00:01:57 · S1, Luca Ferrari
[00:01:57] S1: So how did you pick that one? What was the process? [00:02:02] S0: Well, pick each other when it comes to acquisitions because it's something that has to be bidirectional. We look at a lot of companies, I would say actively, we may look at hundreds of companies in any one year and then we try to establish a dialogue with dozens where we see the best match. And if, you know, some of these are interested in selling, then the conversation can progress. We look for businesses where we believe we can bring a lot of value. We are a very active acquirer. And so for us to be absolutely confident we can offer a kick ass price while delivering strong returns for our shareholders, we need to be able to bring a lot of value, whether it's by improving the product or the technology or monetization, the organization, ideally, all of these. So that's a key criteria. And then we look for businesses that we believe can, you know, whose trajectory we can predict with confidence multiple years into the future. Otherwise it's difficult to underwrite big investments. And it's typically been digital businesses. So we've done consumer internet, SaaS. These are the key areas for us. We also did recently we acquired a hardware company called Tractive in spring, which is very interesting, pet tracking and also help monitoring for pets. Pet industry is booming. So that was a very nice acquisition, a little bit outside of our usual comfort zone.
00:02:02 · Luca Ferrari, S1
[00:02:02] S0: Well, pick each other when it comes to acquisitions because it's something that has to be bidirectional. We look at a lot of companies, I would say actively, we may look at hundreds of companies in any one year and then we try to establish a dialogue with dozens where we see the best match. And if, you know, some of these are interested in selling, then the conversation can progress. We look for businesses where we believe we can bring a lot of value. We are a very active acquirer. And so for us to be absolutely confident we can offer a kick ass price while delivering strong returns for our shareholders, we need to be able to bring a lot of value, whether it's by improving the product or the technology or monetization, the organization, ideally, all of these. So that's a key criteria. And then we look for businesses that we believe can, you know, whose trajectory we can predict with confidence multiple years into the future. Otherwise it's difficult to underwrite big investments. And it's typically been digital businesses. So we've done consumer internet, SaaS. These are the key areas for us. We also did recently we acquired a hardware company called Tractive in spring, which is very interesting, pet tracking and also help monitoring for pets. Pet industry is booming. So that was a very nice acquisition, a little bit outside of our usual comfort zone. [00:03:41] S1: Because the Airtable acquisition kind of set SF, Silicon Valley, American Tech into a bit of hysteria, what do you think they get wrong about technology companies or managing them?
00:03:58 · Luca Ferrari
[00:03:58] S0: I mean, not a lot, clearly. Silicon Valley has built, I don't know, 70% of the most successful technology businesses of the past twenty five to fifty years. So I think Silicon Valley gets almost everything right. I believe we have been able to do well acquiring a tiny fraction of the businesses that have come out of Silicon Valley because we bring something different and new to the table in both the way we're structured and the platform we've built. That's for the most part unavailable to these businesses on a standalone basis. So for people who don't know Bending Spoons very well, unlike most serial acquirers out there, most serial acquirers out there will either buy a business because they think it's physically good as it is and they can't really improve it, but the price is low enough that they can get good returns and then they'll basically leave it alone. And that model can work. I don't think it will ever give you exceptional returns, but it can deliver reliable, potentially appealing returns if you're very good at picking businesses that are slightly undervalued. Others are more active, but they will still keep these businesses separate as, as they were before. But they, you know, these acquirers may have an opinion on how to price the product or how to build the organ. So they will go in and make changes. We are even more extreme on the being active end of the spectrum and we integrate all of these businesses together quite tightly. So we have built over the past decade and operating system of over 50 proprietary technologies to take care of almost everything you need to run a digital business, whether it's a, you know, data storage and processing, AB testing, payment management, the, you know, everything related to recruiting, credentials management, the orchestration for all the AI models using operations and so on and so forth. And so we buy these companies and then we, it's almost like we install them on this shared operating system so they can be much more efficient. And also we have a core team of, for R and D marketing at this point approaching a thousand people. We can deploy very fluidly and rapidly across these various businesses to go after R and D opportunities. And when the R and D opportunities are not as exciting any longer, we can take out the talent and move it elsewhere. So we stay very efficient.
00:06:31 · Luca Ferrari, S1
So these are aspects that I believe none of the teams running these companies on a standalone basis really could, could, could access. And so it's not that a lot of the value we create is because other people are, are, myopic, they're doing the best they can with the resources available to them. But I do think we bring also something extra in terms of culture. We have developed a culture of extreme rationality, almost a scientific approach to running businesses whereby we are not afraid of making unpopular choices when we believe it's for the benefit of the business in the long run. So we tend to run these businesses very leanly using data extensively. Sometimes joke about taking more established companies and bringing them back to startup mode, small team, very talented teams, removing red tape, giving these people plenty of room to maneuver, to experiment, to move fast. And we have found that that generally delivers a lot of value for customers and for the business. [00:07:35] S1: So I think one of the big misconceptions with the types of companies that you acquire is that they're graveyard kind of companies, they're old brands, they're not new, maybe they're distressed assets, that kind of thing. What is wrong about that?
00:07:50 · Luca Ferrari
[00:07:50] S0: Oh, I think it's just the, I think people just try to frame things in a way that will get clicks. But I'll give you a stat. We have 500,000,000 monthly active users. I mean, that's a lot short of being, you know, Google or Meta, you know, many company. If half a billion people using these products every month is a graveyard, then sure, let's call it that. These are, they're, they're often there may be, they may not be like the up and coming sexy thing, but it doesn't mean they're not incredibly useful, important. You could see this at its very peak with AOL, which by of course, AOL is a quote unquote old brand and company, doubt about it. It's been around for what, like forty years, something like that. However, to this day AOL is used as a, especially as an email inbox by tens of millions of people. For many, it's their primary email inbox. It's the best of our knowledge, it's the fifth most used email provider in the Western world. You could imagine that, you know, the four above it. And so, and at the same time, will see if you go to, you know, the online media, you will find so many over the past five or ten years, many email startups, which people who don't actually have the data will assume are far more relevant just because they got more coverage and they sound a lot sexier. But really, you look at the data, these in aggregate, these don't probably adapt to even 5% of what AOL means in terms of emails sent, received activity, people who rely on it. So we just, we don't care too much about being cool. I say we probably don't care at all about being cool. We care about being good at our jobs and creating value. So if we find a business that's slightly perceived as slightly less cool, if anything, that's a good thing for us because it means it's probably also going to be priced a little bit more accessibly. It is what it is.
00:09:55 · S1
[00:09:55] S1: Yeah, so I think I was trying to ask this question earlier, but I might've asked it wrong. Silicon Valley is so tied to funding for growth versus actual business for growth. And so for some of the other email companies you might be talking about, they might not have many users, but they're the hottest, highest flying funded by every VC kind of company out there. And even with the Airtable acquisition, kind of broke people's brains. And there was a bit of hysteria because that was seen as the golden child or at least one of the golden child of the brands in Silicon Valley. And so if that's the exit that they're taking and we're at a bifurcation with AI, what does that mean for all the other companies out there? And we've gone through different kinds of cycles with these tech companies over the years. I think the last one was the reckoning of twenty twenty one-twenty two. There was a lot of overfunded companies that then kind of were zombies. But I guess the question I'm trying to get at is what are the core characteristics that you look for in acquisitions and how does that differ from this stereotypical culture of SF?