Invest Like the Best with Patrick O'Shaughnessy
00:08:14 · Patrick O'Shaughnessy, Luca Ferrari
[00:08:14] S0: 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? And if so, why? Why did you care so much? Why not just go to California? [00:08:25] S2: It's difficult when you talk about the sense of purpose, what inspires you. I think we can try to rationalize 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 because we love learning, we love challenge. And I think the business arena is arguably the most competitive 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, Canada, The US, nobody cares. But if we build something remarkable from a country that doesn't see 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. It can create competencies locally that can have a positive effect. And so we just chose to do it that way. We don't regret it. There were very good arguments for us to maybe start in California for sure. That was a very reasonable point to make. [00:09:22] S0: You said this idea of test yourself. If you think back on Bending Spoons history, what was the first example of you really testing your own limits?
00:09:31 · Luca Ferrari
[00:09:31] S2: That happened constantly. At the very beginning, we actually had another startup called Evernote 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 Evernote. At the time with Evertail, we raised about €1,000,000 all in all and VC money and ultimately the company was about to go bankrupt. We had about €40,000 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, you were honest, worked as hard as anyone could demand of you. You keep the money. We'll sell our shares to you for a nominal €1 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, very low burn rate, very low, as low as it gets still. 40,000 you don't do much. Particularly as our vision was to acquire companies, CapEx intensive, at the beginning. You can't use debt because you are nobody and you don't have a track record of cash flow. And so we figured we need a source of cash to kickstart our acquisitive strategy. We figured certainly the easiest way is to just write software, build products for third parties. We are 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
00:11:05 · Patrick O'Shaughnessy, Luca Ferrari
[00:11:05] S0: To get some cash, yeah. [00:11:07] S2: Especially, our 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. We offer discounts, we're like, just hire us to do something. I swear to God, we couldn't get anybody, not a single soul hired us to do anything. The only contract we got was for about €10,000 from essentially a friend of one of my co founders who I think took PT on us and said, Yeah, we need an app for our small chain of burger places. We'll give you €10,000 to build it. So that was an after failure. I remember the stress levels with after working our ass off for three years on the startup which failed. Having this little money to try to make the dream come true and failing miserably at this sales effort, 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 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.
00:11:07 · Luca Ferrari, Patrick O'Shaughnessy
[00:11:07] S2: Especially, our 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. We offer discounts, we're like, just hire us to do something. I swear to God, we couldn't get anybody, not a single soul hired us to do anything. The only contract we got was for about €10,000 from essentially a friend of one of my co founders who I think took PT on us and said, Yeah, we need an app for our small chain of burger places. We'll give you €10,000 to build it. So that was an after failure. I remember the stress levels with after working our ass off for three years on the startup which failed. Having this little money to try to make the dream come true and failing miserably at this sales effort, 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 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. [00:12:29] S0: Didn't you have to get a job at McKinsey at some point to fund everybody else? The previous startup. Oh, okay.
00:12:34 · Luca Ferrari
[00:12:34] S2: Yeah, it's a cool store. At least I think it's cool. So we graduate two friends of mine, Francisco Mateo, who happened to be co founders of Bending Spoons too. And we have this idea of building this Evernote company. The idea was to create a self rising diary of a user's life with AI. This is 2010, so AI was... Nobody was talking about AI in 2010. And interestingly, you were very early on AI, too early in fact, because the product just didn't work well because you didn't have machine learning, at least not a way that you could scale for users. We had no money whatsoever because all of us essentially come from pretty low class families, whatever you want to call it. We didn't have 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 for rent. So we decided, okay, the three of us were going to look for a job. Whoever gets the most lucrative offer goes to work and pays for rent and food for the other two. Once we raise seed capital, VC 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, 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 lying. So I had to tell the partner at McKinsey that I would be working on the startup on the side. I thought it was unwise in many ways because I was absolutely certain they would withdraw the offer, but I'm like, I just can't. He feels dishonest. Actually he 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, I like a lot of gratitude and worked there for about a year, then we managed to raise initially €500,000, then another 500,000 later from a VC and I completed my project and I resigned.
00:14:18 · Patrick O'Shaughnessy, Luca Ferrari
[00:14:18] S0: 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 [00:14:24] S2: the There was no contract, nothing. Yeah. A 100% just trust. I don't know. I just think it's really a good way to live life. Sometimes you get some sour moments because of it, but it makes 99% of it so much more enjoyable if you don't have to be too transactional. [00:14:38] S0: Between Evertail and Bending Spoons, where did the insight come from to be an M and A driven acquirer of businesses rather than building them?