Prof G Markets
00:00:38 · Ed Elson
[00:00:38] S1: Hey, guys. It's Ed. Just so you know, we recorded this conversation live on Substack last week. So if you would like to catch the next livestream and tune in in real time, make sure to head over to profgmedia.com where you can subscribe, and I'll see you on the next livestream. Welcome to the Prof G Markets Founder Series. What do you do with a software company that was once a household name but has fallen on hard times? Our next guest has built a business around answering that question. His company acquires struggling businesses like Vimeo, like AOL, Airtable, and Eventbrite with the goal of overhauling how they operate, cutting costs, and making them profitable again. And over the summer, this company went public on the Nasdaq at a valuation of more than $18,000,000,000 with the stock jumping 40% on its first day of trading. That IPO turned what was once a relatively obscure Italian company into a public market story that investors around the world were suddenly paying attention to. So we wanted to understand how this model actually works, what the company does to turn struggling software businesses around, and what it's like to take this strategy from a private company to a public one. This is my conversation with Luca Ferrari, the co founder and CEO of Bending Spoons. Luca, thank you so much for joining us on this episode of the Prof G Markets Founder series. I'd like to start at the very beginning in 2013 where you're not actually in Italy. You're actually in Copenhagen. You're in Denmark, and that's where Bending Spoons begins. Tell us the origin story of this company.
00:02:29 · Luca Ferrari
[00:02:29] S2: Very few people know this, but I... With my co founders, almost the same people, we we launched startup in 2010, also in Copenhagen. It was... We used... We were using AI clearly too early to write... To automatically write diaries for people. And, you know, we did that for three years, raised a million dollars and failed miserably. I couldn't make it scale. Although I'm pretty proud of the product we built, but sometimes that's not enough. And so in the ashes of that company, we were left with about $40,000 The BC who had given us the money, basically sold their shares back to us for a nominal $1 and they apparently appreciated. We'd worked hard and being honest and they didn't wanna go through the liquidation process and we ended up liquidating the company ourselves and basically got those $40,000 out of it almost completely. And that was the seed capital for Bending Spoons. So that's 2013, again, Copenhagen. Moved the company to Italy about a year later, but that's where we were at the time. And strategy we're still running these days and the key insights behind it for the most part had originated from that failure. Obviously you get smarter in time, but most of it was in place back then.
00:03:45 · Ed Elson
[00:03:45] S1: So you had a tech company, you say an AI company, I would assume that they're calling it machine learning back then. I assume that there was not a lot of hype around that sector. That's obviously changed. It doesn't work. Then you have $40,000 left over, which you take out of that to start this other company called Bending Spoons. What actually was the idea behind Bending Spoons? And also, think people will probably wanna know what's with this name, Bending Spoons.
00:04:13 · Luca Ferrari
[00:04:13] S2: So over those first three years of that failed startup, we saw our skills in engineering, marketing, product design improved tremendously. Obviously we didn't feel we were anywhere near world class, but certainly much better. And so we thought, okay, we work on this skill set and other relevant skills and build our own tools, we should be able to get to world class levels at some point. And at the same time, saw that finding product market fit going from zero to one, so to say, seemed to require a lot of stars to align, because we met so many startup teams or people worked really hard and we thought they were brilliant and still couldn't make it work, and sometimes in other cases it did work. And so we figured we should be able to find people who are maybe tired of running a business, or or maybe they don't have the skills to go from one to 10, who will, you know, will sell to us. And if you're really, really good at doing this, we should be able to pay a price that's appealing to them and still be able to create enough value to generate strong returns and and be able to compound capital efficiently, basically. So those those were the relatively simplistic ideas we had back then. And because we knew we were gonna grow a vast, hopefully vast portfolio, diversified portfolio different products, we had to find a name for the company that wasn't related to the particular product. And so one of my co founders, Matteo, is a big fan of the movie, The Matrix. And I think he had watched it the night prior or something, and in the morning he came all excited and said, we should call the company Bending Spoons inspired by there is this scene in the movie of a little guy bending a spoon with his mind supposedly. And we liked it because it reminds us of, you know, the mind is powerful, if you set your mind to something, know, maybe you can do the seemingly seemingly impossible. So we just found it kinda inspirational. We like the idea of making a little bit of of fun of poking a bit of fun of ourselves, you know, and not taking ourselves too seriously. So that was also a cool name in our view and it stuck.
00:06:13 · Ed Elson
[00:06:13] S1: So we'll get to what you guys do today, which is you you are essentially buying a lot of these different software companies and we'll we'll get to that. But in the early days, my understanding is you guys are building tools, you're building software products, You're kind of like an app studio in the early days. Tell us a little bit about how... What you were actually building back then and how it eventually led to this seemingly slightly different business model where you're actually going out and and buying companies with money that, you know, now you have. But back then, I assume $40,000 is not much you can buy with that.
00:06:54 · Luca Ferrari
[00:06:54] S2: We've always acquired companies. The first acquisition happened very quickly, think. So we started Bending Spoons in the summer of twenty thirteen, the first acquisition was in 2014. I don't think from that point onward, there's ever been one year where less than 90% of our revenue came from businesses we had acquired. So I'm not sure where the studio thing comes from, but I think it's just that the first acquisition we did that people recognized was Evernote in 2023, so people just assumed that what we were doing before was launched from scratch, but nearly all we have done over the past thirteen years was acquire existing businesses, I'd like to think make them better, more successful. We have launched, occasionally we have launched products from scratch, more so in the early days because we had no money, and so you know, it was both the only thing we could do, but also it was more likely to move the needle at this point, know, we're at a run rate in terms of revenue of almost $4,000,000,000 it's more difficult to launch something that can, you know, reasonably move the needle. But the first acquisition happened, like I said, very early, and we paid $10,000 for it, so very small. But you know, the power of compounding is such that it turned 10 into 20, and then 20 into 40. Fast forward thirteen years, we are where we are. We actually had very modest injections of equity, mostly did, you know, other than the IPO a few months ago, we had a significant injection of equity, about a 0.25 of billion dollars in the end of... Toward the end of twenty twenty five. So really up to that point in time, most of the growth was through the reinvestment of our free cash flows and then debt, which we have used for almost ten years at this point.