March 06, 2024

🌎 Situational awareness: The SEC today will release and vote on its climate disclosure rules for large public companies, although it's certain to face legal challenge. Go deeper.

Top of the Morning

Illustration: Gabriella Turrisi/Axios

When Cerberus Capital Management bought an unprofitable Massachusetts hospital chain in 2010, many viewed the deal as a financial lifeline. Now some believe it was actually a noose.

Why it matters: The company, which Cerberus sold four years ago, is in severe distress and may close facilities, threatening care for thousands of patients, most of whom live in lower-income areas.

  • It also comes as the Biden administration launched an investigation into private equity acquisitions of health care providers.
  • Just yesterday, the Federal Trade Commission held a virtual workshop during which such deals were heavily criticized.

Backstory: Cerberus rebranded the hospitals as Steward Health, and went on an acquisition spree that eventually made Steward the country's largest private for-profit hospital chain.

  • In 2014, it closed one of the Mass. hospitals it had acquired, despite having pledged not to do so for at least 10 years after the acquisition, as part of the state regulatory approval process.
  • In 2016 it signed a $1.25 billion sale-leaseback agreement for its Mass. properties with a publicly traded firm called Medical Properties Trust. As part of that deal, Cerberus took out a big dividend and MPT got a small equity stake in Steward.
  • Cerberus began to exit in 2020, agreeing to sell control in Steward to the hospitals' physicians in exchange for an interest-paying note. The physicians soon borrowed $335 million from MPT to buy back the note.
  • According to Bloomberg, Cerberus generated around $800 million in profit via its Steward investment.

Fast forward: Steward is in deep trouble, arguably in part due to liabilities assumed while Cerberus was still in charge. For example, it's stopped paying vendors and owes at least $50 million in back-rent to MPT.

  • State officials are livid, particularly after Steward refused to provide financial information as required by law. They now want Steward to leave the state and find other operators for the hospitals, for fear that the alternative is shutdowns (it's already slated one Mass. rehab hospital for closure, although claims no more Mass. shutdowns are anticipated).
  • The state's congressional delegation demanded answers from Cerberus in a letter sent last month.
  • Cerberus, which threatened to shut a small Pennsylvania hospital early in the pandemic, submitted a multi-page response that hasn't yet been made public. When asked about the dire Mass. situation, it said via email: "Cerberus has had no involvement with Steward in more than four years and has no comment on that."

Zoom out: There is no allegation that Cerberus broke any laws while in control of Steward. Instead, it's being accused of acting naively at best, unethically at worst. And certainly of hand-waving in its replies.

Look ahead: Sen. Ed Markey (D-Mass.) has scheduled a federal hearing in Boston for April 3.

The bottom line: There are a lot of politicians concerned about private equity's role in health care. Expect them to use Steward as their poster company.

The BFD

Photo illustration: Aïda Amer/Axios. Photo: Patrick T. Fallon/Bloomberg and Michael Kovac/Getty Images for Vanity Fair

Andreessen Horowitz is just weeks away from closing on up to $7 billion in new funds, Axios has learned from multiple sources.

Why it's the BFD: This solidifies a16z as one of venture capital's "haves," in an industry with a growing number of "have-nots," while also reflecting that not even the top firms are immune to a muted fundraising environment.

Details: A16z is targeting $6.9 billion for a master feeder fund, without a hard cap, with expectations of a final close in early April on between $6.5 billion and $7 billion.

  • Half would go to the firm's fourth growth fund, which would represent a significant size decline from its $5 billion predecessor.
  • Then it gets more complicated. A16z no longer is raising dedicated early-stage or seed-stage funds, instead splitting that strategy by sub-sector. That includes 15% allocations for an AI infrastructure fund and an AI apps fund, plus 10% for an "American dynamism" fund.
  • At target, that works out to around $2.76 billion, versus the $2.9 billion it raised last time around ($2.5 billion for VC, $400 million for seed).
  • Finally, there's a 10% allocation for a16z's second gaming fund, which would be a boost over the $600 million raised for its predecessor.

The bottom line: LP subscription docs are due in around two weeks.

Venture Capital Deals

🚑 Overjet, a Boston-based dental provider support startup, raised $53.2m in Series C funding at a $550m valuation. March Capital led, and was joined by General Catalyst, Insight Partners, E14 Fund, Crosslink Capital, Spring Rock Capital, Liquid 2 Ventures, Harmonic Growth Partners, and the American Dental Association. www.overjet.ai

DTEX Systems, a San Jose, Calif.-based insider risk management company, raised $50m in Series E funding led by CapitalG. www.dtexsystems.com

Sweet Security, an Israeli cloud security startup, raised $33m in Series A funding. Evolution Equity Partners led, and was joined by Munich Re Ventures and Glilot Capital Partners. www.sweet.security

Argyle, a New York-based provider of income and employment data, raised $30m in Series C funding. Rockefeller Capital Management led, and was joined by insiders Bain Capital Ventures, SignalFire, and Checkr. https://axios.link/3PwvL3x

Maybell, a Denver-based quantum infrastructure developer, raised $25m from Cerberus Capital Management. www.maybellquantum.com

Hunch, a Dubai-based anonymous social polling startup, raised $23m in Series A funding from Alpha Wave and Hashed. www.hunch.in

Baanx, a British crypto payments startup, raised $20m in Series A funding from Ledger, Tezos, Chiron and British Business Bank. https://axios.link/4c4xwOM

🚑 Nalu Medical, a Carlsbad, Calif.-based developer of miniature neurostimulation devices, raised $20m in Series E extension funding from B Capital. www.nalumed.com

🚑 BrainCheck, an Austin, Texas-based cognitive health assessment startup, raised $15m in Series B funding from Next Coast Ventures, S3 Ventures, and UPMC Enterprises, per Axios Pro. https://axios.link/433Ob0S

Metaplane, a Boston-based data observability platform, raised $13.8m in Series A funding. Felicis led, and was joined by Khosla Ventures, Flybridge, Y Combinator, Stage 2 Capital, B37, and SNR. www.metaplane.dev

🚑 Roshal Health, a Houston-based provider of ultrasound and echocardiogram tech, raised $10m. Catalio Management led, and was joined by Green Street Impact Partners. www.roshalimaging.com

🚑 Fijoya, an Israeli platform for employer-sponsored health and wellness services, raised $8.3m led by Team8. www.fijoya.io

BRKZ, a Saudi construction-tech startup, raised $8m in Series A funding co-led by Beco Capital and 9900 Capital. https://axios.link/3ToJStN

🚑 PreemptiveAI, a developer of AI models to interpret biomedical signals, is emerging from stealth with $6.4m, per Axios Pro. Inspired Capital and Meridian Street co-led, and were joined by Allen Institute, AI2, and Precursor Ventures. https://axios.link/3P9gwNB

Exly, an Indian provider of business tools for creators, raised $6.2m. Chiratae Ventures led, and was joined by insiders Mayfield India and Venture Highway. https://axios.link/3T0XbiU

AppCD, an SF-based startup that helps generate infrastructure from code, raised $6m in seed funding from Thomvest Ventures, WestWave Capital, FireBolt, and Secure Octane. www.appcd.com

🌎 Cyclize, a German developer of plastic-waste-to-syngas tech, raised €5m in seed funding. UVC Partners led, and was joined by High-Tech Gründerfonds, Aurum Impact and UnternehmerTUM Funding for Innovators. https://axios.link/3P570uI

🚑 MDaaS Global, a Nigerian operator of medical diagnostic centers, raised $3m co-led by Aruwa Capital and Newton Partners. https://axios.link/48Ho40P

Ubirider, a Portuguese transportation payments startup, raised $2m in seed funding co-led by Techtree Investments and Cedrus R&D III. www.ubirider.com

Atmio, a German developer of leak-detection solutions for oil and gas infrastructure, raised €1.3m from HCVC, Robin Capital, and Nucleus Capital. https://axios.link/3wHXozZ

Van Heron Labs, a Houston-based developer of precision nutrition solutions for cell growth, raised $1.1m in seed funding led by FoodLabs. https://axios.link/49DGfpE

OpenAI is in talks to raise funding from Singaporean sovereign fund Temasek, which would represent the company's first state-backed money, per the FT. https://axios.link/3PaNVrg

Perplexity AI, an SF-based developer of AI-powered search, is in talks to raise new funding led by Daniel Gross at a $1b valuation, per the WSJ. https://axios.link/49Xpp4M

Private Equity Deals

Bregal Milestone acquired a majority stake in Evli Alexander Incentives, the equity plan design and administration arm of Helsinki-listed Evli Group. www.evli.com

Monomoy Capital Partners completed its previously announced purchase of Waupaca Foundry, a Wisconsin-based supplier of cast and machined iron castings, from Japan's Proterial. https://axios.link/48hlqj6

TPG bought G&A Partners, a Houston-based professional employer organization and human capital management provider, from The Riverside Company. www.gnapartners.com

Public Offerings

CVC Capital Partners is in talks to revive its Amsterdam IPO plans, which could launch as early as next month at a $15b valuation, per Sky News. https://axios.link/3wDTGat

🚑 Galderma, a Swiss skin care company owned by EQT, is seeking to raise around $2.3b in its Zurich IPO. https://axios.link/3Toe7RL

Liquidity Events

Accenture (NYSE: ACN) agreed to buy Udacity, a Mountain View, Calif.-based learning platform once valued by VCs at $1.1b. Udacity backers include CRV, Andreessen Horowitz, Bertelsmann Digital Media Investments, Cox Enterprises, GV, Recruit Strategic Partners, Aeon, SharesPost, MicroVentures, Drive Capital, Baillie Gifford, and Emerson Collective. https://axios.link/48J4268

Carlyle is seeking to sell Japanese cosmetics supplier Tokiwa for around $800m, per Reuters. https://axios.link/3IriHrY

More M&A

Cadence Design Systems (Nasdaq: CDNS) agreed to buy BETA CAE Systems International, a provider of simulation software for car and jet engine designers, for $1.24b in cash and stock. https://axios.link/3v0hXHf

Canal+, Vivendi's (Paris: VIV) pay-TV unit, raised its buyout offer for South Africa's MultiChoice to $1.77b, per Reuters. https://axios.link/48Ja72q

Cisco Systems (Nasdaq: CSCO) is set to receive unconditional EU approval for its $28b takeover of Splunk (Nasdaq: SPLK), per Reuters.

Fundraising

Yesterday's newsletter incorrectly reported the amount that Spark Capital raised for its eighth flagship VC fund and its fifth growth fund. The correct figure is $2.3 billion in total, or $770 million for the former and around $1.5 billion for the latter.

Arcapita raised around $500m for a Saudi logistics fund. https://axios.link/3V18quf

EQT raised $3.3b for its long-hold impact investing fund. www.eqt.se

Riverarch Equity Partners (fka PNC Riverarch Capital) raised $1b for its fourth fund. www.riverarch.com

Team8, an Israeli VC firm, raised a total of $500m for three new funds. https://axios.link/4bYUK95

It's Personnel

Josh Beser joined Orrick as a New York-based corporate partner in the law firm's tech group. He previously was with Wilson Sonsini. https://axios.link/3P7ZtM2

Adrien Gaidon, Toyota's former machine learning head, joined Calibrate Ventures as a partner. www.calibratevc.com

HarbourVest Partners promoted five pros to managing directors: Matthew Cheng, Lee Incandela, Eric Senay, Eric Simas, and Amy Unckless. www.harbourvest.com

🌎 Permira is building a dedicated investment team to focus on the energy transition, headed by former Blackstone exec Kush Patel. https://axios.link/49CsLKP

Final Numbers

Business Roundtable CEO Economic Outlook Index
Data: Business Roundtable. Chart: Axios Visuals

America's top execs are strikingly more confident about the economy, with expectations of stronger sales and capital investments, Axios' Courtenay Brown and Neil Irwin write from the Business Roundtable's quarterly gauge of CEO sentiment.

  • This is the first time in two years that the index, seen first by Axios, is above its historical average.
  • Read more later today in Axios Macro.

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