Prof G Markets
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.
00:08:39 · Ed Elson
[00:08:39] S1: So tell us a little bit about that first acquisition. How did you identify this company that was worth $10,000 same amount of money that a lot of people would pay for a car? And what did you do with this company to turn it around? What was... What were you bringing to the table?
00:08:58 · Luca Ferrari
[00:08:58] S2: That one was a lot easier than things today because it wasn't even a company really. This was a mobile app for iOS. I still remember quite distinctly that it was an app to personalize your iPhone's keyboard. I don't even know if such apps exist these days, but in 2014, I think, or around that time Apple launched, opened up APIs to be able to do that, and a bunch of apps came out, and we saw this one and we thought it had a bunch of users, and we thought it could be both the product was not that good, maybe it had users because it was a first mover and had achieved a good positioning on the app store. We believe we could improve the user experience, monetization was almost nonexistent. And so we bought it, we rewrote the software completely, redesigned the UI and introduced monetization. And and I... It was built... The the app had been developed by an individual, like a single single developer. So kind of an amateurish operation. Obviously, these days we buy sizable companies with professional management teams and institutional investors. But the the key principles trying to be superior at the key functional expertise necessary to run that business, superior relative to whoever is selling it to you stood. Obviously, the bar to be stronger today is much higher, but the the the idea is pretty much the same.
00:10:26 · Ed Elson
[00:10:26] S1: So this gets to the heart of what Bending Spoons actually is. And I think there's a lot of confusion as to what this company is. Because on the one hand, there's this software element where you guys are using AI. You have this software background. You kind of come from this not Silicon Valley culture, but certainly a startup culture. At But the same time, you're doing what many other asset management firms and private equity firms have done for decades, which is you're finding companies, you're buying them, you're acquiring them, you're taking up large positions, and then you're taking up a strategic stake in the company and then turning those companies around. This is what investors have been doing for decades. This is... This exists. This is an entire industry, which I think I would call it private equity. So in your mind, what actually is Bending Spoons? Because to me, it seems like it is... At the end of the day, it's an asset management firm.
00:11:26 · Luca Ferrari
[00:11:26] S2: The, let's say, the investment part of what we do is absolutely important. Clearly we grow primarily through acquisitions or serial acquire. The part that would distinguish us from any private equity I've seen, I would say there are three very important differences. And one is that we are not a fund, we don't buy to sell, we've never sold a material business, so we buy to hold and operate forever. The second, perhaps more important difference is that when we acquire a company, at least T private equities I'm aware of, or I've seen operate, they do intervene, obviously they may cut costs, maybe intervene on monetization, they may change the executive team, but the interventions are relatively, relatively superficial. And you can tell by looking at the team at private equity firms, it's mostly small teams of financial professionals. Banish Spoons takes a different route, we do those things as well, but we take a different route in that we rebuild the org often completely, or in large part, we may re architect the cloud infrastructure completely, rewrite big chunks of the code base, accelerate product development, reimagine monetization from the ground up marketing. So it's a much, much deeper transformation to the point that sometimes we, it's almost like we buy brand customer base, user base, and try to overhaul everything else very deeply. And that, again, that's represented in the in the team we have, which is, even if you look just to the core team, forget for a second the acquired teams, that's roughly 800 people, and overwhelmingly, they're software engineers, data scientists, product managers, product designers. So naturally, you know, most of the work we do is that sort of work. We also have our our... We we have our own team of financial professionals because we need that too, but there's this additional piece. And the and the third big difference is that while pretty much all private equities buy businesses and they keep them separate to sell them down the line, sometimes they put a couple of synergistic businesses together, but that's the extent to which they put things together. We integrate everything super deeply onto the same platform. An investor some time ago told me that after due diligence in Bending Spoons, that they found that we... It's almost like we buy companies and then we...
00:13:43 · Luca Ferrari
They get stripped down to a product installed on a shared operating system. And I think it's a bit of a simplistic metaphor, but there's truth to it. So if you look at how we do things, generally we within a few months from the the moment the acquisition closes, we swap out the entire, let's say, technological foundation. We have built dozens of proprietary technologies, whether it's AI orchestration, data processing, AB testing, recruiting, payment management, credentials management, like basically every component of running a digital business we're built in house, natively integrated, and that's swapped out for whatever third party vendor things the business is using. We have this core centralized team for R and D, G and A, marketing, who we redeployed very fluidly across all of our businesses to go after R and D opportunities, when they're exhausted, we withdraw them, so we keep cost efficient. So to the point that it would be almost impossible to sell one of our businesses, even if we wanted to, so that's the downside of our model. So there are similarities with private equities, first and foremost, the focus on acquisitions, but I think the day to day operational approach is in integration and transformation is different. So it's bit of a hybrid I'd say.