Could more meetings have saved the business?

Happy Sunday. Let’s get started:

A startup that pairs predictive modeling, AI-enabled processes, and proprietary workflow optimization with a Blackstone-Harvard founder pedigree should have VCs tripping over themselves in a rush to provide funding.

For Cadre, a commercial real estate investment platform, that may once have been true — not anymore. News broke this week that the business is in talks with alternative investment platform YieldStreet over a potential sale at a $100 million valuation after failing to secure additional runway.

That’s a dramatic fall from Cadre’s $800 million valuation in its most recent raise, with total VC funding of $130 million from backers including Andreessen Horowitz, Thrive Capital, General Catalyst, Khosla Ventures, Founders Fund, Jack Ma, and George Soros.

The Pitch

Cadre sold investors on a vision of tech-enabled disruption to traditional institutional real estate investing — part of a slew of new companies in the emerging “prop tech” category. Their plan was to replace an investment professional-heavy underwriting process with lower-cost software and analytics solutions, betting that their tech would drive both higher returns and lower fees for limited partners.

It was a reasonable thesis on paper but ran up against the realities of an often disjointed and bespoke real estate investment process. Cadre’s artificial intelligence solutions reportedly struggled to overcome issues related to disorganized property data and varied deal-by-deal information.

The result: a platform that wasn’t quite as tech-enabled as promised. In a 2018 pitch to SoftBank, the company showcased a tool that allowed users to input a street address and return a set of analyses including projected occupancy rate, lease terms, and net operating income. Shortly thereafter, it was revealed that the company had never actually used the tool as part of its investment process. Instead, it was cobbled together in the weeks leading up to the SoftBank meeting as a temporary prop.

Financial performance wasn’t much better: in a 2017 raise, Cadre projected more than $400 million of annual revenue within the next three years. In 2022, Cadre reported revenue of less than $30 million and remained unprofitable — it’s difficult to hit your numbers when you build out a software development team but still need a full cohort of traditional real estate investors.

Not Your Ideal Founder Dynamics

The technology platform wasn’t the only piece of the business that failed to live up to the hype — former Blackstone colleagues have accused founder Ryan Williams of misrepresenting his position and contributions to his old firm.

Co-workers specifically disputed Williams’ account, including in official Cadre press releases, that he played a leading role in a particular $550 million hotel acquisition, despite being one of the team’s most junior resources.

In 2016, Williams also claimed he’d received a Blackstone offer for an accelerated promotion to partner. Bloomberg later reported that sources close to the matter said no such offer had ever been discussed.

The accusations fit squarely with Williams’ industry reputation as a patently insufferable founder. It’s a characterization that’s perhaps best highlighted by a day-in-the-life interview in which Williams credited his daily 6:30 a.m. push-up routine with providing a “multidimensionality” that drove both outsized returns and his standard schedule of nineteen back-to-back meetings.

The Perfect Storm

Cadre may still have found a path forward if not for the confluence of headwinds brought on by post-pandemic economic tightening. Rising interest rates, office vacancies, and challenged fundraising environments for both venture backing and LP investment proved to be insurmountable challenges.

Though, according to The Information, the story isn’t unique to Cadre:

Whatever the final outcome, traditional real estate investors may avoid wholesale disruption for a little while longer.

1. The steel industry looks set for a significant shake-up as US Steel nears a sale.

• US Steel (NYSE:X) received a series of unsolicited takeover offers this week. The board then brought on Goldman Sachs and Barclays to lead a strategic review and saw a nearly 40% week-on-week jump in share price.

• Bids are in the $10 billion enterprise value range, with rival U.S.-based producer Cleveland Cliffs (NYSE:CLF) in pole position after securing the exclusive support of the United Steelworkers union. Privately-held Esmark has also submitted a proposal and ArcelorMittal may be considering an offer of its own.

• A sale could prompt a closer look from U.S. antitrust authorities, though consolidation is one of the few options left for domestic producers facing mounting pressure from low-cost offshore competition — we’re a long way removed from Andrew Carnegie’s “monster steel trust.”

2. Hawaiian Electric considers its future after the Maui wildfires.

• Hawaiian Electric (NYSE: HE) has held talks with restructuring firms as it prepares to face the financial and legal aftermath from this month’s disaster, per the WSJ.

• Shares have lost nearly two-thirds of their value since the wildfires as investors are faced with what may be a new normal for grid operators — causation of wildfires in an increasingly dry climate is likely to send more providers the way of PG&E, California’s utility operator which filed for Chapter 11 in 2019 after being overwhelmed by liabilities related to a series of fires tied to its infrastructure.

3. Apax agrees to acquire Bazooka Candy Brands for around $700 million.

• It’s a solid exit for sellers Madison Dearborn and Torante. They had agreed to take the company public via SPAC in 2021 when it still included the Topps trading card business, but saw the deal fall apart after Topps lost its exclusive MLB licensing deal to Fanatics.

• Bazooka then sold the Topps unit to Fanatics for $500 million, keeping the candy business under MDP ownership.

• That led to this week’s sale, which hits a combined exit valuation of $1.2 billion for the two units. It’s a slight discount to the $1.3 billion SPAC agreement but is a full exit (vs. ongoing public sell-down in the SPAC scenario) and closes the book on a tumultuous couple of years.

The rest of the deal sheet…

• BAE Systems (LSE: BAES) agreed to acquire Ball Corp.’s (NYSE: BALL) aerospace unit for $5.6 billion in cash.

• Warburg Pincus and Kelso & Co. are in talks to buy packaging business Envoy from Mexican Coca-Cola bottler Femsa for around $5 billion.

• Bain Capital agreed to buy data center operator Chindata Group (Nasdaq: CD) for $3.2 billion, coming in ahead of a rival bid from China Merchants Capital.

• Abu Dhabi National Oil Co. is considering submission of an improved takeover offer for German plastics business Covestro, which previously rejected a $12 billion overture.

• DLocal (Nasdaq: DLO), an Uruguay-based payments processor, is exploring strategic options which could include a sale of the $4 billion market cap business.

• Exor acquired a 15% stake in Dutch healthcare technology firm Philips (AS: PHG) for €2.6 billion.

• Dragoneer and General Atlantic have partnered on a take-private of Arco at a $1.5 billion valuation.

• Energy Transfer (NYSE: ET) agreed to buy pipeline operator Crestwood Equity Partners (NYSE: CEQP) for $7.1 billion in an all-stock deal.

• Paramount Global (Nasdaq: PARA) ditched plans to sell a majority stake in its BET Media Group as reported earlier this year.

• Bain Capital agreed to buy Brazilian steakhouse chain Fogo de Chão from Rhone Capital for about $1.1 billion, a greater than three times return for Rhone, per PEI.

• TPG has approached Ernst & Young about buying a stake in its consulting business, per the FT.

• TPG Rise Climate acquired a majority stake in A-Gas, a refrigerant life-cycle management business, from KKR.

• DFL is reviving talks around the sale of a 25% stake in its Bundesliga broadcast rights after a stalled 2021 process in which bidders Bridgepoint, CVC, and KKR valued the asset at nearly $2.2 billion.

• Occidental Petroleum (NYSE: OXY) agreed to buy carbon capture company Carbon Engineering for $1.1 billion in cash.

• Silver Lake is considering a potential exit of its majority stake in Global Blue (NYSE: GB), a tax-free shopping business which went public via a Third Point-led SPAC in 2020.

• Temasek has hired Barclays to lead a sale process for certain natural gas assets owned by Pavilion Energy, which could be worth more than $2 billion, per Bloomberg.

• Intel (Nasdaq: INTC) has terminated its $5.4 billion acquisition of Tower Semiconductor, signed in early 2022, after failing to secure regulatory approval.

• Mastercard (NYSE: MA) agreed to buy a minority stake in the fintech unit of publicly-traded African telecom provider MTN Group at a $5.2 billion valuation.

• Wheels Up (NYSE: UP) has secured a $500 million investment from Delta Airlines, Certares Management, and Knighthead Capital Management in exchange for 95% of its common stock.

• Tyson Foods (NYSE: TSN) hired Goldman Sachs to lead a sale process for its Chinese poultry business, which brings in nearly $1.1 billion in annual revenue.

• Mars agreed to acquire the veterinary business of diagnostics company Synlab.

• KKR is partnering with Italy’s Finance Ministry on its pursuit of Telecom Italia’s fixed-network unit, granting the Ministry up to a 20% stake and some decision-making power.

• Sun Capital Partners agreed to acquire Koch Engineered Solutions, a Koch Industries-owned provider of industrial operations solutions.

• EQT agreed to acquire the 21% stake it doesn't already hold in software firm SUSE at a €2.72 billion valuation, taking it private.

• Comvest Partners invested in Apotheco Pharmacy Group, a digital-first dermatology pharmacy network.

• Peak Rock Capital is prepping for an exit of Paragon Infusion, which reportedly brings in between $50 - $70 million of Adj. EBITDA, per Axios Pro.

• VinFast, a Vietnamese electric vehicle maker, went public via a SPAC transaction with Black Spade Acquisition Co. at a $27 billion valuation.

• CVC Capital Partners is reviving previously shelved IPO plans.

• Better.com is nearing a deal to go public at an $8 billion valuation following shareholder approval by SPAC Aurora Acquisition (Nasdaq: AURC).

• Sangon Biotech, a provider of life sciences research tools, raised $290 million from backers such as Novo Holdings.

• Abcuro, a developer of anti-KLRG1 therapeutics, raised $155 million in Series B funding. Redmile Group and Bain Capital Life Sciences co-led, with participation from RA Capital Management, Samsara BioCapital, Sanofi Ventures, New Leaf Ventures, Pontifax, Tekla Capital Management BlackRock, Mass General Brigham Ventures, Eurofarma, and Soleus Capital.

• Anthropic, a responsible AI research group, raised an additional $100 million from SK Telecom following its recent $450 million Series C.

• BitGo, a cryptocurrency custody platform, raised $100 million in Series C funding at a $1.8 billion valuation.

• ClassWallet, a digital wallet-based purchasing and reimbursement platform, raised $95 million in a round led by Guidepost Growth Equity, with participation from Education Growth Partners and Lazard Family Office Partners.

• Dcbel, a developer of home energy optimization solutions, raised over $50 million in Series B funding from Volvo, Coatue, Real Ventures, Idealist Capital, and Investissement Québec.

• Aether, a developer of rare metal extraction solutions, raised $49 million in Series A funding co-led by Natural Capital and Unless.

• Rondo Energy, a developer of energy storage solutions, raised $60 million from Breakthrough Energy Ventures, Energy Impact Partners, SCG, Titan, Microsoft's Climate Innovation Fund, Rio Tinto, SABIC, Aramco Ventures, SDCL Energy Efficiency Income Trust, and John Doerr.

• Mitra Chem, a supplier of iron-based cathode materials for batteries, held a $40 million first close on a $60 million Series B round led by General Motors.

• Mendaera, a healthcare robotics startup, raised $24 million in Series A funding. Lux Capital led, with participation from Founders Fund, Operator Partners, and Allen & Co.

• Ocuco, an Ireland-based provider of cloud software solutions for the eyecare industry, raised $60 million from Accel-KKR.

• Ceibo, a Chilean developer of copper mining tech, raised over $30 million in Series B funding from BHP Ventures.

• ZetaChain, a layer-one blockchain developer, raised $27 million in equity funding from Blockchain.com, Human Capital, VY Capital, Sky9 Capital, Jane Street Capital, VistaLabs, CMT Digital, Foundation Capital, Lingfeng Capital, GSR, Kudasai, and Krust.

• Figur8, a musculoskeletal health platform, raised $25 million in Series A-1 funding. First Spark Ventures led, with participation from DigiTx Partners and Phoenix Venture Partners.

• Lindus Health, a London-based clinical trial platform, raised $18 million in Series A funding from Creandum and Peter Thiel, as well as existing backers firstminute, Seedcamp, Hambro Perks, and Amino Collective.

• Trove, a fashion resale solutions developer, raised $30 million in Series E funding. Wellington Management and ArcTern Ventures co-led, with participation from Mitsui Fudosan's CVC Fund, G2 Venture Partners, and Prelude Ventures.

• DynamoFL, an enterprise-focused LLM adoption platform, raised $15.1 million in Series A funding. Canapi Ventures and Nexus Venture Partners co-led, with participation from Formus Capital and Soma Capital.

• Blackstone held the final close of its energy transition credit fund after hitting its $7.1 billion hard cap.

• Hayfin raised more than €6 billion to date for its fourth direct lending fund, with a €7 billion hard cap.

• CVC Capital Partners has raised over $4.5 billion to date for its Asia-focused fund, with a final target of $6 billion.

• Princeton Equity Group held the final close of its second fund with $575 million in total commitments after hitting its hard cap.

• Growtheum Capital Partners, a Singapore-based buyout firm, raised $567 million for its debut fund.

• Balbec raised $460 million for its latest flagship credit fund.

• Angeles Equity Partners raised $500 million for its third fund.

• Soma Capital is raising up to $200 million for its fourth venture fund.

• DNX Ventures raised $50 million against a $200 million target for its fourth fund.

1. Music catalog sales are the latest alternative asset piquing private equity interest.

• Axios’ Kia Kokalitcheva sat down with specialist investor Shamrock Capital to learn more about their model. (Check it out: Axios)

2. The latest attacks in Daniel Och’s feud with Sculptor Capital Management.

• The hedge fund world’s nastiest fight that just doesn’t seem to stop. FT’s Alphaville looks at the most recent developments. (Check it out: FT)

3. Some light reading on the private credit landscape.

• UBS published its 2023 private credit primer, providing a summary introduction to the current funding trend that’s taking over private equity financings. (Check it out: UBS)

Thanks for reading, catch you guys next week. Drop a line with any feedback or scoops (just reply here; kept anonymous).

— Sam

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