Acquisizioni, Debito e Talento estremo | Intervista a Luca Ferrari, CEO di Bending Spoons

Hello Giorgio, Streamyard customer service. How can I help you? My name is Luca.

Thanks Luca also for participating in this gag.

Hello. Hello. Thanks Giorgio, it's a pleasure to be here. By the way, we saw each other, I don't know if your audience knows, 10 minutes ago to do the technical tests and you said wow, I'm red and you're white, and now that I see myself next to you we are completely mismatched in terms of color.

It's not a good period from that point of view. Exactly. Exactly.

Look, the story, to make it very short, is that my co-founders and I all studied engineering, physics, that kind of stuff, and we had the itch to build a successful company, right? The classic entrepreneurial stimulus. And we built one in Denmark because we finished our studies there, there are few of us...

Indonesia. Exactly. Yes, look, right at the end of our master's degree, we took a trip to, so to speak, celebrate our graduation in Indonesia. The idea came to mind to build, by the way, with AI in 2010, which now everyone is doing AI startups, at the time, clearly it was something that, yes, a bit in university Computer Science they talked about it, but it was absolutely not like now. And the idea came to mind to do this, to write an automatic diary with AI, because well, the vacation obviously has lots of beautiful memories, photos, places visited, but no one wanted to somehow then tell it, write it down, right? So then you're afraid of forgetting, not knowing, not being able to share. Anyway, we worked on it for about 3 years, it was called Evertale.

It went badly. We raised a million dollars, or rather euros. Well, yes, at the time it wasn't bad for a seed round. It was an experience that taught us a lot, but essentially a failure. And in the end, we found ourselves with about 40,000 euros left from that million, which would have been the investor's money, and they gave it to us, but for them it would have been more of a hassle to go through the whole liquidation process, imagine a fairly large fund, lawyers, a mess. Guys, you've been honest, you've worked your asses off, figure out the liquidation, we'll sell you our shares for a nominal 1 euro, like that, and then you'll have a little something left, go on a vacation. So we liquidated this Danish company ourselves, without expertise, we probably made some mistakes too. Luckily...

The investor didn't stay, exactly. We managed to get out practically all the 40,000 euros because we didn't use lawyers, nothing, we figured it out ourselves. And instead of going on vacation with that money, it was the capital, let's say, of seed, as they say, for Bending Spoons. By the way, until 2023 we never did capital increases, so practically all bootstrapped. Bending Spoons, the first time we took in institutional money was in 2019 for a small secondary. So what that means is that an existing shareholder sells shares to someone who comes in, but the company itself is neutral to that operation, for the company there is no...

Well, the insights on which it is based are insights, at least the original ones, that we had acquired through that experience with Evertale, and to put it very simply, there are two. On one hand, clearly when you are a startup founder, at the time in Copenhagen, because then we moved Bending Spoons to Italy shortly after its founding, many think it was founded in Italy, in reality it was founded in Copenhagen and moved to Italy about a year later, like that, immediately. When you are a startup founder, it's natural that you meet other teams that are also doing startups because, how to say, you share advice, you cry on each other's shoulders because there are probably more failures than successes. And we saw at the end of this period that there was a very, very poor correlation between who seemed more pissed off, who worked harder, who was smarter, who had a theoretically more sensible strategy, and who had success. And so we said to ourselves, 'Well, talent counts, but probably to go from 0 to 1, as the good old Peter says, probably the luck factor plays a very important role.'

This was the first insight, and the second is that after 3 years of writing code, we were all engineers anyway, but we were writing code, doing design, marketing, monetization. It's not that we were absolute masters, but we started, we didn't know how to do anything. We had learned, we said to ourselves, become exceptional in the skills necessary to manage a digital business well. Digital is not luck, it's good talent and above all a lot of dedication over time. It's something you can achieve with certainty if you plan for it. So 2 + 2 = 4. We said to ourselves, there will probably be many companies out there that are not managed optimally because of insight number 1, the luck factor. And if we commit ourselves a lot over time, we can become better than, I won't say everyone, but we should be able to find some to acquire that if we manage them can do better and consequently generate returns. The seller gets a higher price than the value they would have managed to get on their own. Rinse and repeat.

Well, it went like that, it went like that. And now I'll tell you, I'll give you more details. We reasoned the same way, meaning where do we go with 40,000 euros, we park this stuff, we find a way to generate revenue and then at a certain point we hope sooner rather than later to start implementing the strategy that we think can really scale a lot, which is the one I described to you, which then was wanted a lot, clearly it was a very rough idea at the time, but conceptually what I told you is what it was. And so we said okay, what do we know how to do? We know how to write code, we think pretty well. We know enough about digital experiences, obviously today we know 1000 times more, but and we sell, we do consulting, right? There are a lot of companies out there that need software, apps, and these are fairly unusual skills. And so we started doing that, right? The Live Quiz app came many years later, I'd say 2018, something like that, here we are talking about 2013. And so we start looking for clients. For two months we literally sent, I swear, hundreds of emails a day to all the numbers we found on the internet or we made them ourselves with cold calling, so for two months we couldn't keep a client, to be precise we kept one client who was also a cousin, a friend of one of my co-founders.

We had to make an iPad app to manage, he had a chain of burger joints, so he sold hamburgers, essentially sandwiches.

A startup project in its own right, and...

No, no, no, I mean here we were trying to build software for someone on commission, like Accenture does.

Yes, yes, yes. Because we wanted to find some money, the cash flow you were talking about, to then do the acquisitions, right? And we spent two or three months looking for clients, we didn't find anyone. Except this one who did it almost as a favor, a friend, a relative, I don't remember, of one of my co-founders, 10,000 euros for the project, I still remember it, to make this iPad app, and for the rest, everyone said no. It was probably the hardest moment I've personally experienced professionally. I was really distressed because you come from 3 years of a startup where you give it your all, literally night and day, 365 days a year, and you fail. There isn't much to save except the friendships, the trust, the skills that had been created with my co-founders. You try this other path and no one commissions anything from you and you say wow, we suck, we are failures, we won't get anywhere. And then I remember that parallelly we had launched, just because no one was giving us anything to do, so what do you do? You get your hands dirty. We created this very simple app for customizing, let's say, fonts on the iPhone, stuff from 2013, late 2013, which in my opinion was a decent app, but we couldn't get users. And so we said, 'But wait, we had the idea of acquiring companies and we said we don't have the money to acquire them, but why don't we start on a lot of apps, like this one that has a lot of downloads, are even worse than ours, why don't we start by acquiring these, they'll cost a pittance.' Then obviously the hope is that one day we'll acquire bigger stuff, but why not start small? And so the first acquisition we make shortly after, I think early 2014, something like that, anyway we are talking about, well, 8-9 months after the founding of Bending Spoons, is of an app for customizing the iPhone keyboard that costs us 10,000 dollars. So a negligible amount.

No, no, this one didn't cost anything in M&A due diligence because imagine it was an app by some guy, I don't remember if the first two were by a Canadian and one from the United Arab Emirates, I don't remember what. Anyway, an indie developer totally sells it to you for 10,000 dollars. An app that made 1,000 dollars a year in revenue, a very small thing. But we thought with a bit of product improvement, a bit of monetization improvement it could make good money and we see that we manage to transform it to the point that it generates, now I don't remember exactly, but let's say 20-30,000 a year in revenue, so...

Within a few months, so you put in, you take out, I'm simplifying, 30, and with those 30 you make another one for 30, you take out 100, and the years pass, we do things always bigger, even if seen from today's perspective they are microscopic little things, I mean products that I don't even remember some of their names, because they were never famous, they had 50,000, 100,000 users. Little by little we continue to grow and you know this very well, I know that, well, investing is one of your passions and more... No, correct me if I'm wrong, well, yes, yes, yes, yes, yes, quite different as an investment concept, but clear.

Clear. Yes.

Actually the ROI of the operations is stellar. I don't know what you're referring to. I've read analyses that are essentially completely wrong about our financials. If...

The main reason I've seen, but I don't know if they are the ones you've seen too, if you have the ones I've seen sometimes from someone, not from investors, but maybe let's say some analyst who improvises a bit, is that one looks at the capital invested today, says I don't know, you've invested 5 billion dollars in debt, equity, whatever. And then they go to see the profits to see how much we return. But they look at the profits, I don't know, in the last 12 months. But if I'm growing 100-150% a year and of those 5 billion I've invested 2.5 in the last 3 months, naturally if you take my profits from the last 12 months...

To this add the fact that we don't necessarily buy companies that are already highly profitable, so as they arrive in our P&L you're capturing that profitability, but one of our strengths is taking something that makes 10 in EBITDA and bringing it to 50. So, clearly, if you look at the current snapshot, what we shared in our prospectus, which in my opinion is one of the things I can say, that best explains it, is that our IRR, so a form, let's say, the measure of return most typically used in the industry, the target we have with acquisitions is 65%. This is an annualized measure, so it gives a sense of compounding over the years, this exponential value, and to make the comparison, private equity in general is considered successful if it's between 15 and 20, so 65 is something completely off the charts, which is also the reason why typically our valuation, now I don't want to get into whether it's high, low, or medium, but it gives us a...

Look, in my opinion, internally what we always tell ourselves is that we want to build a company, ideally one of the most successful companies of our generation worldwide, and let's say in this specific case we want to be the best in the world, the best ever ideally. I'm talking about the aspiration, I don't see it as an arrogant thing, more like a target that a tennis player sets for themselves saying 'I'd like to win Wimbledon'. I mean, it's not that they necessarily achieve it, but in this specific case we are, let's say, we want to be among serial acquirers the best ever. For us this means we must be unparalleled operators because the way we create value is not in buying well, it's not that we are geniuses who identify rare gems, but where we create returns is in taking something that is worth 10 for others and making it worth 30 because we know how to manage it much better. So all our focus is on being the best and most efficient at doing engineering, the best and most efficient at doing design, the most efficient at doing monetization and so on. This doesn't have, I mean, so if we succeed it will be more of a success story like Berkshire Hathaway, like Procter & Gamble, it's not that we have a mission to cure cancer. Then...

What you said now, in my opinion, is generally accurate, perhaps not entirely complete, as is also normal, in the sense that I wouldn't have anything better to do than dissect Bending Spoons in every detail. Let me describe a bit how I see it specifically on the private equity comparison, okay? Obviously I could talk about Bending Spoons for 8 hours, but relatively I'll give you a bit of a diff if we were talking about...

So a difference, well, clearly the similarity is that typically private equity acquires, so do we, so that is an element in common. A very big difference that is not just formal, but then also impacts how we operate, is that private equity are always funds, so they raise money from limited partners, buy assets, companies with these funds and then liquidate the funds after, well, the single asset on average they hold from 3 to 7 years, let's say five on average. We don't buy, we are not a fund, we buy everything from the, as they say in jargon, from the balance sheet and integrate everything together and the idea is to hold forever. We have never sold a, well, never say never, maybe...

And this is not just, again, who cares, one could say sell, hold, it's important because it changes the mindset in my opinion with which you manage them. If the only way you have to make money from a company you've acquired is the cash flows it will generate from here to infinity, in my opinion you often make different decisions than what you would do if you had to sell it in 3 or 5 years. There are, not in a good or bad way, it's not a moral judgment, but...

Unfortunately it doesn't work for us, and I'll explain it to you when I finish giving you the diff, because otherwise it becomes...

The second big difference is the type of intervention. Generally, and here I must perhaps generalize because there are 23,000 private equity firms in the world, so clearly there's a bit of everything, but generally private equity intervene in a relatively superficial way, they change the management, this very, very often. They cut costs not always, very often, they optimize prices almost always, often they sell secondary assets, maybe they buy a company that has two or three businesses, they sell the less successful one to finance the debt they raised to buy, let's say, the company as a whole. But these are fairly superficial interventions. If you go to see how Bending Spoons operates, typically we do very deep interventions, we rebuild the organizations even entirely, which is also one of the most controversial things we do, right? Because this...

No, well, but I'll finish this and then you can ask me that too, but so we rebuild the organizations in part, but even entirely sometimes. We rewrite the code totally or anyway large parts of the code, clearly those that matter to make the product more performant, more maintainable, more evolvable. We do redesigns. Often we launch a ton of features, I don't know if anyone uses it, from when we acquired it in early 2023 to today it has completely changed, it must have 200 more features, new design, it's totally accessible from AI, from third-party models, all features are enabled. So we do very deep interventions with the pros and cons that this entails, the cons are that it takes a lot of time, a lot of effort and we can do fewer acquisitions, we do 5-6 a year, precisely because it takes a lot of attention, time. Another big difference is the team which is clearly a child of having to do this stuff. If you look at a private equity team, even the best in the world, they are few people with financial profiles. There are even private equity firms managing 100 billion that are 25 people, 50 people, maybe they have a few analysts, a few accountants. We have 700, we call them Spooners, core team members who are almost all software engineers and research engineers, product designers, I mean one can go look on LinkedIn and because 80% of what we do is write code, redesign UI, launch monetization experiments. This stuff is very hands-on, very technical.

And then another big difference is that private equity generally don't have their own technological platform, I call it an operating system because they must, a bit because maybe I'd say it's a lack of foresight, but because with that model where you have to keep the various companies separate and resell them, if you put all your tools in there, what do you do? You can't sell them the tools, what do you give them? A license to the buyer forever. We have built ourselves with the infrastructure. Sure, it doesn't make sense.

The last time we counted them, by the way, recently for the IPO we had more than 50 tools, some very complex, not that they are fancy, very fancy in my opinion, that we have built over time that form this sort of shared operating system layer on which we run everything, which has efficiency, effectiveness advantages with the disadvantage though, and now it's clear, integrating everything into this stuff, the centralized team, how do you sell these? You can't fractionate, but this also comes to meet the... so there is a bit of a common thread, you've built an infrastructure that handles large files for Vimeo or real-time streaming for Streamyard. I imagine there are areas where you are stronger, right? You'd have difficulty acquiring, I don't know, a company that does completely different things. You are now positioned in a niche of productivity, video, large files, file transfer, events, now Airtable, Meetup, I mean...

Let's say that the bulk of those technological synergies are actually more behind the scenes and are fairly, most digital businesses have very similar needs at the base. For example, you want to work with artificial intelligence, typically nowadays if you want to be efficient whether you write code, do design, do data analysis, you will use, right, models, I mean otherwise you're stuck in the Stone Age. And we have built what is generally called a harness, so the infrastructure part, let's say, that allows Spooners to go do data analysis, write code using various and sundry models. Then one day we use Claude, one day we use Gemini 3, it's all, let's say, it's all completely managed automatically for the Spooner. We have centralized contracts with Anthropic, with OpenAI, with Google, with AWS and obviously...

We try to see ourselves a bit as scientists in managing the businesses. We like to be extremely rational, mathematical and data-driven. The platform for doing A/B testing substantially, I mean whether you do it on Vimeo or on Evernote and...