00:24:46 · Katie Prescott, Luca Ferrari
[00:24:46] S10: And when it comes to that returns point, when do you get to the point of selling some of these companies? [00:24:52] S11: We never sell any company. So we are a perennial owner. [00:24:54] S10: So it makes you very different to a traditional private equity.
00:24:57 · Luca Ferrari
[00:24:57] S11: Oh, yeah. Completely. I think the only... The people have compared us to private equity before. I think the superficially understand private equity is generally funds. They buy companies through a fund and then they need to wind down the fund. They sell the companies, they return money to limited partners. You know, they've done a good job. They've made money and everybody's happy. We buy off our balance sheet. Everything is integrated super deeply in the same operating system. We don't sell. We make money because these businesses produce free cash flows. We can then, you know, hopefully those amount to more than we paid for the business in time. And then we can redeploy those cash flows toward new acquisitions and also making that engine that platform better. And also unlike private equities, just to kind of underline this difference, generally, precisely because private equities need to sell these businesses down the line, they need to keep them separate. Yeah. Otherwise, you can't sell them. We do the exact opposite, which is, again, complete integration technologically, so we couldn't really sell them. Or I mean, I guess we could, but it will be incredibly difficult. And also the team is so centralized that we either sell the business without a team, which would greatly narrow the set of possible buyers for obvious reasons, or we would have to sell the team with it, but that would break that bond of trust. Team members come on board believing they're part of Bending Spoons as a whole, not necessarily Evernote, although they pour their hearts and minds into making Evernote as good as possible while they're working it. And so we couldn't do that. We couldn't sell a team off with the business, I think.
00:26:15 · Katie Prescott, Luca Ferrari
[00:26:15] S10: Along those lines then, another criticism that often gets leveled at private equity is they take on too much debt. I think Bending Spoons, I saw a number from S and P, you're going have almost $6,000,000,000 of debt by the end of this year. When does that become too much, you [00:26:32] S11: So I think it's not so much the absolute number of dollars. What matters is how much debt you have relative to your projected free cash flows. And we think we have kept very prudent levels of debt. Our guiding principle there is that we want to be in a position to pay back all of our debt before it matures. So we have kept a leverage ratio between two and three times run rate profitability. In fact, if I have to look at what we hear from investors by far investors have suggested that we should raise more debt, not less debt. And of course they don't want us to go bankrupt for obvious reasons. So we have tried to keep a prudent level of debt, but using no debt whatsoever would be suboptimal because with that you can, you can grow faster. So it's always a trade off between how much risk are you willing to take? Hopefully very little, but more than zero, no doubt, in exchange for a faster growth. But they they can never be zero. The moment you have $1 in debt, there's a little bit of risk if you don't pay it off.
00:26:32 · Luca Ferrari, Katie Prescott
[00:26:32] S11: So I think it's not so much the absolute number of dollars. What matters is how much debt you have relative to your projected free cash flows. And we think we have kept very prudent levels of debt. Our guiding principle there is that we want to be in a position to pay back all of our debt before it matures. So we have kept a leverage ratio between two and three times run rate profitability. In fact, if I have to look at what we hear from investors by far investors have suggested that we should raise more debt, not less debt. And of course they don't want us to go bankrupt for obvious reasons. So we have tried to keep a prudent level of debt, but using no debt whatsoever would be suboptimal because with that you can, you can grow faster. So it's always a trade off between how much risk are you willing to take? Hopefully very little, but more than zero, no doubt, in exchange for a faster growth. But they they can never be zero. The moment you have $1 in debt, there's a little bit of risk if you don't pay it off. [00:27:33] S10: Before we finish, I'm really interested in in going back to how you got into the tech world in the first place. Because you grew up in a small village outside Verona. Your parents were hairdressers. They're not techy people. You didn't come from a family of very academic people. And yet here you find yourself running, you know, US listed billion dollar firm. Like, what do you think pulled you into the world of tech and engineering? [00:28:00] S11: That's very difficult to know. [00:28:02] S10: And they must be very proud of you.
00:28:03 · Luca Ferrari
[00:28:03] S11: I hope so. I don't know. I mean, I... I'm certainly proud of them. I owe them a lot. I think I think having supportive parents must be quite important. I always loved the idea of building something ambitious. That's very clear to me, especially in hindsight when I look back at me as a kid when I was very little, probably six or seven, I spent several months basically coming up and codifying an imaginary country shaped like Australia. I had hundreds, at least hundreds of pages filled with drawings and text describing institutions, infrastructure, even sports leagues, striving for perfection. I really enjoyed the idea of making things really as good as they could be. But obviously, yes, growing up in the countryside, you know, farmers, plumbers, truck drivers, I didn't even know what being an entrepreneur meant, really. So you sometimes lack the tools, the mental models to understand how to make that passion or ambition concrete. Later, when I went to university, got some scholarships and whatnot. And I met people, including one of my co founders who had much broader horizons than I did. And I remember that at some point, one of these people mentioned something that, that read on, on TechCrunch, you know, this tech blog. And I went online and I spent an hour just reading through a bunch of articles and it was love at first sight, not with TechCrunch, but with the stories that we're telling. I thought, okay, this may be my path. Was eye opening. Then it was kind of natural from there this determination to build something we could be proud of and through which we could learn a lot, you know, in the process. And then as I studied engineering in general, I love the, the problem solving, the, let's say the logical analytical process, which is necessary to build great technology, but in general to, to solve business problems. I'm more of an abstract thinker, I think, than than the typical tinker.
00:29:57 · Katie Prescott, Luca Ferrari, Danny Fortson
[00:29:57] S10: So reading those tech crunch stories of people who'd who'd built businesses and created something. [00:30:02] S11: Yeah. Exactly. So they really clicked for me. I had this ambition of building something exciting, ambitious that would teach me a lot, but I didn't really know what that would look like. So it gave me a very concrete avenue to implement those ambitions. And I think I had it before. But once I saw it, it was... It clicked immediately. Again, love at first sight pretty much. [00:30:23] S10: Thank you. Thanks so much for coming in today. [00:30:25] S11: Thank you for having me. [00:30:28] S10: That was a really enjoyable conversation. [00:30:30] S9: I'm sold on on Bending Spoons. I'm a I'm a starving because [00:30:34] S10: of the name? What do you think? Hugging Face or Bending Spoons? What's your favorite? [00:30:37] S9: That's a close run thing. I'm just trying to think of what other old school Internet companies that, like, I could maybe, you know, zhuzh, as you say. [00:30:45] S10: He says there are so many. I mean, their perspective says there are at least at least a thousand that they could get their mitts on. And they're not flogging them. [00:30:52] S9: I love that.