Luca Ferrari - Building Bending Spoons - [Invest Like the Best, EP.446]

0:03 Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review along with all of our podcasts at joincolossis.com. Patrick O'Shaughnessy is the CEO of Positive Sun.

0:31 All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Some. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc. My guest today is Luca Ferrari.

0:58 Luca is the co founder and CEO of Bending Spoons, which he describes as twenty five percent private equity and seventy five percent technology company. Founded in twenty thirteen, Bending Spoons fully acquires and operates digital companies like Evernote, Meetup, Vimeo, and most recently AOL. Our conversation explores the unique model behind bending spoons and the culture required to scale it. Lucas shares exactly how their acquisition playbook works from identifying promising businesses. to rebuilding every part of them across product design, monetization, and marketing.

1:29 We discussed her approach to financing long term ownership through both debt and equity, Luca's obsession with finding and developing exceptional talent. And his decision to build the company in Europe. I found Lucas description of himself as perennially unhappy to be the clearest window into how he builds. It's a mindset that fuels his pursuit of excellence. And defines the culture at Benningstones.

1:48 Please enjoy my conversation with Luca Ferrari. For those that don't know about it, since we're in Milan today, it's not New York City. Not everyone yet knows about Benning Spoon, soon they will. Can you just tell us what it is and then we'll go from there? We are a pretty unusual beast.

2:05 Unique almost I think as far as I can tell. I think a good representation would be twenty five percent private equity, seventy five percent tech company. Meaning We acquire companies as a key engine of growth. A hundred percent acquisitions, no minorities.

2:18 And then Unlike a private equity which would typically look to sell them three, five, seven years down the line. We buy off our balance sheet to own and operate forever. And unlike a privacy equity which typically would make relatively shallow interventions, maybe change the management team.

2:33 We actually re think. The entire company, try to come up with a vision for the most successful version of that company and work as hard as we can to close the gap between the Cirusco and that vision. And it could be rewrite the software, re-archety the cloud infrastructure, launch lots of features, redesign the UI. Optimize monetization and marketing, rebuild big chunks, sometimes the entirety of the organization. So it's very Extensive deep.

2:56 Time consuming work. Sometimes radical work. And if we do it right, that creates a lot of value, we can reinvest in Making our platform more powerful so build better proprietary technologies, better access to talent, more knowledge.

3:09 And go after New bigger acquisitions. Can you say a little bit about the vision you have for the business, not in terms of how big it will be or the number of acquisitions or anything, but five years hence, I know you care very deeply about the culture of the people here. What The home office looks like and feels like. You have a huge ambition for

3:27 What you're building. maybe describe that ambition and that vision a little bit. We felt inspired uh the prospect of building The company being our product.

3:36 building an institution. Hataway, that sort of company that people look at and think was a a defining company of its generation. And so to do that scale is important. I think it's unlikely that you can be in that conversation un unless the company is large and dominant, but also there needs to be some level of excellence along certain dimensions where the companies really stands out vis a vis the others. And for us it's always been

4:00 Besides being absolutely exceptional at the functional things, like being incredible at running these businesses. One part that we really wanna be Awesome at is spotting some of the best inexperienced talent in the world and being the ideal place for that talent to Just skyrocket toward the maximum realization of of their potential.

4:19 As quickly as possible. We wanna be the ultimate Testing and training ground for incredibly talented and motivated people. And so the company five or ten years south, I think will still be a conglomerate of very interesting digital technology businesses, hopefully much more and generally the company would be bigger.

4:35 And I hope we can be much stronger at everything we do and have even higher levels of talent density and hopefully inspire. others to try to raise the bar in how they run their businesses. And by the way, we started in Europe We like the idea that Europe. It's fascinating that if you think about s most of the very large super successful companies globally, you think about

4:54 almost entirely US or Chinese companies. Historically US now China has more. Europe has very little. to offer in that regard, but it's seven hundred million person continent. Very good education. I'm not saying we should have ten trillion dollar companies, but

5:09 We don't have a single one, pretty much, I think last time I checked. part of that movement showing that you can actually build Such a company. We're an international company with operations in the US too, but the deeper roots, the original roots Can be here too. We are not a periphery of the empire.

5:22 It was actually Daniel Eck at Spotify who introduced us originally. Obviously he's built one of the great European origin businesses. Why do you think there are not more of them? Like obviously you're seeking to change this, but there's not that many. What do you think the deep reasons are? I think the main reason is a matter of default. Why Thus California has had so much success over the decades. One of the reason is

5:45 You have seen Incredible company is being created and grown in California, you just assume That's where you go and do it. Especially as a founder, you don't know much. Like you are Ultimately.

5:57 At least I was I think that's true of many founders. You are a passionate, determined, maybe talented Idiot, essentially. You don't know the world enough to actually Determine what the ideal location will be. If you even think about it,'cause it typically

6:10 How many times have you heard of founders? Doing a locational study, where should I start my company. It tends to be momentum. I happen to study here. I know people are there. I should probably just do it. And so a lot of talented Europeans Many of the most talented Europeans who have an entrepreneurial streak, I think they just default to building in the US, which has been fantastic for the US, of course. But There is a gap I think and

6:32 If we had more virtuous examples of people We have built incredible businesses again with a seed in Europe. Any more people would not default. to that and think, Oh, I could actually build such a business from France or Portugal or Italy. Was that a key part of the original vision that you wanted it to be a beacon for European talent to show the world that a company like this could exist here? If so, why? Why did you care so much? Why not just go to California?

6:56 It's difficult when you talk about the sense of purpose, what inspires you. I think we can try to rationalise it, but there's something comes from the gut. We just felt that there was a mission there that was worth pursuing and that turned on our drive, our passion and Ultimately we figured we love to build a business'cause it's we love learning, we love challenge. And I think the business arena is arguably the most competitive

7:18 field in which you can test yourself of any field, even more than sports, academia. So we liked it to start with. Whether we fail In Italy, Denmark. Канада, де ус, нобади Кирс. But if we build something remarkable from a country that doesn't see

7:32 as many successes that means something extra. It can be an inspiration, like I just said, it can help local businesses aim a little bit higher, raise their standards. You can create the competencies locally that can have a positive effect. That's what we just chose. To do it that way, we don't regret it.

7:47 There were very good arguments. for us to maybe start in California for sure. That was a very reasonable point to make. You said this idea of test yourself. If you think back on Bending Spoon's history, What was the first example of you really testing your own limits?

8:03 I happen. Constantly. At the very beginning. We actually had another startup called Evertail. And that was a failure. We learned a lot and actually the strategy for bending spoons we came up with it through the failure of Advertil.

8:15 At the time with Evertale we raised about a million euros All in all and V C money and Ultimately the company. Was about to go bankrupt. We had About forty thousand euros.

8:25 Left. That money belonged to the VC because of liquidation preferences, but it was too little for the size of that fund. And they told us look, it's just too much hassle and legal cost for us to go through this administrative process of liquidation you guys worked. We're honest, worked as hard as anyone could demand. Of you.

8:42 You keep the money, we'll sell our shares to you for a nominal one euro and you'll probably get something after taxes from it and just go and get a nice vacation. We're sick in the brain and so rather than going on vacation, we took Whatever we could. And that was a seed capital for bending spoons. Twenty thirteen. It wasn't a lot of money. All of us lived in the same apartment.

9:01 Very low burn rate. Very low. As low as it gets still. Forty thousand euros you don't do much. Particularly as our vision was to acquire companies. Capex intensive, but particularly at beginnings. Well you can use debt'cause you are nobody and you'd have a track record and a cash flow. And so we figured we need a source of cash.

9:19 Kickstart. our acquisitive strategy. We figured Certainly the easiest way is to just write software, build product for third parties. We are

9:30 decent at programming and design, we should be able to do that. It seems like an easy business to start, maybe not to scale to gigantic cash, yeah. Especially a co founder and I spent A good three, four months. twelve, sixteen hours a day just emailing anyone on the planet and cold calling people just trying we offer discounts we're like just hire us to do something. I swear to God we couldn't get

9:52 Anybody not a single soul hired us to do anything. The only contract we got was for about ten thousand euros. from essentially a friend of one of my co-founders who I think took P on us and said, Yeah, we need an app for our small chain of burger places. We'll give you ten thousand euros to build it. So that was an utter failure. I remember the the stress levels with After

10:12 working our ass off for three years from the startup which failed. Having this little money to try to make the dream come true. And fail miserably at this Sales. Effort.

10:23 I had a real breakdown. I remember I don't cry much. I cry maybe once a decade. I cried I had a moment where I cried at that point. I remember I left the office, I just had to cry because I was like Goodness, it's been like three and a half, almost four years, where we've been working like a hundred hours a week and we have nothing to show for it. So that was a massive challenge to my resilience and I owe it to one of my co founders who I think is naturally more optimistic and

10:50 has better perseverance than I do. And he comforted me and we said, Okay, at least We're in this together, and just keep going. So we did and of course I'm happy we did. That was a pretty low point.

11:00 Didn't you have to get a job at McKinsey at some point to fund everybody else? The previous startup. Oh, okay. Yeah, it's a cool store. At least I think it's cool. So We graduate two friends of mine, Francisco and Matteo, who are happen to be co founders at Ben Insplance too and We have this idea of building. This every tail company the idea was to create a self writing diary.

11:19 of a user's life with AI. This is twenty ten, so AI was nobody was talking about AI in twenty ten. And interesting, you were very early on AI, too early. In fact, because the product just didn't work well because the you didn't have machine learning, at least not way that you could scale for users. We had no money whatsoever,'cause all of us essentially

11:36 pretty low class families, whatever you want to call it, without a lot of money. And as much as we didn't have an idea for a business that would require a billion dollars in Capex, like a lot of startups today, We certainly needed some money, at least to eat and pay up for rent. And so we decided okay, the three of us were gonna look for a job. Whoever gets the most lucrative offer goes to work. And pays for rent and food for the other two.

11:56 Once we raise seed capital V C money somehow, then this person would resign and join full time and then we go and conquer the world. So we all look for a job and I get an offer from McKinsey. Which was by our standards at the time very lucrative and so I said, Okay, this is perfect. I'll be the one paying for rent and food. I'm capable of not being transparent. Let alone line. So I had to tell the partner at McKinsey.

12:19 that I would be working on the startup on the side. I thought it was unwise in many ways'cause I was absolutely certain they would withdraw the offer, but I'm like I just can't he feel dishonest. Ashley was enthusiastic and he encouraged me and said Absolutely, we'd love to have you and if and when the startup takes off, wish you the best and thank you. I was very grateful. I still have a very fond memory of McKinsey for that reason like a a lot of gratitude and worked there for about a year, then we managed to raise initially half a million euros, then another half a million later. From a VC, and I completed my project and I resigned.

12:49 Willingness to do anything to get going. I've never heard that before one person funds the other two to be building and then you join them on the There was no contract, nothing. Yeah. A hundred percent trust. Trust. I don't know, I just think it's probably a good way to live life. Sometimes you get some sour moments because of it, but It makes ninety nine percent of it so much more enjoyable if you don't have to

13:10 Between Evertail and Bending Spoons, where did the insight come from to be an MA driven acquirer of businesses rather than building them? So Evertale was your startup by the book, meaning this idea that probably won't work, but if it works could be huge and very innovative, like nobody had attempted, as far as we could tell, anything like that before. And so we worked super hard on that project for about three years. And naturally as you are You tend to network with people in a similar situation. For a bunch of reasons.

13:41 So over time we got To observe probably a couple dozen teams. Go through

13:46 Journeys as we did. And through that observation we saw that of course most failed, which you would expect, and maybe three or four had levels of success, and we saw Almost no correlation between The teams we considered more talented and more hard working than those who And so we concluded it's not a huge sample, but

14:04 Probably to go from zero to one. Lack plays a huge role. There are so many factors and variables that even if you're a genius and you work your ass off, the stars will probably not align for you anyway. Whereas at the same time we also found that our skills at all the functional things like software engineering

14:21 AI at the time for what it's worth. Product design, product management, marketing. Although they were still pretty crude three years later. They were night and day relative to when we started. We were on a clear path to I'd like to think excellence. And so we thought being really good at the functional knowledge and skills necessary to run a

14:39 digital business as probably a matter of if you're assuming you're reasonably talented, a matter of perseverance, effort. Discipline. We can bet on that. We don't wanna bet our entrepreneurial lives on Getitoaki. So why don't we try to be excellent at the functional things and then buy businesses from people who maybe god lucky or they're very good, but they also the passions change between going from zero to one, to two, to to ten. Like it's a different job. And so maybe there are very talented people who have gotten far. They're just a little bit fed up with it. They're not interested in running the next phase of it.

15:09 We should be able to find situations where it's a great deal for both parties because of these factors. That turned out to be true, and now in hindsight, twelve years later There is a lot more to it. There are structural advantages in integrating different businesses under the same roof. But at the time we didn't have that insight. Which today is probably more important than what I just described.

15:28 But what we had identified was enough to drive some level of success for the first maybe five or six years. I'm gonna come back to the beginning and the early acquisitions, but since you mentioned it now, describe what you've learned those advantages are that exist uh having I'll call it a home office that sits on top of a lot of different business units. I'll give you an obvious one and two not so obvious ones. The obvious one is of course you get to negotiate with a band or cloud infrastructure.

15:53 advertising partner better. So that's probably a couple of percentage points and you'd be dumb arguments. It's good. It's useful. It's not Transformative. Or you can make an R D investment in a general purpose technology that many businesses can then leverage and Although that investment would be prohibitively expensive.

16:09 Irrational to make it. Any one of those businesses individually, it's actually very appealing if you can deploy it across. The two more important ones are or at least equally important, but I think more important ones are one. We can move RD and also marketing resources fluidly across businesses. In my experience, the R D opportunity when you run a business is quite fleeting.

16:28 It changes quite rapidly over time and so you to maybe you're new certain field or that field evolves and there is an opening to expand the feature set, upgrade your technology. In time, that's gonna be table stakes. There's a window. That actually yields substantial returns.

16:44 But hiring people. Coaching people, training people, organizing people is very slow. So you really have two choices. Either you do you make it happen in a few months but you're gonna do massive damage to your team, your culture, talentness, it's gonna be low. Trying to do right, it's gonna take years.

16:58 At the same time, as you go after an R and D opportunity, you basically you build the features. Every business has a kind of a saturation point where There's nothing more, at least nothing more very substantial to build But then you are stuck with a larger team and of course it's costly, emotionally taxing for all involved to shrink that team, it's difficult. Because of all these factors, in my estimation, most companies are

17:19 Ears behind in terms of the optimal staff They're actually ears behind what they should be Could they control The people factor. Perfectly instantaneously.

17:31 It's really just an inherent inefficiency of a single product. Model. But because we can pool at least part of our R and D resources and we really work on hiring people who are super flexible, adaptable, we've there's a whole Batch of things you need to do for this to be feasible.

17:45 We can move them very quickly and attack these opportunities and withdraw as the opportunities are not there any longer. This makes us super efficient both on the offensive and on the defensive. Not a major advantage. Of our mom. Take Evernote. It's a very nice business, nice product, beloved product.

18:00 Most People would consider the prospect of working at Evernote just average appealing. Like it's a nice, probably nice company but it's I'm not as excited as I would be thinking about Open AI or The next big thing. So On average, a business like Evernote, no matter how

18:15 A charismatic Intelligent its leaders are willing to Attract someone Everage talent. There will be a Gaussian function and some people better than others, but

18:24 Venus pools is a model. That's very appealing to people. First of all, it's growing fast, so it feels like we're going places. You have variety. So you know that you can test your skills and fine tune and expand your skill set across a variety of challenges and businesses and technologies. It's more and in a way from the talent attraction perspective much better than an Evernote standalone. So all has been equal, we can attract

18:46 Stronger talent. Layer on top of that the ability to make massive investments in the processes the knowledge and the tools required to attract and predict talent. We have a massive investment in AI applied to Predict.

18:58 future performance based on CVs, covered ladders, test results. It's a very expensive investment to make. It's difficult to justify for a company that maybe only hires Twenty people a year, smaller. And we can build on top of that. inherent advantage by doing even better on And basically we have access to better talent plus

19:14 We'll be better at selecting within that talent. pool than most companies would. So That gives us a major talent edge. That's just not a Attainable for companies that for m I'm sure again OpenAI

19:25 Probably has. Access to Many of the best time is but like ninety nine percent of companies cannot say that. We're better off this year alone, this twenty twenty five. It's almost at the end of the year. We'll be receiving

19:36 About eight hundred thousand unique job applications will be hiring two hundred and fifty people. So it's one in three thousand, four thousand, it's super selective and It's not because I'm smart or anything, it's just inherent advantages of the banning school smart. And of course have an employer brand built over a decade of investment and People work here saying it's amazing, Titanic is great, so you can't shortcut it, it takes forever, but

19:56 You couldn't as a standalone company, even if you had the patience. I heard somewhere that for a long time on Slack your label was recruiter, which is pretty cool. It still is. You mentioned the idea of building an employer brand for a decade plus. Talk about those two things, how they go hand in hand, and what you've done that's been most successful at building the employer brand.

20:17 By far talent density. We think about the jobs we offer as our most important product. So you need to know what your customer is, what you're offering, how you're differentiated. And have the courage of really focusing on that sharply. I find a lot of companies are almost afraid.

20:33 of someone not liking them, some team member Getting offended by some practices. And they are I think they're unappealing in general because they're too vanilla, too boring. They're nothing in a way. They're everything and nothing and Certainly they're not appealing for the most brilliant and driven people.

20:49 We want very clear. Exciting opportunity. So we have focused Pretty much from the beginning of getting better over time at it. on being the ideal place for Incredibly talented and hungry determined

21:02 professionals. We make a promise to them to surround them with incredibly high talent density. J'en dis how selective we are The entry point, we continue to be selective throughout. That certainly forces us to have difficult conversations and our moments of stress, but overall it's a clear Positive.

21:16 Yes, it's a more intense challenging workplace, but for people who wanna be the best version of themselves professionally as quickly, it's almost a unique opportunity. So that's our customer, that's the person we wanna surround ourselves with. Why is testing yourself so addictive? What is it about it as a function

21:36 That you and the team so enjoy. It's difficult to tell, I suspect though, it's a common trait of a lot of people who I've achieved greatness in their vertical, I'm thinking For some reason tennis comes to mind. When I look at Novak Djokovic

21:50 Rafa Nadal, I don't know them personally. They both strike me as people who are absolutely turned on by the idea of testing their limits and pushing against those limits. I don't think they wanted to win for the sake of saying, Oh, I want Twenty three. Grand Slime tournaments, they love the idea that it was supposed to be impossible. And you know what, I'm gonna prove it's not. It's one of the ways some humans are wired, but the truth is a lot of humans is wired that way, and those humans are those who tend to

22:15 have breakthroughs, excel in their fields, whether it's academia, sports, or business. And so if you feel that way yourself, if you want to win. and excel in an area like we wanna do with our approach. That's the kind of person I think you want to surround yourself with. Have you learned anything surprising about yourself? Or about how the world works.

22:33 In all these years of testing yourself. It's cost me a lot of sanity and caused me some Sleepless nights. Is that

22:43 Consensus. Is overrated and even dangerous. At least when you're trying to achieve something. I don't like the model of the bright brilliant asshole or anything like that. I think you can not be a consensus seeker while being a perfectly respectful Nice human being.

22:58 I think that's the model I would Espouse. But In general, if you're striving to stand out in your field If you're very concerned about aligning everybody around that particular we vision approach

23:10 Not causing anybody to dislike you, criticize you. I think you're absolutely doomed to fail. Unfortunately, I'm naturally wired to enjoy consensus. I quite struggle with Friction and criticism by nature. And I think

23:25 At least personally and certainly my capacity as a company that slowed me down, caused me some pain that in hindsight unwarranted and didn't bring any good to anybody, so I was felt pain and others uh benefited as a consequence. And instead When you have a clear idea, you believe that's a right approach, and of course you have listened to input, intellectual honesty, openness, so it's not a matter of pride, just a matter of intellectual conviction. Then I think.

23:48 Being able to just accept Disagreement. Pissing some people off and just going very straight toward that goal. Is a superpower. Not perfect at that for sure, but I'm much better today than I was when I started, but it'd be at least the first seven or eight years, I think I was absolutely terrible at it.

24:03 Thankfully the artists on the team were better and so as usual in a team you Compliment each other. I think a lot of management teams are too worried about having a percentage, for example, of their team Disagreeing with them criticising them.

24:16 Instead, I think they should really try to if they believe they've got a solution, the path ahead, I they should be uncompromising in that regard. So if we rewind time now to the early days where you've got this core insight that zero to one is really hard and maybe somewhat random. You have this skill set that probably is really valuable in one to N And you're gonna go acquire businesses and apply the talent and skill set to make the products way better, bigger, faster, everything.

24:39 What is the first couple years of that process like? Like how are you looking for companies? How do you have enough money? You I'm sure you must have started small. What were some of the first acquisitions? Talk us through the early lessons and ear activity in the MA markets. The beginning again we had those forty thousand followers. So we were trying to get do some consulting, like I said, which never worked. Basically brought no revenue. Pretty much. The first acquisition I think we closed it within the year, so pretty quickly.

25:05 And we paid ten thousand for it. I don't remember what it was called. It was a An iOS app to personalize your keyboard. Ultimately made twenty thousand off it. Very good return in a short period of time, but at a tiny scale. And then

25:19 That twenty went into couple out of acquisition and maybe turn into forty, but again similar nature, so small product Amateurishly built. Certainly no institutional investors. No investors of any sort definitely no professional management teams, typically one person. Yeah, exactly.

25:37 In parallel we also launched a A handful of products from scratch. Learn things. Because if you don't acquire almost anything'cause you've got no money, you're also not learning. So we're trying to learn hopefully make some revenue. We had a couple of My success is

25:49 Enough that it extended a runway. So many small things like that and we kept adding and compounding. But slowly but steadily ten K turns into twenty K and forty and eighty and We've been combining at pretty fast rates, but if you look at our per share revenue or Ibita growth over the past four years. Where we are.

26:06 A decent scale, I guess about one point three billion this year. It's still about seventy five percent per year. We're still combining pretty fast. Ten years go by and you look back and you go, Oh wow, I remember we were making half a million a year, now we're making a billion. So in those early days, what were the key lessons that you were learning? What did you start to realize were the right attributes of an app, a piece of software, a company that you might acquire?

26:29 What were the things that you were after? It's always been the same things from a high level, and that would be So far we've always focused on digital technology. We haven't bought supermarket change, nor do we plan to. I feel you wanna stay. Reasonably

26:42 within your circle of competence. Ideally here and there you want to Take a step outside of it. You need to keep pushing the boundaries'cause that will keep your TAM expanding as you expand within the TAM. But I don't think it it would be wise, especially As long as the model works well, it it's efficient to

26:57 Take massive leaps outside of the circle of competence just because Digital technology Scale? Scale is relative, but because our approach is so hands on So time consuming. I mentioned we can

27:09 Sometimes we radically rethink a business or at least several components of it. We will do maybe five acquisitions a year could be one, could be ten, max, and if it's really a stretch. And each some more than others will really go super deep and rethink the details. The time investment and the effort does not scale linearly with revenue. So for us to do An acquisition that will bring in half a billion in revenue is not five times as time consuming as one that will bring a hundred million. Maybe it's on average a little bit more time consuming because it tends to be more complicated, but

27:37 Nowhere near linearly. And so we wanna do fewer acquisitions, but bigger. So first criterion is scale. And again at the time tenkey looked like a big bat, or do we feel like as a Today we're actually hoping to invest easily a billion plus, but conceptually the same thing. The second thing is we need to be able to predict the future performance of that business. Otherwise There's no way we can make a confident investment. We've gotten very sophisticated in times with statistical models and lots of assumptions and probability distributions, but

28:03 And the essence of it. We need to buy stuff where we know where it's going. At least with sufficient confidence. And the last one is we need to believe We can make meaningful, substantial improvements to that business.

28:15 Not that it's necessity, but it's difficult for us to imagine being able to make an offer that's super exciting for the seller. And then being, okay, this is perfect, buy. Probably they wouldn't sell it to us for that price. These are the criteria and they have remained the same, but the level of sophistication, our understanding of these criteria Over time it's incomparable. Maybe we could talk about Evernote as a great case study because I used to use it all the time. It was my like place of record for keeping my notes and book highlights and all these things, and people have heard of the brand. It was a big acquisition for you. I'm curious what you think of it as like the milestone acquisition in the history of bending spoons. I'd love to dive into that one.

28:49 Just to hear an example of the whole story soup to nuts of How you found it, what you saw, what you did, how you thought about price, what your team did, what's happened since. I mentioned earlier at the beginning it was all what you would call asset deals. individual apps and whatnot. And then we had a period of maybe three, four years where we saw that very basic small scale model work was going to saturate at some point in the not too distant future.

29:13 And we figured we should do this at a bigger scale with structure companies with management teams and large teams of professionals and uh institutional investors. But will we be able to do as well or at least enough there. And we were quite I think we lacked confidence to take the leap immediately and so we started Losing a bit of focus and looking at alternative

29:31 strategies while Taking tentative baby steps into that next level of the same thing really, but just I guess it's a bit like I played locally now, I wanna do an international tennis tournament to go back to the tennis Will I be able to compete? And probably yes if you're doing super well locally. But I think it's you can empathize with there being a little bit of hesitation. And I think Evernote was the first Such company like

29:56 Uh clearly within that definition. And it was very successful and so it gave us And so was it for the settlers, by the way. I think it was a great deal for both parties. My guess is that we paid fifty percent more than the next best offer. So it was really a win win. Any good strategy needs to be somewhat win win, otherwise it will not go far. We were invited to that process.

30:16 At the time it wasn't Something we took for granted'cause we were not so well known. So many times we missed out on processes and sales processes that happen and Took a look at it. I think we were very fast in uh making a What turned out to be the winning bid and we just saw A very good brand, although certainly

30:32 It's Lily Tarnished? But Still a quarter of a billion people. Had you ever known. You can say that of a lot of products. Wow, yeah. A strong brand.

30:40 An important use case, a lot of customers with thousands or tens of thousands of notes using evernote to run their lives really. And so that means potentially good retention. The product had not probably kept up with the times as well as you as a customer would have loved to see. Of course, you can only Realize that fully once your on the inside and really open hood and You get a sense of that as a user and I was a user actually before I acquired it. I've been a user since twenty fourteen, I believe. And so we bid we won it.

31:07 We began our usual transformation process on a different scale, but essentially And a team of some of our best experts. Functional experts, growth product, the design and engineering and Going we met everybody, we spent a lot of time with everybody on the team and worked on projects and really got acquainted with the

31:25 Need to agree to details of the business, probably speaking. And then developed a roadmap for how to make Evernote more successful and Got to work. It's a completely different business today. I think in two and a half years we have released probably about two hundred and fifty significant product improvements. It's difficult to be

31:41 hundred percent quantitative product improvements'cause there's no perfect definition, but my in my estimation we have been Improving and innovating probably three to five times faster than before. We've been able to do this with a smaller team. really working on keeping all the positions that were critical, getting rid of projects and initiatives that we thought were tangential and really not adding a lot of value. Working on talent density, the culture of impact orientation and rationality, really trying to make sure that what we do moves the needle and

32:08 I have a million things you bring in as a business with our platform, but we rebuilt almost entirely the code base, the cloud infrastructure. There's almost nothing, at least nothing of the core components. It's now far higher performance. Not sync up in Less than 10% of the time, in some cases 1% of the time. I remember that being a problem when I was using it. That's why I stopped. It is super fast. You would not tell the difference at all compared to the products you cons you probably consider.

32:34 The best in the broader product like maybe you think notion is Top notch in the broader productivity. I think if you tried Evernote today, you would consider they do different things, but the quality of the experience you consider probably On par? So we had to close a big gap there. Retention is

32:49 At an all time high. Despite prices being higher,'cause now Evernote is substantially more ex it varies by country and it's probably on average, say sixty percent more expensive. So it's substantially more expensive than before. Actually retention is better'cause yeah, we did lose ten percent of customers who were Already not so sure and once the price goes up, okay, I'm out of here. But all the

33:08 More engaged. Loyal customers, they're still a more than customer satisfaction by any Quantitative metric is Better than it's ever been before. But it was a very time consuming effort, not something

33:19 I think completely beyond what say a private equity could do without having It's own R and D team and everything. And having to maybe be ready to sell within a few years. And again, we can't do it a hundred companies each year, but we could do three or five or six How do you know when there's pricing power? If prices are six percent higher, you've made it out of better product, so maybe that's why the price can go higher, but

33:40 How do you think about price charge to end users across your universe of applications that you own? It really depends on each case. I'll give you another case that's quite different from Evernote, and that would be meetup. So Meetup historically you could only use it as an organizer. You could only use it if you paid for it. And since we acquired it.

34:00 We introduced a free tier so you could organise we actually do quite a lot. For free? kinda qualifies as a price decrease in a way, like we give away more for free. And we actually increase the price for the more advanced use cases for the truly dedicated Based on my observation, there's room for being more sophisticated about pricing.

34:17 Which is different from increasing price, it's being better at Segmentation. What's paid, what's given away for free. Personalization. communications experiences that ultimately all blend into monetization and the maximization of user L T V.

34:31 Our direct experience is that There's a wide range of levels of sophistication in the market. I'd like to think Benny Spoon's being at the very top of that sophistication. Yeah. Whether that translates into higher prices or lower prices or same prices

34:46 I don't know. It certainly translates into a very different overall approach to monetization. Just as a quick aside, why is it called bending spins? So when we started, we knew that we weren't gonna be a one product company. We still wanted the name to connect to something for us. A lot of companies are named after somehow have after the problem they're trying to solve or produ all of them, but or the product they're trying to deliver.

35:08 That wasn't an option for us. We figured okay, why don't we look for a name that's more connects to Some principles or values that we find inspiring. One of my co founders, Matteo, is a big fan of the metrics. Watched the movie the night before, I'm not sure but anyway. He told us why don't we call it bending spoons? They watch the movie and there's this little bold guy who

35:29 Ben spoon with his mind and I I think it's cool. Initially we didn't like it. I still have spreadsheet with the different names. Manage boost I think we give it like four out of five stars. There were a couple of others that Got more stars. Thank God we didn't pick it appeal.

35:45 We're doing only apps initially, now we do all sorts of technology uh software but Appeal. I think it's awful for some reason. The Luca from twenty thirteen thought it was brilliant. Yeah. So it got five stars out of five, but we picked Benny's Bruce and the reason why We liked it was it connected to two principles or values and they're still very dear to us. One is Call it the power of the mind.

36:04 The deal bending spoons Somehow At least to me. It inspires this vision of a powerful mind that can do things that appear impossible. And we're big believers that the the human brain has incredible potential if you work

36:17 on it and at it and try to really give it the tools. And the second reason why we lobbed it was that even if you have that brain, it again just intuitively feels to get to the point where it can bend spoons You've probably worked really hard at your craft. And we like the idea of almost Anything in life that has value, you gotta work at it. I think it's true with a family.

36:38 Romantic relationships. Your craft as a professional. your abilities as an athlete. I think almost anything that will really give you satisfaction. Requires work. So and plus it was of a unique name. We hadn't heard of any company called Bendy Spoons, and so we figured it's probably memorable. Let's go for it.

36:55 I love it. And I love that movie. So now knowing the reference, it's great. Going back to the Evernote acquisition, you mentioned you paid fifty percent more than maybe the next highest bidder. How do you know the right price to pay. Like how do you think about pricing assets as you buy bigger and bigger ones, we can talk about Vimeo, we can talk about AOL.

37:11 These bites of the apple are gonna get bigger and bigger. Price matters, of course. You have the ability to do a lot after buying it. So maybe that allows you to pay a higher price, but still, I'm sure you want to pay a good, fair, responsible price. How do you think about it? One is how do you Determine your retur as a function of price.

37:29 How do we Stay disciplined, so we will really not pay more than we believe is right, pays our Expected returns, opportunity cost. What else we could be doing with that capital and what returns. So the first one is a matter of sophistication and the second one is a matter of psychology, really, I think.

37:46 discipline, patience. And the third one is How well do we negotiate? How efficient are we at positioning the ultimate price on that curve? The fastest but stupidest approach would be to immediately offer The very most you can pay. The opposite of

38:00 offering at ridiculous low price is probably equally stupid. So we wanna find the right balance. Interestingly actually are much closer to the former. We believe it's better to have a reputation for someone who offers a very fair price. Immediately, but who's not gonna be very willing to negotiate much. So the first one

38:16 How do you Determine that. Return as a function of price curve. You gotta be very sophisticated at knowing what you're doing, having first party data for benchmarking. Asking the right questions, having

38:28 good models, but the output of the model is only as good as the assumptions to put in it. And we certainly have very sophisticated cohorted models and whatnot, but Main advantages in being able to run these businesses a lot better. We don't win because we're good at predictions. We win because we can run them better, so we can offer a good price. But it's really marginally important to making good predictions and so you wanna at twelve years of experience

38:48 Running many businesses from the trenches in the details, private equity, I think teaches you a lot more. So you understand why things went a certain way with certain business. You're wiser when you set the assumptions for your next acquisition in a way that I think if you stay on the financial layer or kinda Oh, I talk to management every week. You think you understand, I don't think you really do. There is a cost to pay. It takes time.

39:09 But then on the bright side you're basically smarter and then predicting the future when you find yourself in a similar situation again. So we assumption setting is critical for us. We have many assumptions, each has a probability distribution and We debate assumptions extensively without ever looking at what the model will spit out as a consequence. That's forbidden.

39:28 'Cause we think that if you see the P N L basically the business plan. As you do it. There are all sorts of biases on it doesn't look good enough and you're like, Oh, maybe this is conservative and people should so We do not look at the output, only at the inputs. We debate, analyze, dig for more data. Once we're happy, that's the best we can do. At this stage We ran a Monte Carlo simulation.

39:48 And then we look at this distributional IRR, MPV. And that's the truth. Nobody can say now that I see it, I think maybe we were a bit pessimistic with the assumptions. No, too late. This is now the truth. This is what will guide our negotiation. So that's phase one. And then you make an offer. As I said, we try to make an offer that's sometimes the maximum will to pay or close to it because we think although we could probably get a better deal.

40:10 In the moment if you started lower. Then we don't wanna establish a reputation for people you can push around. and get more out of. We're more like the Warren Buffett model of I'll give you a What I think is actually a very good offer. And I'm okay if I hear no, but don't think you can get twenty five percent more out of me just asking.

40:26 And then you gotta be disciplined when they ask for more than you're willing to pay. You absolutely need to not have fallen in love with that particular business and say, Okay, you know what? That's not to be, we'll move on to the next one. What's your walk away rate? Like for every AOL Vimeo Evernote that you buy, how many did you wanna buy that you ultimately didn't We need to define this because we look at Actually thousands of businesses each year. We don't make an offer to thousands of businesses, I'd say we probably make an offer Two twice as many as we buy? You know what? We have never lost

40:54 A bid before. There's never been a business we made an offer for. And someone else got it. Those we didn't buy were ultimately the seller just chose not to sell to anybody. So that tells me our offers are typically super competitive. We also tell us we're probably not very good at negotiating. Uh'cause I think some level of failure rate would indicate a more optimal strategy. I guess you you fail, you learn, you get better. Can we talk about the history of the financing of the business? Because Like you said, you've done very little direct equity capital raising before, you've done some debt. Has most of this just been build up of free cash flow from earlier businesses until you have enough to buy the next thing and then just

41:28 Rinse and repeat. Yeah, in short, the more sophisticated version is Completely true what you just said for the first Five years? Then we started using that.

41:37 Pretty basic. That from commercial banks. Not very high leverage ratios. Three point five times he'd be down a good day. Generally lower. Trailing Ebi Dow.

41:45 In the last twelve months. That helped accelerate. Before we couldn't use that because you need to be uh have an established track record bec before they take you through the code. Since then it's been essentially that and reinvested earnings and that we have raised a bunch of equity, but mostly to fuel secondary transactions. 'Cause you if you're in business for a long time, you start to get into a good scale, people saying, Okay, I've invested in this company

42:08 And I'm talking really just team members,'cause from the beginning we enable people we pay just cash. No variable pay of any kind. And people can choose though to receive some of their cash pay in equity at a discount. It's very unusual, by the way. And so in time, people have accumulated positions and that equity is worth nothing if there's never any liquidity. So we started organizing

42:28 Secondary transaction every eighteen months, one year, two years. We've had maybe five, four probably since twenty nineteen. And so most of the equity has been raised to finance those transactions, but occasionally The first Capital increase of any significance was in twenty twenty two, I think. So yes we have

42:44 Dilution from Capital increases very modest. Off the top of my head, I'd say maybe ten percent. We could also not have done any of those at all. We still did them because we figured In a couple of cases it helped us get over the hump to close the deal we couldn't without that little extra. With that we were maxed out.

43:01 But also we figured if we bring in a little bit more In terms of high quality International investors. That would be helpful. Credibility. Fire power if we need to go after a huge acquisition quickly. Just optionality. But we're generally very cautious when it comes to dilution. I think if you really believe what you're doing, you should be painful.

43:19 to increase your capital base. I don't know if it was Evernote or some other one. I'm we've talked about Evernote so maybe pick a different one. I'm curious for another acquisition Whether it's we transfer or commute or anything else. A I photo sharing one remedy. Which I was just looking at out before we started this morning.

43:34 Are there other acquisitions that have taught you personally the most? About Your own process. About doing this well. That stand out in memory.

43:43 There was one time where Let's say we bought a product at the peak of let's call it a viral moment. This is really not applicable to the type of businesses we buy today, but at the time It was a thing. It's many years ago now. And then as soon as we bought it, the basically that viral wave was reaching and had reached the peak and that completely changed. We thought we had been conservative, but it completely changed.

44:06 our assumptions and led to Drastically inferior returns. Versus what we expected. And that taught us to be absolutely Paranoid.

44:15 when it comes to the sources of user acquisition. So basically either we buy businesses where Almost all the value lies in existing customers or users, like people, okay, these have been acquired, it's just about now managing them as well as possible. Or if a lot of the value is predicated on substantial.

44:31 additional user acquisition or customer acquisition then We need to really clearly understand. the drivers of that expected acquisition and make sure that these drivers are things we can predict. For example, we know We can make pretty accurate predictions of word of mouth rate. Under normal circumstances.

44:47 But not under sudden viral moments. We don't feel very confident. making predictions of future rates of user acquisitions through paid advertising, for example. So that was a big lesson learned. Another one. We learned we actually went after Grinder.

45:02 the LGBTQ Plus dating app in twenty nineteen. So the app was owned by a Chinese firm and Sea Fuse. was forced me to sell. So a long story short, it was a big bite for us at the time. We're much smaller. It would have quadrupled the company. We didn't have

45:19 an equally substantial truck record as we do today. We went above and beyond to raise the capital. Almost won the deal. Ultimately we lost it because someone else offered a bit more and we would have offered more still, but we just at cap thousand available sources of funds. So that was a failure. We worked took us about nine months. My main thing and the main thing for several colleagues.

45:40 At a time we were s very small, we had an MA team of one person. So It really Paused. Our growth. Had we bought it, it would have been an incredible

45:49 Acceleration afterward. But it taught us to be very careful to put all our eggs in one basket. And so in hindsight I think we could have still tried to get it, but maybe not obsessed so much over it, considering how unlikely it was to make it happen and try to Place another few bets that year.

46:05 If you look at our growth those couple of years it's way slower than almost any other year, and that's the key reason like we All we had into making that one thing happen, it didn't happen. We hadn't done anything else. I'd done some things but nothing that really moved the needle. So It taught us to be

46:20 Think more in terms of probabilities. Not that we weren't before, but I'd say we've gotten almost obsessive about seeing the world in terms of statistics. With that model of the world, act accordingly. Can you talk about AOL a little bit? Obviously that's a name that literally everyone will have heard of, and I'm fascinated to hear the story of you acquiring the business. So uh people know AOL as the way to connect to the internet back in the day, in the nineties, even the eighties I think actually, I think they started. Pioneers of I At some point AOL was

46:49 What Google was in the two thousands was the hard new thing, so They had this outside in it seems like a failed merger, time warner and whatnot, and then they had different homes. It's actually a very good business. It lost All the customers that they had to lose over the decades.

47:04 And today it's a email inbox and a web portal with the aggregator of news and other content. It's very good business with tens of millions of active users, very loyal users. Again, there's a lot of selection bias. People who wanna Gmail have decades to go for is people who really love that particular experience, they have lots of stuff there. And at the same time we think

47:22 Although the team has done a pretty good job I think at managing this business, there's a l a next level to be unlocked in terms of polishing the product. Optimizing the offering, optimizing monetization. It's just a very good business that I think superficially people think, Oh, it's probably legacy old, it's probably worth nothing. But actually it's wonderful business and in fact again I There are companies in the broader messaging or email them.

47:45 industry segment and if you just read the news you would think are doing super well and they're much larger, but actually if you had access to User account. P L. Including in time, looking at trends. They're just not nearly as good. Like it doesn't even begin to compare. AOL is actually the fifth

48:01 Most used Email inbox in the Western world. Crazy. Which is at something. It's a pretty competitive category. So Is it Gmail? No. If Google ever wants to divest it up, we'll be happy to take a look. It's a very good business that will be even better, I hope. That's the intent as we

48:18 Pour our hearts and souls into the Improving every facet of it. One of my mentors who's done a lot of investing in building software businesses over a long period of time. Said that one of the ways that he made the most money or was the most successful would be that he would enter in product situations where there were twelve things going on and there should only be three. that there was always just like too much stuff, too many features, too many products in the company.

48:38 Have you found that to be true at all that especially with companies that are a bit older, that there's been this creep of stuff that gets added that's not necessary. Is that like a common element of your playbook to take twelve down to three. I don't know that it's necessarily common because not all companies do that, but we have seen it and it's quite true. I thought it was a contrarian view, but now that I know your friend thinks the same, maybe It's not as contrary as I thought it was.

49:00 But yes, I think people in general Overestimate the value of R and D. Let me qualify. They think that General money into

49:09 Building staff pays off. It's really not true at all. What we find is that there's a very small number of things that pay off Handsome and most Things are a waste of money.

49:20 And while there's an element of you don't know before you do it, so for sure. A lot of it you do. For example, if you start from what your customers need. Really focus on that. Rather than maybe what your engineers think is cool.

49:32 Or fancy visions that have very little to do with the core problems we're solving. You're probably actually already Taking big strides in a direction of greater efficiency. And by the way, it's not just about keeping costs. More under control, but it's also doing the thing that matters.

49:46 Better. Ever not today. as a lower cost base than before. But I promise you if if you take ten users at random Power customers, power users.

49:55 Nine will tell you that it's actually higher performance, more resilient, a better feature set. And part of it is we've really focused on what these customers painfully needed. That helps you do more with less. How do you think about taking capital from a fund that's a ten year VC fund or something or a private equity fund versus A ballet gifford that's got capital that lasts forever. When you're thinking about the right partners.

50:17 All else equal we do prefer A permanent capital and It's not so much because even permanent capital could ask you to liquidate. It's just that you don't have to. And I think the fact that they don't have to

50:27 reduces the probability that you'll find yourself in a situation where It's just an unnatural, complicated moment. Incentives can be calm a little bit perverse. We haven't experienced that before, but I know stories of artists having done that. But I think there's an evergreen

50:43 Source of capital, I think. You're less likely to find yourself in that unpleasant situation. I will add I side more with investors at least than entrepreneurs, although in a way I'm more of an entrepreneur, yeah. Certainly. I think a lot of entrepreneurs take money from

50:57 Investors? And have a level of entitlement? That they should never be asked T. Provide a return.

51:05 Oh, but why do you ask me to sell now? It's only been f four years, five years. I think that's either naive or intellectually dishonest. Regardless of the particular buy laws that investor is subjected to where maybe they could stay forever, ultimately An investor is trying to achieve Some form of IR

51:21 So You should remain very respectful of the fact that when you take Anybody's money, if you ask me, but certainly institutional money. You can't find it shocking or disappointing or then bitch about it in the entrepreneurial circle so they're asking putting some level pressure with you to sell.

51:37 You're in such an interesting seat because you're both investor and operator. And so you have the shared perspective that you're often buying things as an investor but then running them as an operator. If you think across all the investors, pure investors that have come and studied bending spoons, some of them had made equity investments, secondary investments, et cetera. What distinguishes the best

51:57 Investors What do they do that's most different from those that are, let's say, average? I say most good investors They recognize patterns. So I've seen a certain business model work.

52:09 And I use that to select their investments. If done right, this is a very successful way of investing. And then there are the bad investors and the amazing investors. None of which is a pattern recognizer. So they actually assess its business

52:22 In an ad hoc manner. On its own deep fundamental merits. But it's much more difficult. That's what divides the truly outlier investors from the bad ones. Those in the middle, maybe even Leaning toward good.

52:35 Our pattern recognizers I mean the truly incredible ones. You sit with them. They're not saying, Oh, you are the Uber of bicycle. Yeah, you're the Berkshire for this. They understand the almost the laws of physics to make a metaphor that makes so that the apple falls? And that gives them

52:53 Certainly a lot of confidence, but also the ability A lot of the time good investment is not. Determining that something is good. Like a lot of companies, most of us could tell they're good, but i if everybody or even not quite a lot of people think they're good, probably the price embeds that goodness and it's not a great deal.

53:11 It is what it is. It's like a lot of companies today in AI, again, I'm not gonna name names, but Some probably deserve their valuation, some will Easter will prove we're even cheap. But most, even the good ones, are probably too expensive simply because everybody wants to invest. So in a way it's the same thing. The truly outstanding investors will be able to find something that's really good. A few people think is good.

53:29 And the only way to do that is not to apply pattern because by definition, if it fit a pattern then It's either by the pattern or good by the pattern, everybody is on board. It has to not fit the pattern and you have to find ways of determining it's good. That's very difficult intellectually. You need creativity, imagination, lots of little logic. Rationality, it cognitively is next level. In that specific effort for bending spoons.

53:50 Specifically. Where have the best investors really dug in to get that? Physics understanding. of your business. That's different than how other things work. Like we're the best again. See some of the best are really good at understanding people.

54:04 A discerning Узрили смарт. And not promotional from those who are not so smart but very good promoters. And so when you see a business has a strong track record And someone explains to you in a way that makes sense.

54:16 It's not just a good story, but it makes logical sense. That's a huge indication that probably there's something there. First of all. You now know why things have worked out. And you can determine whether they're likely to continue working out. And second, if you're investing in someone who's made good decisions for the right reasons, not just out of luck. They're just more likely to navigate in the future.

54:34 the variables that will be thrown at them better than most. I know investors who invested, for example, in Amazon early days. Who told me one particularly. Who told me that the main reason why he did and he made a big bat on it and it was a Huge success. He did believe in the e commerce model and all that, but he believed that very few people he had ever met had the

54:52 Clarity your thought. The rationality Of just beas. And so a model he believed had legs. Coupled with a person he thought was a brilliant leader a very bright problem solver.

55:04 That alone set that opportunity apart from a lot of other stuff. Yes, it would be difficult to have wide margins for a long time, but he was confident he w the company would be much better than at least it was priced at the time. So I think understanding people and their cognitive abilities is quite difficult. It requires in and of itself great cognitive abilities, I find that If someone is eight out of ten smart

55:27 They can only discern the sevens from the sixes from the fives. But the eight and a half, the nines, the tens for them look like the same, like a big batch of oh They're so smart. And so to be able to distinguish the tens from the nines and the eights, you need to be probably close to a ten yourself. of course experience and other elements too which make it very difficult. They're not just brilliant

55:46 From a point of view of logic and analysis, but also rationality. Trying to really ignore This person was really Pleasant. Or charismatic, yes.

55:55 Park it. What's really beneath that? It's difficult. We as humans have been Evolutionists. Made us Animals of gut of

56:04 Emotion. But Emotional investing. They're not good friends, I think. Or at least good investing. Another thing that you have to deal with in a unique way is this cocktail of incentives and motivation for different parts of the business.

56:17 You have business units where a team is running an Evernote, for example, that's different than a spooner that's in the home office that's being moved around and doing lots of different things. What have you learned about setting incentives for people to get the outcomes that you want. Fairly complex structure. I don't know if this will disappoint you. But we don't.

56:35 Everybody Is paid a fixed salary. No variable pay. No stock grants, nothing. They can choose to invest part of their cash pay at a discount. Not a crazy but a pretty

56:46 General's discount at the top core level. And that's it. The way we maximise alignment of effort is by hiring people who believe are high integrity, they have great professional pride. And then just treating them with the utmost respect. And I think most people will try to do what's right and do what's right for the business along the lines of the mandate you give you gave them. So if you say ultimately you're optimizing for manage pools.

57:07 Not ever note. Nine out of ten people if you're hired well and the culture is right. We'll take it to heart and do that. In fact, I believe sometimes setting financial incentives of course if people do well, they're likely to get more responsibility, higher salaries. Certainly there's that, but it's not as

57:22 Immediately tied to a results next quarter or something very measurable. Is ob is through observation in time, if you're great at your job. You probably get more or do more. I think that sometimes when you set Typical incentive plans with

57:34 KPIs and whatnot. First of all, it's very costly. Takes a lot of time. For that to be R I positive, it's not enough that it adds value. It needs to add more value than the cost that's implied. It's absolutely guaranteed. To create at least some perverse incentives.

57:48 'Cause nobody can set perfect incentives. The world is too complicated, it changes too fast. For sure. So even if you're a genius Whatever you set as incentives will be imperfect. So there is an additional inefficiency that whatever extra efficiency needs to overcome before even into black territory as opposed to red territory. I think also those kind of incentives tend to

58:08 Relationships. They tend to make things more transactional. It's more difficult to have a proper problem solving session w where All we're thinking about is How do we win together? I think most people will have it in the back of their minds, okay, how do I get the better bonus? It's difficult to be entirely

58:22 resistant to that feeling. And so I'm sure it could be done better, but we chose the simple way, which is treat people respectfully and just get rid of all that stuff and assume you'll do the best you can. I'm sure you're always dissatisfied with the state of things and want things to get better all the time. What about bending spoons today are you most dissatisfied with? I'm that kind of person, by the way. I'm perennially unhappy, which I think sounds awful'cause in a way I feel very fortunate. It's just I feel very fortunate.

58:47 I'm apparently unhappy. For some reason. Discontent. Which is a huge superpower. And a curse at the same time. You could imagine. What is not good, or at least not as good as it could be.

58:57 One of the things that's critical for our growth is hiring and coaching. I'm absolutely positive we offer Literally one of a kind level jobs, some of the best on the planet. Absolutely certain. Incredible talent in the city, you learn faster than anyone el anywhere else you get. An opportunity to take on responsibility that's that's crazy. Most of our general managers run businesses on average.

59:17 fifty, hundred million in revenues. If they were a scale up, they would be Many of these people are like twenty seven, twenty eight. Most of them are I think very few are above thirty. Unique opportunities. Excellent financial opportunities too, whether it's very good salaries and investment opportunity in a company that's growing fast.

59:35 We feel very privileged of getting a ton of great applications, like I said, a huge number. I think we should be getting more Better we should be better at identifying the raw talent. I know we're rejecting a lot of great applicants who are actually better off some of the people we hire because we're just not good enough at

59:50 spotting that talent in someone who has a such a short track record, maybe a student, you graduate. That's an area of massive frustration in a way. At the same time very proud of what the team has done there and frustrated we can't yet do better. And I know that's one of the keys to growing fast and achieving what we start to achieve.

1:00:07 So it's certainly a major Yeah. I'm always frustrated with our societies, there's too much regulation, we're really working on the wrong stuff as at the institutional level. People try to create economic growth and prosperity through more rules, just telling you, Yeah, if we tell them exactly where to go with lots of rules. surely will be prosperous. They don't understand that it's quite the opposite. You gotta get out of the way and create as

1:00:29 free and open a playground as you can. We keep adding rules. Elon Musk once said something that I thought was Brilliant and I fully subscribe to it, he said. We should have a rule.

1:00:39 That every new law is automatically removed, say three years later, unless someone can make a really good case that's created a lot of value. So we wouldn't have ten thousand One thousand Page longs or whatever.

1:00:52 Where it's basically trying to prevent Rare corner cases. Unpleasant, sometimes tragic corner cases. While making ninety nine point ninety nine percent of the normal cases. Less efficient.

1:01:05 More painful, some utterly impossible. But s because they're not as newsworthy, because they're typically widespread and normal, those inefficiencies are not as Interesting to talk about. In aggregate there are just a massive tragedy, a much b bigger tragedy than the one individual tragedy of one corner case. Ultimately When it comes to regulation, the corner case wins and we regulate it away, but we make life much worse for everybody else ninety nine percent of the time. This frustrates me because I think we're just shooting ourselves in the foot as society, essentially. What's your balance of time around this idea of being constantly discontent? What's your balance of time of what I'll call maintenance hours of the business? Things that are repetitive, meetings with teams, internal stuff, keeping the trains running.

1:01:46 versus space that you create. To tinker with the business, try new things, stretch that comfort zone that you were talking about earlier. The question behind the question is like, what does your week look like? Like how do you spend your time? Varies by period a lot. So for example, if when we close a large transaction, I'm often There with a task force in the trenches, meeting the new team and for weeks or even months sometimes that will take up fifty percent of my time or seventy percent of my time. If we're working on a big fundraise which has raised the largest

1:02:13 That round of any private company in Italy in history. And like we said, we raised seven hundred million dollars at an eleven billion dollar valuation inequity. These two Initiatives certainly two K. Substantial part of my time.

1:02:26 when we're not in fundraising mode that that goes down to trickle, maybe have some calls with investors, but much less. So it varies. But I would say probably A first plate would be Fifty of my time. Talent?

1:02:37 I check. Each candidate before we extend an offer, I extend the offer. I talk to many of the new hires. I help with Tannin Density. I help try to push for Being demanding.

1:02:48 So that's probably fifty percent of my time. fifty percent of my time is on average in time probably financing an external relations, I would say. Fifty percent of my time is These transformations of companies we newly acquire. And fifty percent of my time would be other call it.

1:03:03 Long tail. platform work, which is probably where I would put that thinking creatively about how to improve the strategy and I work all the time, so I probably work as two F Ds like I think most people in in my position would. But it's probably these four categories are comparable in in investment on average in time. What did you learn during this biggest ever debt raise? Most of the people that I talk to for this are raising equity capital. I haven't had a lot of conversations with people that have raised lots of debt capital for something like an acquisition.

1:03:32 I'm curious about the whole process and how you would compare and contrast equity versus debt capital markets from a raising perspective. The mindset is quite different'cause an equity investor tolerates The risk of losing money vastly better. Because they have an upside that's essentially uncapped within reason. A lander.

1:03:49 is almost entirely intolerant to the possibility of losing'cause their upside is that three percent spread, five percent spread, depending on the exact financial instrument, it's still a limited f and generally fixed Upside they have. It's all about not losing it. So a lot of the questions are more oriented toward understanding the potential

1:04:09 Worst case scenario and the risks. Equity investors are more oriented toward the TAM. How big could this be? How quickly could we get there? The surprising part is a lot of banks, a lot of lenders are actually quite visionary. I heard people say, Well, they're probably more boring because they're actually no, a lot of them are brilliant and visionary. So they're quite curious about the model and how far it could go and understand very quickly why it works I thoroughly enjoyed my conversations with lenders.

1:04:36 At least as much as those with equity investors. Perhaps because they have these They have to be so paranoid about the downside, this breeds in them a thoroughness, a thoughtfulness, that's not always the case with equity investors. For whom maybe. That intuition of all these team

1:04:52 This thing could go far, it's more important. Like catching the big wins is more important that And so they can be wrong more often. So they're maybe a little bit more quicker in their judgment, a bit more. But I think lenders are quite an interesting type of investor to talk to. And generally it works that you talk to a couple of anchor lenders. Some of the biggest banks, typically those with a strong investment banking arm too. They help you figure out not kind of shape. The round deep

1:05:16 Commit some of the mone immediately so you know you've got Some of it covered and you know where you're going. And then you start bringing under the tent. More players with other important roles and then lesser roles and at some point it's quote unquote just Providing capital.

1:05:29 And typically some of these capital is Basically it's with that lander It will stay with you until maturity, five or seven years down the line. Some of this capital you may wanna syndicate, the lender tells you, Okay, I'll give you A billion dollars, but we agree that in the short term we'll be going out to

1:05:46 sell away essentially this billion dollar to many Providers each with one, ten Fift million each. And they'll hold it for five years or seven years, but I'm just giving you a bridge to that moment. You need the money now, you're doing MA, for example, and we don't have time to talk to twenty parties plus it would certainly leak that you're buying that target.

1:06:03 So I help you get there, but then we agree contractually that will be Transferring that. credit from me to these other lenders. So that phase is also interesting and it's quite optimized because the dead markets are huge. It's gigantic and vastly more efficient probably than the actually much smaller, say V C capital markets and so

1:06:21 The process of how you take That credit from the point of view of a lander and syndicate it out is super standardized by now. You create a deck, you record a presentation, it you show up for one hour, maybe three times with batches of landers, like it's super, super standardized. Very efficient. I'm so curious what you think about what I would call almost like a religious debate right now in the world of software, which is how AI will affect.

1:06:45 the sorts of businesses that you've bought historically. Will it enhance them? Will it hurt them because it's easier to create replicas or copies or new versions. We talked about Remedy earlier, which is an app that you bought before ChatGPT or that I'm sure has benefited tremendously From the advent of AI. How does this new

1:07:02 tidal wave of technology impact Your old businesses, how you think about new businesses, just your take on it in general. Yeah, it's a complex discussion and I think you're asking maybe a time frame of five years'cause AI changes the very fabric of our society. fifty years out or something like a long time frame in ways that are both exciting and scary.

1:07:22 But in the medium term, I think for Bandy Spoon specifically, I think it's mostly a good thing'cause We don't care too much about We didn't reason the risk. To each individual piece of a business. Basically most of our business units are twenty percent of our revenue or less.

1:07:35 A dramatic. decrease in one of them is still Yeah, we've been growing at seventy five percent a year. None of them decline, but some do, some will. Maybe one or two will decline fast. It's

1:07:46 Undesirable but not existential. So for our model it's highly diversified. Lastly. A lot of what we do is being Better

1:07:54 functionally better at running this company, meaning having a higher quality output at a lower cost across the functions, engineering, design, product, growth. AI is a an accelerator of both quality and efficiency if used properly. But it doesn't do it by itself. Maybe it will in ten years, but today we've seen it clearly as we have invested in excellence through AI in our operations. A lot of it is custom integrations. proprietary technology, a lot of culture work on getting people to use it the right way. So

1:08:25 Like with every innovation in the past, we'll see a small percentage of companies being at the forefront of leveraging that. Most companies being laggards. And I'm pretty confident Benis Plus will be at the very cutting edge of using it. So we're already Making strides there.

1:08:39 That if anything, the gap in ability between us and most companies will widen for years. But again, I think it's likely to mostly benefit An aggregator. And consolidator like banned spons, assuming we stay disciplined with pricing. While being very disruptive for certain

1:08:55 Vertical. So some will be disrupted much earlier, so I think we as a society and investment community will be able to start seeing Things and update our model of reality and predictions based on that. No. Can it be disruptive for many SaaS businesses? Absolutely. I think the time where

1:09:10 We open up ChatGPT and we tell it, Okay, build me Jira. As far away. It's not months away. It's not even a couple of years away. AI today can't do a lot for you. beyond say research, copyrighting and maybe some basic kind of production, but it'll do more and fast.

1:09:26 We were working with AI in twenty ten, so we're very early. I'm a big believer in AI, very big. However, even if it could build Jira today. It's not that easy to explain to it what you want when it's so complex. So I wouldn't underestimate the inability of of the user

1:09:41 to get out of it what they need. These products are being honed To customer needs for a long time. You're already using them. There is no investment in them in terms of data. So not only does the tool need to get to a point where it can replicate that and with the same guarantee of performance, very difficult, like getting to something that works.

1:09:59 The same ninety five percent of the time, we're super far from it. But that's an infinitely easier challenge than something that works essentially a hundred percent of the time. Influ easer. but also you need to be able to guide it to build it the way you want. And as long as software is ultimately a

1:10:13 Ratfield is more Shrub Wallet? If you think about it, it's not and expense people will optimize first. It's not like a car that literally you plan your finances around. Before that truly eats into the overall size of the market, I think we're talking a lot of stars need to align. I think it's probably

1:10:29 Many years out. You mentioned earlier that ultimately your main product is your company and the people that work here are the key people to attract the jobs or products themselves. What are some of your favorite ways of making sure once you get these amazing people, we talked a lot about data science and recruiting and the pipeline and the crazy number of applicants and so on. Once they're here. Making sure that

1:10:49 they get the most out of it and you get the most out of them, which is mutually beneficial. What are the sorts of traditions and things that you do that you think have most contributed to it being The kind of place you want to work. I think ultimately the most important thing is to be very clear on what kinda company you wanna be your principles, your values and then Hire people to

1:11:06 Embrace those And then You yourself. As a person who's maybe more visible than others, try as hard as you can to be the best paragon of those values as you can be. That's more important than any Manifesto or initiative or proclamation.

1:11:20 There are certainly things you can do that On the margins help foster. Those values a little bit further. Personally a few things we do that I think are unusual, we love are one is called State of the Spoon. It's twice a year. We have somewhat the equivalent of an Apple keynote, but it's just internal.

1:11:37 And Most of our teams Take turns on stage presenting. The most proud achievement and also failures and lessons learned of the past six months. What are planning for the future.

1:11:48 There is an element of comedy and self deprecation, which makes it I think quite entertaining. You laugh a lot. It's three four hours and at the end of it I I've my jaw is painful because I laugh too much. It's just fun. We organized all sorts of almost cabaret things. It's a great tradition and it just helps us. Be proud of the things we do, remember not to take ourselves too seriously, we're not saving lives. You meet an Learn about colleagues, you

1:12:10 maybe hadn't necessarily Another one we do is a yearly retreat where we bring everybody to a remote, exciting typically exotic destination for seven, eight, nine days. On the company's time and dime.

1:12:24 It's just a vacation, but with colleagues. The last one was trying to remember in which order but we went to Seychelles, Mauritius, the Dominican Republic, in the past we went to Japan, Australia. And everybody's there being together, making friends. It's expensive naturally, but We think it helps.

1:12:38 Establish A level of trust, bonds with colleagues, and ultimately a company is people. So if you bond with colleagues, you're bonding with the abstract concept of the company to an extent. It's not the same thing, it's not enough, but it's part of it. We believe that it pays dividends in terms of again willingness to sacrifice, to be honest.

1:12:56 About problems. To do your best. Why do you think there are not more bending spoons? It's kinda like asking why are there not more Berkshires, like there's only one buffet. Why do you think there haven't been more people that have taken advantage of this ecosystem, this huge TAM of companies that are more mature now that you can acquire that have installed user bases and low growth, lower growth? There's always a first. Private equity wasn't a thing until it was a thing and today you have trillions of dollars in private equity.

1:13:21 You could have done private equity before KKR did private equity. Nothing prevented you from doing private equity in the nineteen thirties. To my knowledge, nobody was doing private technology. So at some point someone come up comes up with an idea. It makes sense, it's efficient, it works. Others flock to compete. Sometimes that ruins the opportunity.

1:13:38 Regardless, you have a market. This may be the case, we'll see. I think we have to have a Far superior competitive advantages than a private equity because Essentially a private equity.

1:13:49 Every acquisition is almost a we start afresh, in a way. In our case, we do well because of the platform and the structure. It would take many years for someone to build the employer brand, the talent pool, the culture, the technologies to get to really compete. So I'm actually not which is also one of the reasons why you see me being pretty transparent about some of the principles I thought about it and I figured if I start it over

1:14:11 Knowing all I do which Someone else typically wouldn't at all bec also because What I say here, yeah, it's the tip of the iceberg, but then from there to actual day to day make it work. But even if I start it over with all I know. And even if someone said, Oh, I trust you do super well, here's a billion To get to where we are now, say twelve years after the foundation of Bandish Plus, it would take me maybe not twelve years, but easily seven or eight. Like it's a huge slog. You hire two people, you spend a year coaching them.

1:14:36 And then you hire four and they coach them and you help two. And you build the technology slowly, takes time to write software and polish it. Presumably more will try. I would say that's to be expected. I also think there are some things that are harder to do than other things. It's being painful.

1:14:51 Again, a private equity is very difficult. But if you're bright, you understand business Finding someone who will give you not a hundred billion dollars. That's the best of the best over decades, but enough that's That you can have a business and it's worth trying is not that difficult. There are so many private equity firms. And ultimately you just need to do well enough that you don't look bad, like you're around

1:15:11 average and many will die, but some even statistically will do well enough. The barriers to entry are low. I saw you have proliferation, out of proliferation of wannabes some will prove to be great, some will be great out of luck, and so again you have more competition but If you understand what you're doing, which is a prerequisite to even have a chance.

1:15:29 It's dauntingly painful. Many years. From the ground up. cultivating the little garden, there's no shortcut to it. So I think it's just not a model that When people see it.

1:15:38 A lot of people have known about it. for years as I've talked to investors. And I've seen nobody try'cause they just understand it's Just too painful. I have loved doing this with you. It's so fun to hear you be so transparent about what you've done to build this thing. It's such a unique business in a unique place. It's fun to do it here with you here in Milan.

1:15:56 When I do these interviews, I ask everyone the same traditional closing question, what is the kindest thing that anyone's ever done for you? When I was a little kid, I was almost pathologically shy to the point that I was let's say diagnosed with autism. I think the diagnosis was not necessarily particularly scientific, but that's to say I was so introverted and shy.

1:16:15 I spent years in elementary school talking to nobody pretty much. So I go to middle school in Italy with middle school between the age of ten and thirteen, I think. The first school year goes by and I've talked to essentially nobody in my class. Literally. And we're late in the year, I think it's probably May. We're on a school trip.

1:16:31 In the hills, just taking a stroll with our teacher and probably seeing some ruins or some Roman thing. Pretty common thing to do in Italy. Plenty of ruins. And all of a sudden to Classmates of mine Come over, just hug me and

1:16:44 And this is a time, there were the two Outgoing popular guys in the class. It's just talking to me and they on the bus they just drag me with them in in the back and we start singing and I'm terrified and happy at the same time'cause I did want to Socializes I just I didn't know how.

1:17:00 And they keep investing in this relationship for a long time and they were Ten or eleven. So Little kids. Until Months later I felt confident in myself and I had turned into a reasonably

1:17:10 Effective. social person. Like I could I'm not the most social, not the most outgoing, but you wouldn't tell that I had been almost pathologically shy. To the point that my mom Brought him to a doctor.

1:17:22 And I owe it to those two and what I learned during the third and last year of middle school was that One of them got mad at me for something Stupid like a girl, I don't know, kissed me, not him. Stupid thing, twelve years old. And it lasted five minutes, but in those five minutes he was furious and he told me, You remember two years ago When

1:17:40 Alberto and I Did this and that and helped you and involved you and got you out of your shell. We didn't do it because we thought you were cool, but because this teacher Told us that you needed help. And he needed to hurt me to say that.

1:17:53 Actually, I'd never felt more grateful in my life. 'Cause it's very difficult if you think about it for someone ten years old. Two Actually implement that request from a teacher. To go with the uncool guy.

1:18:05 Go through this log of months where the guy barely talks, inviting him. after classes to go to his place to play video games. They literally changed my life. It's probably the single thing that ever happened to me That I'm most grateful for. Incredible closing story. I absolutely love it. Thank you so much for your time. Thank you, Patrick, my pleasure.

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