20VC: Bending Spoons: The Most Untold Success Story in Startups: Lessons Scaling to 500M Downloads, $360M in Reported 2023 Sales and a $2.55BN Valuation... Bootstrapped with Luca Ferrari, Co-Founder and CEO @ Bending Spoons

Bending Spoons buys apps with users and rebuilds them

Bending Spoons has grown to over 500m downloads by buying apps that already have users and rebuilding them, instead of searching for product-market fit itself. Earnings and debt pay for the deals, which keeps control with the founders. The main risk is forecasting user acquisition, and Ferrari admits the company has never priced a deal correctly.

Takeaways

• Buy products with users, then rebuild them. Rather than hunt for product-market fit, the company buys apps that already have users and brands, then rebuilds the software, architecture, marketing and monetisation. It holds them forever, has never sold a significant asset, and values deals by discounting free cash flows.
• A tech company with a private equity arm. About 400 staff work there, at least 300 of them engineers and product staff. A capital-allocation side resembling private equity handles deals, and cash is managed at the top company level.
• Growth was funded by earnings and debt. Ferrari doubted Italy offered appealing terms, and the business was cash flow positive early. Roughly $200m of equity was raised in the past ten months, yet most funding came from earnings and debt. No liquidation preferences exist, so employees share economics equally.
• User acquisition is the hardest number to forecast. Ferrari says the company has never priced a deal correctly and has erred in both directions, once projecting acquisition too optimistically for a large app whose underlying drivers were waning. His lesson is to build a large margin of safety.
• Playyond's failure taught intellectual humility. The Netflix-style mobile game subscription app cost about $6 to $7m before it was shut down. Ferrari says Apple Arcade did not cause the failure, and concludes the team should stay humble about new products.
• Hire for talent and motivation, not experience. Ferrari hires mainly for talent and motivation. Traditional interviews predict poorly, so candidates take practical tests that simulate the job. He calls giving too much weight to experience the company's biggest hiring mistake.
• Ferrari wants resources aimed at positive impact. Ferrari's long-term goal is to use Bending Spoons' resources to make a positive difference, citing the Gates Foundation's work on polio. He also believes AI will eliminate more jobs than it creates.

How Bending Spoons began

1. Ferrari's first startup lasted about two and a half years and failed. He says the team was naive about building a team and arrogantly built a product without testing the market.
2. The cofounders agreed that one would take a job and fund the others. Ferrari joined McKinsey for about fifteen months while working nights on the new company.