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?
00:17:44 · Luca Ferrari
[00:17:44] S0: I think we use AI as much as anybody. As far as I can tell, we're probably in the ninety ninth percentile by aggressive deployment of AI in our operations to improve our products, we have developed a lot of technologies powered by AI internally. So I'm very bullish on AI overall also concerned, it doesn't mean I'm bullish about all or even most of the startups that are coming up. I'm pretty sure that some of the most valuable companies of all time, sustainably valuable companies of all time will be coming out of these broader cohort of businesses. Businesses built over the last, let's say five years with AI the center of the thesis, but I'm equally confident that most of these companies will fail or at least basically fade away because everybody it's a gold rush. When you see people raising massive amounts of money at billion dollar valuations with pretty much nothing other than any idea, maybe a good track record in academia or elsewhere, anybody who's half credible because they were a great student or they did well at a big company, was not too worried about their reputation. We'll just run and try to raise money because you know, what do you have to lose other than your credibility and reputation? So a lot of this is just fluff, but there is real substance here and there. Have been as many as from side, right now we're not considering acquiring any of these companies. I think we, I said earlier, key criteria for us is being able to predict how things will go in the medium to long run. And it's very difficult to know, not just because some of these businesses are up and coming, growing super fast and when something is growing a 100% a year, it's very difficult and you only have one or two years of history. It's very difficult to know whether there'll be growing at a 100 in three years or at 12% in three years, and that changes everything. So plus valuations are very high, often irrationally high. So we don't think we can compete there and deliver good returns for our shareholders. You know, but, maybe later down the line, when the market is a little bit more mature, we'll look again and find something interesting.
00:20:07 · S1
[00:20:07] S1: Well, I want to go into your centralized platform because you guys, to your point use AI a lot, it's core to the business. I think 95% of your code is AI. It's written by AI. So can you walk me through the centralized platform, how you built that out and kind of, I mean, you made various different types of acquisitions from Evernote to AOL to Vimeo.