💼 PE Intelligence Briefing

November 24, 2025

Strategic intelligence for private equity investors and operators

1. DEAL & MARKET INTELLIGENCE

💰 DEAL ACTIVITY

Wix Acquires Base44 for $80M

• The Transaction: Public company Wix acquired AI-based app builder Base44 for $80 million after the startup had been operating for only 18 months.
• The Thesis: This is a vertical integration play. Base44 (founded by Maor Shlomo) proved that AI "vibe coding" can allow non-technical users to build complex apps with back-end infrastructure. Wix is betting that the future of web dev isn't drag-and-drop but prompt-to-product.
• The Implication: We are entering a phase of "acqui-hiring" for AI velocity. Speed of execution is the new moat. As Shlomo noted, a one-person team reached significant valuation; PE should expect leaner OpEx structures in software portcos moving forward.

Anduril’s "Lattice" Strategy

• The Context: Palmer Luckey (Founder, Anduril) discussed the company's massive growth trajectory towards becoming a Prime contractor.
• The Strategy: Rather than building singular hardware platforms, Anduril invested heavily in "Lattice"—an OS for defense hardware. This allows them to amortize R&D across dozens of products.
• The Implication: For Defense Tech investors, the "platform first, hardware second" approach is the only way to compete with cost-plus incumbents like Lockheed or Boeing.

📊 MARKET SIGNALS

The End of Financial Engineering

• Mike Kelly (CIO, Future Standard) argues the PE playbook of the last decade—buy, lever 6-8x, wait for multiple expansion, and exit—is dead.
• Reality Check: With higher cost of capital and rich entry multiples (mega-cap LBOs trading at 17-20x EBITDA), returns must now come from revenue growth and operational improvements.
• Shift: This favors the Middle Market, where faster growth and lower entry multiples still exist, over the crowded mega-cap space.

The "Wealth Channel" Floodgates

• Private wealth is now the fastest-growing source of capital for alternatives. Future Standard (formerly Franklin Square) has scaled to $90B AUM by packaging private credit and equity for mass affluent investors.
• Structure Shift: Expect a proliferation of evergreen and tender-offer funds to accommodate liquidity needs of this channel, disrupting traditional drawdown fund models.

🏢 PORTFOLIO PLAYBOOKS

The Red Bull "Marketing Conglomerate" Model

• Dietrich Mateschitz built Red Bull into a multibillion-dollar empire by outsourcing everything except marketing/sales. No factories, no logistics fleets owned directly.
• Application: For consumer portcos, consider if you are a product company or a brand company. If the latter, asset-light models free up cash flow for aggressive customer acquisition (Red Bull spent ~30% of revenue on marketing).

2. 💡 THE SHARPEST INSIGHT

"Spearfishing" & The Global Valuation Gap

Martin Escobari (Co-President, General Atlantic) delivered a masterclass on market timing and valuation disparity.

• The Insight: US equities are trading at the 97th percentile of historical valuations (approx. 26x earnings for 4% growth), while markets like Brazil and Mexico are trading at 9x earnings.
• The Context: The premium for "US Exceptionalism" has likely peaked. Debt to GDP is at 125% (highest in OECD).
• Application: The "free lunch" of diversification is real right now. GPs should look outside the US for growth at reasonable prices (buying 40-50% growers at 12-14x EBITDA in emerging markets).
• The "Spearfishing" Discipline: Don't chase small fish. Successful investing requires waiting years for the "fat pitch"—a market dislocation or a unique asset sale—and then deploying massive capital in weeks.

3. ⚖️ OVERHYPED OR UNDERHYPED?

Topic: "Vibe Coding" & AI-Generated Internal Tools

The Overhype (Traditional SaaS):

• Bloated enterprise SaaS (Salesforce, Monday.com) is becoming expensive and rigid.
• Companies are paying for thousands of features they don't use.
• Integration costs and implementation consultants are a massive tax on ROI.

The Underhype (Bespoke AI Software):

• Maor Shlomo (Base44) predicts a future where SMBs and even Mid-Market companies build their own CRMs using AI prompts rather than buying licenses.
• AI coding agents can create lean, 100% customized software that owns its own data and code.
• This eliminates vendor lock-in and subscription fatigue.

The Verdict: UNDERHYPED (8/10) While displacing Salesforce in the Fortune 500 is unlikely near-term, the disruption of the SMB/Mid-Market SaaS layer is imminent. Capital should look at vertical AI infrastructure (the tools enabling this build) rather than generic B2B SaaS point solutions which are about to be commoditized by AI agents.

4. 📡 SIGNAL VS. NOISE

SIGNAL (Actionable Intelligence)

• DoD Cost-Plus Disruption: The Pentagon and Congress are actively seeking to break the consolidation of the Defense Primes (5 companies get 80% of spend). Startups that reuse technology (high gross margins) vs. cost-plus billing are the new winners.
• China’s Economic Pivot: China’s Fixed Asset Investment (FAI) had its biggest monthly fall ever. The growth miracle driven by real estate and infrastructure is over; the pivot is to high-tech manufacturing and exports.
• AI Model Switching: Switching costs for LLM providers (OpenAI vs. Anthropic) are near zero for developers. This is not a sticky cloud infrastructure play; it's a commodity war. Margins for AI-wrapper apps will improve as model costs race to the bottom.

NOISE (Safe to Ignore)

• Daily Geopolitical Headers: While structural risk (Thucydides Trap) is real, reacting to daily headlines about China/Taiwan drills is a distraction. Focus on supply chain diversification, not timing a conflict.
• Tech "Bubble" Doom-mongering: While US equities are high, the AI capex is being funded by cash-rich giants (Mag 7), not junk bonds (like 2000) or subprime debt (like 2008). The floor is higher than people think.

5. 📊 WEEK IN NUMBERS

• $1 Trillion: China's projected trade surplus, a historical anomaly that signals their pivot to an export-driven economy as domestic demand falters.
• 4%: The target loss ratio for General Atlantic's growth funds (significantly lower than the 20-40% venture average), achieved by avoiding binary risks.
• 145%: Projected US Debt-to-GDP ratio within 5 years (higher than Greece or Italy), signaling potential long-term currency headwinds.
• $200 Million: The cost Red Bull pays annually for Formula 1 teams, funded entirely by operating income—proving that efficient marketing assets can replace traditional ad spend.
• 30%: The reduction in personnel the UK Navy is targeting, to be replaced by autonomous systems—a massive tailwind for defense automation plays like Anduril.
• 3-6 Months: The ideal window to "hire fast, fire faster" in a high-growth startup according to Jamie Siminoff (Ring). If they aren't a fit by month 3, they never will be.

6. 🎯 SECTOR SPOTLIGHT

DEFENSE TECH — [The Rise of the "World Gun Store"]

• Market Dynamics: The US is shifting from "World Police" (boots on the ground) to "World Gun Store" (arming allies). This requires mass-producable, autonomous systems, not just exquisite, expensive platforms.
• The Opportunity: Autonomy & Quantity. Wars in Ukraine and potential conflicts in the Pacific are proving that "quantity has a quality all its own." Systems that allow one operator to control 25 drones are valuable; systems requiring 25 operators for one drone are liabilities.
• The Risks: Misaligned Incentives. The DoD procurement process is still designed for cost-plus contracts that incentivize slowness and high costs. Startups must fight political battles (lobbying) as hard as engineering battles.
• Winning Playbook: Build hardware enabling software reusability. Creating a central OS (like Anduril’s Lattice) that works on drones, subs, and towers creates software margins in a hardware industry.
• Timing: Critical. We are in a re-armament super-cycle.

7. 🔮 MARKET IMPLICATIONS

Where We Are: The "Golden Era" of PE (1987-2021), defined by falling rates and easy leverage, is unequivocally over. We are in a fragmented market where US public equities are historically expensive, while private middle markets and international equities (Brazil, parts of Europe) offer value.

What's Changing: The source of capital is shifting from institutional DB plans to the Private Wealth channel. This changes liquidity requirements (need for semi-liquid structures) and marketing (brand matters more for GPs now). Simultaneously, the "SaaS Playbook" is under threat from AI-generated software, threatening the unit economics of B2B software portfolios.

What It Means:

• For GPs: You cannot financial engineer your way to a 20% IRR anymore. You must have a distinctive operational edge (e.g., General Atlantic’s 100-person ops team).
• For Operators: The bar for automation has moved. AI isn't just a feature; it's an efficiency lever. If your engineering team isn't 50-90% AI-assisted within 2 years, you are structurally uncompetitive.
• For LPs: Diversification is the only free lunch left. Over-concentration in US Tech/SaaS is now a major risk factor. Look to defense, infrastructure, and non-US growth.

What's Next: Expect a wave of "take-private" deals or strategic acquisitions of smaller AI application companies by larger platforms (like Wix buying Base44) to secure tech stacks before they become threats.

8. 🔧 OPERATIONAL INTELLIGENCE

Marketing & Brand:

• The "Pre-Awareness" Hack: Jamie Siminoff (Ring) advises building products where 90% of the marketing is already done by the form factor. (e.g., Everyone knows what a doorbell is; you don't have to explain the concept, just the upgrade).
• Indifference is the Enemy: Take a page from Red Bull. If your product is banned or rumored to be controversial (within reason), do not quash the rumor. Let the market talk. Silence is worse than criticism.

Talent Strategy:

• The "Tom Brady" Draft: Talent is often overlooked. Tom Brady was the 199th pick. Stop overpaying for "consensus" talent (the #1 draft picks) and look for obsessives who are undervalued by the market.
• Hiring for Weakness: Founders/CEOs must explicitly hire deputies to cover their known flaws. Steve Jobs had deputies to handle the things he was terrible at.

Effective Presence:

• Sales Psychology: Molly Bloom’s insight on high-stakes sales—people buy (or invest) when you reduce their uncertainty. The brain equates uncertainty with fear. Your job in a pitch is to provide certainty and safety, not just ROI stats.

9. 🎯 THE BOTTOM LINE

The era of "beta" returns in Private Equity—riding the wave of cheap debt and multiple expansion—is finished. The new alpha is Operating Leverage via AI and Structural Diversification.

Capital is flowing into defense autonomy, wealth-channel democratization, and emerging market growth because the traditional US buyout trade is crowded and overpriced. The smartest money is currently "spearfishing"—holding dry powder for specific, high-conviction dislocations rather than deploying ratably into an expensive market.

The Question to Ask:"If AI drives the cost of software creation to zero, does our portfolio own the infrastructure (the pipes/data) or just the interface (the wrapper)?"

10. 📌 ACTION ITEMS

For GPs:

• Audit your SaaS portfolio for AI disruption risk. Which portfolio companies are essentially just "CRUD" apps (Create, Read, Update, Delete) that could be replaced by a bespoke AI agent?
• Investigate "Private Wealth" distribution. If you aren't building a channel for mass affluent capital, you are ignoring the largest liquidity pool of the next decade.

For Portfolio Operators:

• Implement "Vibe Coding" efficiency targets. Challenge engineering leads to reduce headcount growth by utilizing AI coding agents (Cursor, Replit, etc.) for 50%+ of code generation.
• Re-evaluate Marketing Spend. Are you buying ads (renting attention) or building media assets (owning attention like Red Bull)?

For LPs:

• Check US Concentration. If your portfolio is >70% US-based, you are betting on a "perfect landing" for the US economy. Consider increasing allocation to emerging growth markets (Brazil/India/SE Asia) where valuations are <12x PE.