The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:04:01 · Harry Stebbings, Luca Ferrari
[00:04:01] S1: I would have been described as weird too. Guys, did you feel like an outsider when you were growing up? I I didn't have many friends at school, and it shaped a lot of how I do what I do. [00:04:09] S0: Yeah. Probably. I really wanted to to make friends I couldn't for the first probably ten or twelve years of my life. I have major struggles socially. Not I'm incredibly well versed with socializing these days, but I have definitely proved a lot. I guess you could say an outsider. But an outsider who wanted to be an insider. Was an outsider because he was incompetent at being part of people's groups. [00:04:37] S1: Sorry for this weird tangent. Would you say you've become an insider or you just accepted being an outsider? [00:04:43] S0: No. I think I I have different phases. So I was by, you know, your definition of trolling outsider initially who really wanted to be an insider. Then I became, you know, kind of average, so make it an insider. Like, I started having friends and being invited to doing things with others. And then, as I grew older, particularly the last five or six years, I think I've become a little bit more of an outsider again because I find my bandwidth and my patience have become more limited or perhaps have been tested more aggressively. And so I learned to build more walls and more protections.
00:04:43 · Luca Ferrari, Harry Stebbings
[00:04:43] S0: No. I think I I have different phases. So I was by, you know, your definition of trolling outsider initially who really wanted to be an insider. Then I became, you know, kind of average, so make it an insider. Like, I started having friends and being invited to doing things with others. And then, as I grew older, particularly the last five or six years, I think I've become a little bit more of an outsider again because I find my bandwidth and my patience have become more limited or perhaps have been tested more aggressively. And so I learned to build more walls and more protections. [00:05:18] S1: One of your friends told me one of your points for improvement could be a willingness to accept more dinners and social events. So maybe they were maybe they were onto something. I would love to start. I I heard that you were at McKinsey, and you were essentially sharing your salary with your cofounders to fund the early days of Bending Spoons. Can you just take me to that and those early days of Bending Spoons? Tell me a little bit about that. [00:05:41] S0: That's almost true, but I would say it wasn't Bending Spoons. It was another company called Evernote, which I founded before founding Bending Spoons. It only lasted for about two and a half years. So that was a failed startup. Pretty, you know, by the book failure. And I had two co founders there, and all three of us also, you know, founded Bending Spoons plus two other people.
00:05:41 · Luca Ferrari, Harry Stebbings
[00:05:41] S0: That's almost true, but I would say it wasn't Bending Spoons. It was another company called Evernote, which I founded before founding Bending Spoons. It only lasted for about two and a half years. So that was a failed startup. Pretty, you know, by the book failure. And I had two co founders there, and all three of us also, you know, founded Bending Spoons plus two other people. [00:06:01] S1: Well, I didn't know that. What did you learn from the failing of that company? I think we learn a lot from failings. What did you learn from that failing? [00:06:08] S0: Well, many things. I would probably say two in particular. One is the importance of building a good team. At the time, we were quite naive and superficial in that regard. And the second one was to be very thoughtful as to what you build or more broadly what you do and why. We had this idea and we just thought we were right and arrogantly got into execution mode and of course, we crashed and burned. And, you know, you can still crash and burn even if you're thoughtful, but your odds are better. So I would say we learned to do our homework a lot more and iterate more and faster. [00:06:43] S1: How did Bending Spoons come to be then? So this company failed, and the three of you went and go, what now?
00:06:48 · Luca Ferrari
[00:06:48] S0: Yeah. So connecting to your previous question, so the three of us, we started it, we didn't have any money, we had this agreement whereby we... All all three of us would look for a job, and then whoever got the most lucrative job would work and pay for food and rent, and the others would work full time and then once we we get an investment or some sort of ability to do without the financing from the person working, you know, that this person would join full time. So I I ended up getting this offer from McKinsey. I told them before accepting that, you know, or as I accepted that I meant to work and start up part time and then resign as soon as we hopefully got this investment and they... I thought it would kick me in the in the ass and tell me to go away, but they were great actually. They told me this is awesome and we love the ambition and this works for us. And so, I worked there for about a year, I think a year and three months give or take. And then I was working nights and weekends in my vacation also on Evertail. I like to joke that once I joined full time, made it fail very quickly. We immediately pretty much started Bending Spoons on the ashes of of that startup. Can I ask, what was the insight with Bending Spoons? It was a straight off transition to founding Bending Spoons. What did you believe? What did you see? What was that opportunity set? With Evertail, we went the usual path. You have an idea for a product. You focus on building that. You hope it finds a fit with the market. It grows, and you're successful, and the rest follows. We took the opposite direction, as in we focused on building a platform of technologies, know how, company culture, employer brand, fully optimized, not for launching a product or specifically a technology product, but acquiring a product that has shown fit with the market, but where we feel there is some, you know, substantial untapped potential and then we work to try to unlock that additional potential. So that's a very different approach. We let others seek product market fit, and then we... If they will sell it to us, we will acquire their company and try to make it even better than they they have made it up to that point.
00:08:48 · Luca Ferrari, Harry Stebbings
The reason why we we took that route, think, is precisely because we crashed and burnt by being arrogant in thinking we knew what the market would want and we could build it for them. And it turned out we were wrong, and so we we decided to see whether a different direction was more efficient for us. [00:09:04] S1: Can I ask a weird question, which is how do you determine what has product market fit or enough signal to be interesting? Because things can be volatile, things can be transient short term. How do you determine whether an asset has enough signal to be interesting to partner with? [00:09:20] S0: The assessment process is fairly sophisticated, but, you know, the very simple way of summarizing it is to say we like user base, a customer base, a recognizable brand, or good positioning in a distribution channel. What was the first product? And how did you acquire [00:09:37] S1: it given you didn't have funding or money?
00:09:39 · Luca Ferrari
[00:09:39] S0: The company, we founded it with around $40,000, which was the leftover capital from Evertail. And then the Venture Capital firm at the time preferred to sell their... The money would have been theirs because they had liquidation preferences, it's pretty typical for a VC deal. And for them, it was more of the hassle of going through the liquidation process for $40,000 and paying low... For lawyers and all that. And so they sold their shares to us for, I don't know, a euro, I think, or something. And then we liquidated Evernote, and then we founded with a different group of people, as I mentioned, the same three founders plus two employees we had at Evernote. We founded Bending Spoons. The first product wasn't wasn't... And I think the first two or three were not, were very simple apps. The first one I remember because I coded it myself with one of my co founder co founders. I think it was called Fontsy. It was a very basic fonts app. We built it in like a few days and, you know, neither of us was an expert software engineer. So long story short, I think we made around 10,000 in all time revenues from that particular app. Launched another one or two, maybe one slightly more successful, maybe made a $100,000 from it. But soon enough, we made our first acquisition, I think early twenty fourteen. So we're talking maybe six or seven months into the startup at the time. It was for a keyboard app, paid $15,000 for it, and we managed to make it grow a little bit. And then we invested the proceeds into building team and learning few more things and building some in house tools. Bought a new a new, you know, high potential larger app. Rinse and repeat, compounding all those things over a decade now. I mean, we're going for eleven years in a few months. We've gotten to a much bigger scale.