch. Thank you, Pieter, for that, see you another time!
Pieter: You are welcome, it is a pleasure working with you guys!
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