What happened

Shares of the specialty finance lender Horizon Technology Finance (HRZN -0.52%) traded more than 10% lower in the late morning today after the company reported disappointing earnings for the fourth quarter and full year of 2020.

So what

Horizon Technology Finance, which makes secured loans to venture-backed companies in the tech and biotech spaces, reported net investment income of $0.21 per share in the fourth quarter of 2020.

That's down by more than 50% from the fourth quarter of 2019 and missed the analysts' consensus estimate of $0.28 per share. Total revenue in the quarter was roughly $10.1 million, which also fell short of analysts' expectations.

Line with arrow trending downward.

Image source: Getty Images.

Venture-backed companies can be risky. During 2020, Horizon Technology exited several underperforming loans that resulted in realized losses, and saw the company's annual earnings fall by more than 22% from 2019.

Now what

Despite a tough year for the company, it is operating in a great space. The tech, life science, and healthcare industries are ripe for disruption and bursting with start-ups looking for capital.

Additionally, entrepreneurship and start-ups tends to surge following a recession, which I would expect to see again, given how the pandemic has accelerated the use and necessity of technology.

Horizon Technology also holds a big basket of warrant and equity positions in companies that will turn into big gains if those companies get acquired or go public.