$500B+ Blackstone has been wheeling and dealing all summer


September 8, 2020

Plus: Check out how much Netflix and Snapchat spend on the cloud.
September 8, 2020
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Yesterday, another chapter was added to the “Who is Banksy?” saga. A theory started rolling around the internet that Neil Buchanan — former host of the kid’s art show, Art Attack — is the anonymous street artist. Buchanan has denied the rumor.

The only thing we know for sure is that our head of content, Brad, has been MIA for one week with nary a peep. Suspicious? You tell us.

The Big Idea

Blackstone, the $500B+ PE firm, has been very busy this summer

Blackstone is big. Very big.  

Founded in 1985, the company has grown from a modest mergers and acquisition firm into a mammoth money management business that oversees $500B+ in assets. It deploys capital across a dozen investment strategies, including private equity, hedge funds, infrastructure, energy, and real estate.

With a market cap of $63B, it’s the world’s largest publicly traded PE firm, handily besting the likes of KKR ($30B) and Apollo Global Management ($21B).

And it’s been very busy this summer

Befitting its wide scope, Blackstone was linked to 2 deals last week — one acquisition and one sale — that could not be more different:

  • A joint ~$18B bid for the railroad operator, Kansas City Southern
  • A prospective listing of the dating app, Bumble, for $6-8B — a value that would double the firm’s 2019 majority stake investment

This just scratches the surface of other wheelings and dealings the firm has been involved with this summer:

  • It closed a new life-sciences fund at $4.6B
  • It closed a secondary infrastructure fund at $3.75B 
  • It acquired the genealogy company Ancestry for $4.7B
  • It acquired Takeda Consumer Healthcare for ~$2.3B 
  • It purchased a 49% stake in a portfolio of Hollywood movie lots for $1.49B 
  • It joined a $200m investment round for the oat-milk maker, Oatly

This isn’t the first time Blackstone has done major deals during a crisis: it largely created the single-family home rental market after the 2008-09 financial crisis. 

Private equity coffers continue to fill up  

PE firms have faced increased scrutiny in recent years for deals that left several well-known corporations in bankruptcy (Toys ‘R Us, Sears).

Despite this, the industry keeps raising more money. In Q2 2020, Blackstone reported an inflow of $20B, and its dealmaking dry powder (cash + other liquid securities) is currently sitting at $100B+.

Even with its weighty fees, the world’s biggest pension funds, sovereign wealth funds, and college endowments turn to PE firms for their management skills and long-term investment horizons.

With the US Department of Labor potentially allowing PE firms to tap 401(k) plans, funds like Blackstone may only grow bigger.

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Snippets
  • Chipped: China’s largest chipmaker (SMIC) fell 23% on news that the US might blacklist the company. 
  • There’s a big decline in pirated movies right now, thanks to a series of international police raids. 
  • China just safely landed a mysterious, reusable spacecraft
  • ‘Tenet’ brought in $20.2m during the holiday weekend in the US and Canada, and no one can really agree if that’s a good number or not (although Trung has a theory).
  • “NZ phone home”: New Zealanders who went overseas are now coming back home to a country that has handled the pandemic well — creating a wave of “brain gain.” 
AI

This AI startup is reading the entire internet non-stop. Why?

Open-AI’s latest natural language process (NLP) model, GPT-3, is an astonishing feat. The tool is able to generate poems, short stories, songs, and technical specs that can pass off as human creations.

But as cool as it is, GPT-3 doesn’t actually understand what it’s creating. AI needs to demonstrate a deeper level of comprehension to gain our trust.

Enter Diffbot 

To address this issue, the machine-learning company Diffbot is building an AI that reads every page on the entire public web, in multiple languages, extracting as many facts as it can.

Rather than using this info to train a language model like GPT-3, Diffbot turns it into a series of 3-part factoids that relates one thing to another: subject, verb, and object.

This approach creates a more accurate knowledge graph

In addition to the subject-verb-object paradigm, Diffbot’s founder Mike Tung tells The Hustle that his startup is building an AI system that consumes information like humans do.

Among other parameters, it takes into consideration things like; 1) trustworthiness (“Did this come from an official source, or social media?”); and 2) up-to-date-ness (“Is this information stale?”), so that you can see where the facts it generates come from on the web.

The startup already has ~400 paying customers

Diffbot is the only US company (aside from Google and Microsoft) crawling the entire web, and the knowledge graph it’s building is being deployed across various industries:

  • DuckDuckGo uses it to create Google-like answer boxes 
  • Snapchat uses it to extract highlights from news pages 
  • Adidas and Nike use it to find counterfeits

What’s next for Diffbot?  

Making it easy to use information from their knowledge graph for popular business tools like Excel, Google Sheets, and Salesforce.

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  1. High labor costs
  2. Incredibly slim margins

In a market this big, fixing just a single one of these issues would disrupt the entire industry.

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A massive frickin’ opportunity — and one that you have one week left to invest in. 

Meet Graze, the fully autonomous electric lawn mower 

Graze is the brainchild of John Vlay, a CEO with 35+ years of experience — and a huge exit — in the landscaping industry. He realized a product like Graze could help commercial landscapers explode their businesses through drastic reduction in fuel and labor costs.

How? Because Graze is 100% electrically powered (with support from top-mounted solar panels).

Plus, thanks to machine learning paired with smart features like a localization GPS, an optical suite, and proximity detection, Graze can map and mow job sites with maximum efficiency. 

Want to get in on a company primed to disrupt a $100B market? Join Graze on SeedInvest.

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Let’s Get Social

Can social commerce catch on outside of China?

Look around the world, and Instagram Shopping — which lets you buy a pair of fish flops without leaving the platform — looks like child’s play.

In China, ecommerce giants like Pinduoduo sell to 683m people through livestreams and messaging apps. But so-called social commerce (the meeting of social networks and ecommerce) hasn’t caught fire elsewhere.

Next stop: India? 

Last year, the India-based social commerce platform, Meesho, raised $125m to get small businesses in India selling on WhatsApp and Instagram. 

WhatsApp now has 400m+ users in India — and experts say the platform could soon be the next frontier for the hybridization of messaging and payment systems.

Does social commerce actually matter? 

It sounds bland: Instead of clicking between Amazon and Instagram, now they’re in one place. But the potential of social commerce is way bigger.

Take Shihuituan, a Chinese e-grocer that uses WeChat to organize buyers into groups. The company recruits “community leaders” in rural areas who buy on behalf of ~100 customers each.

Use cases like this can help regular people get bulk discounts on shipments — and help level the playing field for small businesses.

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Subscribed

Tech companies spend a LOT of money on the cloud

Have you ever looked at all your monthly subscription charges and thought, Yo, WTF?!

Well, if it makes you feel any better, the world’s biggest consumer tech companies spend hundreds of millions of dollars a year on cloud services like Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft’s Azure.

The cloud management firm, Bepsin Global, combed these 2020 figures from public records, S-1 filings, and annual reports:

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Editing by: Zachary “So much dry powder” Crockett, Procurer Caldwell Ahead (Sleepy LaBeef Ticket).

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