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?
00:11:10 · Luca Ferrari
[00:11:10] S0: So I think there's a lot of, there's a lot to unpack here. There's number one, there's a lot of, of, of value in, in that, you know, model, that, that relies on generous funding early. Many, many amazing companies have come to exist often from Silicon Valley because precisely because of that abundant availability of capital, plenty of companies you could probably not take off the ground at all without that. Even once they are well off the ground and generating substantial revenue, there's often a very good, you know, it's often wise to inject more capital in them so they can grow faster, get to a position of greater market power, whether it's scale economies, network economies, brand. So again, I think that model overall has been incredibly effective. I believe there's no doubt that if you look at the overall capital that's been deployed in Silicon Valley by Silicon Valley into technology over the past many decades, and the real tangible non hyped business value of the companies that came out of that, the ROI is excellent in general. It doesn't mean it's, you know, every investment decision is perfect, so I don't think that the fact that Bending Spoons is doing well should, should in any way undermine that model. I think it's a great model. And I, and, but, but like everything, especially in, you know, when, when there are sometimes perverse incentives involved, there will be cycles of excess. And so yes, in 2021, I think valuations were out of whack completely, but you know, when investors are ultimately incentivized by managing as much capital as possible as opposed to actually delivering strong returns and when returns are primarily delivered through exits, where all that matters is the multiple, not actually the cash that the business will generate in the long run, at least not, it's not the primary reason why you get a certain price, then you will get hype cycles and stuff like that. But I think there are overall, when I look at Silicon Valley and its investment philosophy over, you know, the past many decades, I would say that's a relatively small price to pay for a model that overall has been incredibly successful. Airtable specifically, I think deserves a lot of credit because yes, their valuation was very high in 2021. You know, that's not anybody's fault.
00:13:41 · Luca Ferrari
If anything, it's mostly, if we agree that that was perhaps excessive, think most people would, but the business was great. It just was too much. And that was not true of Veritable alone, but pretty much every business. If if any... Anybody made a mistake there was the investor, certainly not the company. As a company, you will try to take capital at the best valuation you can. That's the responsible thing to do for your shareholders. And if anything, how we and the team were incredibly disciplined. They actually didn't raise all that much money. They could have raised more, and they they stayed profitable and burned to very little of that money, if any. And in fact, if you look at the acquisition price, you know, the enterprise value was approximately $1,300,000,000 but then they still had plenty of that cash on balance sheet. So investors ultimately got back approximately all the money they had put in plus more. And the valuation at which Airtable exited was very much in line with the SaaS businesses of comparable quality on the public markets. So they got a very reasonable deal in my view, obviously I'm biased, but I believe that to be true. So there's a lot of good there. I think our table has done a very good job and, but yes, the internet will have to debate and when, when you go from being perceived as the ultimate winner and the poster child of success to an exit that would be considered amazing by almost any measure, I mean, a billion dollars, how many companies are started that ultimately exit at over a billion dollars? We have one in a thousand. I don't know the stats, but it must be very, very few.
00:15:30 · S1, Luca Ferrari
[00:15:30] S1: People forget how hard it is to get to a billion dollars. It's crazy. And a $100,000,000,000, let alone this whole trillion dollar company thing is is really disorienting. [00:15:39] S0: It is. Exactly. There's been literally a handful in the history of humanity at that scale. But... So a billion dollars plus is unbelievable. It's definitely and it's achieved based on real economics, plenty of revenue, real customers, real growth, excellent brand. So I really applaud Airtable, Howie and everybody there. So I think the business model for Silicon Valley overall makes sense and funding a company early, even at a loss makes sense, but it doesn't mean that things couldn't be done better. I'm sure sometimes there's too much enthusiasm, pouring money into businesses that don't make sense, or too much money in businesses that do make sense, but should use less. [00:16:17] S1: So what are the key characteristics that you look for when you're acquiring companies? Yeah, so basically
00:16:17 · S1, Luca Ferrari
[00:16:17] S1: So what are the key characteristics that you look for when you're acquiring companies? Yeah, so basically [00:16:25] S0: the most important thing is that we can predict where our business is going. We buy to hold and operate forever, not to sell three or five years down the line. And so we need to feel comfortable with our investment, with a long term view. We prefer businesses that are robust and maybe growing. We're not opposed to buying businesses that are shrinking. We have done that before, but we need to know how much they're shrinking. We need to be able to plot out their trajectory at least five years, a little more into the future. So that's a non negotiable. And then I would say the second most important thing is that we need to be convinced that we'll be able to add a lot of value to that business, essentially improve revenue, lower costs, certainly both through technology, product, talent. Otherwise, we are unlikely to be able to offer a price that's appealing to sellers while at the same time delivering very high returns for ourselves and our shareholders. [00:17:25] S1: Because there's a proliferation now of all these AI application companies that are dependent on token spend and lots of tokens, they're somewhat... Sometimes negative gross margins. Would those at all be of interest for you guys? Like where do you see those companies getting acquired or exiting?