02:29:40 · Luca Ferrari
[02:29:40] S5: I think your your point stands. I mean, but Sure. Just to for accuracy sake. Yeah. Yeah. Well, I I think it's very difficult, perhaps impossible to do if you are, again, a private equity and you have a small investment team. Mhmm. In our case, we will add a task force that's sized in relation to the size of the organization we're trying to study. And so if we acquire a 1,000 person company, we'll probably have, say, 50 people. Okay. If it's a 100 person company, maybe as few as 10. Mhmm. And then over the course of couple of months, you know, we will split the work so everyone is in charge of understanding a piece of the organization that's not not too big for like, the right size for them and and specific to their capabilities and expertise. So if there is a more technical part of maybe an engineer, if it's something has to do with design or marketing, you know, and so on and so forth. And then those people will be talking to each individual in in that part of the organization multiple times. They will be looking at the code base. They'll be contributing on ongoing projects. So we take our time to learn. I mean, was about to say everything there is to know. Of course, that's not entirely true. Like, you don't learn everything in two months. True truly learn the vast majority of what matters. And only then do we come up with the say a a new vision for the company, a new road map, the a new design for the updated organization. It is extremely time consuming and only feasible you have if you have a large, call it corporate staff of of experts, like in our case, only only then can you do it at scale. Otherwise, yeah, you couldn't. I agree.
02:31:17 · Jordi Hays
[02:31:17] S1: Yeah. What how how much is, I'm assuming when you're thinking evaluating potential acquisition, you're thinking how much can this company benefit from AI and what is kind of the AI disruption risk? Oftentimes, it could be both. I can I can, you know, imagine with AOL, you're saying, like, better content recommendation that you could roll out maybe with with less resources invested? But at the same time, there's risk of new companies entering the market. But what's your any framework that you're using to evaluate what companies are going to do well? Because nightmare scenario is you buy a great business today, and that becomes less relevant. But there's also think Silicon Valley also maybe again, going back to my earlier point around durability. There's companies that have been disrupted multiple times that can still continue to produce cash flow, but I'm I'm curious what your framework is.
02:32:18 · Luca Ferrari
[02:32:18] S5: Yeah. So I think there's I believe you can come up with plausible visions for the future. I mentioned earlier, we were working with AI in 2010 where I I I didn't know a single other person who was interested in AI back then. So, I mean, I'm sure there were many in the world, but it was not mainstream. So, you know, we did have a big vision for AI in the long in the long run. It turned out to be way too early, maybe a decade or more. So I'm I'm I'm a big believer in, yes, you wanna have a vision for the future, but at the same time, if you think you know what's gonna happen and especially over what timeline, you're very likely to be disappointed. So I would never wanna bet our future on those sort of assessments. What we try to do is evaluate whether a company is more or less likely to be disrupted and, of course, also enhanced through AI, and that that's basically a qualitative assessment. We try to embed that in our acquisition thesis, but also we all always need a a contingency plan in case there is a very aggressive rapid disruption. So we need to make sure that we have ways to get back our investment in case we end up in that or most of our investment in if we end up in that scenario. So you some businesses are structured in a way that if things don't go well, you you may be able to trade long term health for short term returns and at least salvage your investment overall. I mean, it's not gonna be a stellar investment, but still the breakeven. So we we try to have a an escape route just in case things don't turn out the way we we think it will. And of course, the fact that we're so diversified, the biggest business we own contributes about 15% to our revenue, and they are across many different segments. We are massively less exposed to sort of disruption than any company running a just one product, no matter how successful that one product may be today.
02:34:10 · Jordi Hays, Luca Ferrari, John Coogan
[02:34:10] S1: Yeah. Makes sense. Any any plans to create a Neo Cloud or anything of the sort? Or you guys like staying at the product level? [02:34:20] S5: No. No such plans for for none. [02:34:24] S0: What's the Italian early [02:34:28] S1: I stage wanna dig I I wanna dig into that a bit more just just out of curiosity because I'm I'm I'm assuming there's a lot of different players that would love to give you guys capital to help deploy, cloud given that you're running a lot of, you know, companies that are gonna be, buyers of of compute and you have a track record of being able to deploy large amounts of capital, is the decision to you like you the strategy is you're you're invested in a bunch of different companies, but do you like them to be the same kinds of companies? And that, like, again, is it just a mandate around digital products? Or would you one day branch out? Because again, if you use the Berkshire Hathaway comp, it's like you've seen them buy everything from Coca Cola to Google. Right? And operate a bunch of different businesses.
02:35:16 · Luca Ferrari, Jordi Hays
[02:35:16] S5: Yeah. Look, I I think there's a trade off between let's say there is a meet you know, going back to Warren Buffett, a circle of competence, as he calls it, where you you're proven you're good or very good, better than most. And so on the one hand, if you stay within that circle of competence, you're more likely to do well. But at the same time, if you venture outside of it, you extend your toolkit, your capabilities, and the TAM grows with it too. So there is a trade off between expanding that circle over time while seizing the opportunity at hand with what's already have proven that works. In our case, we'll we'll be next year will probably be at about 2,500,000,000.0 in revenue. And the overall the overall digital technology market is about $2,000,000,000,000. Yeah. So it's not exactly we're saturating the opportunity here. So before we get into something we know very little about other than on a high level, I I I think we should make sure that we are accelerating the core opportunity. But, yeah, maybe in five or ten years, if we ever feel that we're getting too big for for the TAM, maybe we'll look beyond that. We'll we'll know what will be appealing then. [02:36:33] S1: Do you think it's funny that the The US venture capital ecosystem is somewhat like off balance sheet r and d for you guys? It's like they can deploy a bunch of capital into these categories, create good products like Evernote, then you guys can come in and and, own them for the long term?
02:36:33 · Jordi Hays, Luca Ferrari, Stacy Rasgon, John Coogan, John Tennant
[02:36:33] S1: Do you think it's funny that the The US venture capital ecosystem is somewhat like off balance sheet r and d for you guys? It's like they can deploy a bunch of capital into these categories, create good products like Evernote, then you guys can come in and and, own them for the long term? [02:36:53] S5: Look. We when it comes to acquisitions, we're opportunistic. I don't you know, whatever the market offers, if we think we can deliver great returns, we'll be happy to buy it regardless of the particular history. Usually, I don't know. I don't have a other gratitude or any particular opinion on on that. Know, VCs have many have done really well. I guess it's normal that at least in some cases, their investment didn't turn out to be the [02:37:19] S1: Yeah. [02:37:19] S5: Exceptional success that could have been. [02:37:22] S6: Well, in [02:37:22] S0: many cases, some of [02:37:22] S4: those firms [02:37:23] S0: have IPO ed, and, you know, delivered a bunch of returns for the LPs in the venture fund. Yep. I I am interested in now you you've you've acquired Evernote's probably a good example. Yeah. But any any example of acquiring a company that's already publicly traded, how does that work? How how do you work through those that process? Are you going directly to the board? Like, are there are there best practices around, like, when a company or or a group of shareholders might be more receptive to a to a takeover? Or or do you see yourself ever getting into more of like a hostile takeover scenario? Does that does that does that matter to your strategy?