Two months after announcing the deal, however, it had begun to fall apart.
By July 2022, the economic downturn had impacted Recurrent Ventures’ business, exposing its weaknesses and causing it to fall short of its projections, according to three people familiar with the matter. Interest rates had also risen substantially from the beginning of the year, making it more costly to lend capital.
That month, it shuttered Mel Magazine and mandated a round of layoffs.
“Mel Magazine ended up being the canary in the coal mine, rather than an outlier,” said one source. “It became incredibly clear that Blackstone was going to run the company.”
By that fall, Blackstone had deployed between $10 million and $20 million in Recurrent Ventures. But, pointing to Recurrent Ventures’ weak commercial performance, it refused to provide it with further funds, according to four sources.
Recurrent Ventures’ leadership initially protested and considered taking legal recourse against Blackstone. No lawsuit materialized, and by the end of the year, the two parties had restructured the deal, according to two people familiar with the matter.
“It’s ultimately Blackstone’s prerogative whether to fund or not,” said one source. “If they feel like the performance of the underlying business is poor, they will do what they need to do.”
Under the new arrangement, Blackstone gained more control over the disbursement of funds. Going forward, it would have to approve any acquisition Recurrent Ventures sought to make, no matter the size, according to two sources.
As a result, Recurrent Ventures can still technically access the Blackstone capital, but only if the private equity firm greenlights the purchase. For the past 16 months, no such deals have materialized.
“We believe that Recurrent should run profitably—independently of outside financing—and are committed to utilizing that capital for its intended purpose,” Hebert said. “Remaining disciplined on our operating costs, running profitably and leveraging the funds when there’s an opportunity to exponentially scale our business sets Recurrent up for success in the short term and long term.”
Outside of an impossibly compelling opportunity, Blackstone is unlikely to deploy more capital into Recurrent Ventures until the media company strengthens its business, according to three people familiar with its strategy.
Until then, Blackstone has little need to move urgently, as it will eventually recoup its investment—plus interest—through a liquidity event, according to three people familiar with the deal structure.
The development has left Recurrent Ventures in a state of limbo, unable to take advantage of a down market flush with potential purchases.
It has also had to eliminate broad swaths of its workforce. Since announcing the $300 million investment, Recurrent Ventures has laid off at least 80 full-time staff.
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