This EU Firm Made Billions Buying Up Forgotten Tech

We found that the market tended to undervalue the unsexy things and, in our view, overvalue the new and sexy, sometimes to a fault in a major way. When we were comparing, after having done the qualitative screening and done the math, we were comparing the returns we would get from the AOLs of the world, or I'm not going to name names, but let's say fleshier, newer, sexier things. We found that the latter would consistently give us much worse returns, and we saw no reason to do it simply because people liked it.

Thank you for having me, by the way. It's a pleasure to be here. Very few people know this, but I, with my co-founders, almost the same people, we launched a startup in 2010, also in Copenhagen. We were using AI, clearly too early, 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 you know, sometimes that's not enough. And so, in the ashes of that company, we were left with about $40,000. The VC who had given us the money basically sold their shares back to us for a nominal $1, and they apparently appreciated our hard work and being honest, and they didn't want to 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 the strategy we are 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.

So, well, the strategy was, we thought, so over those first three years of that failed startup, we saw our skills in engineering, marketing, product design improve tremendously. Obviously, we didn't feel we were anywhere near world-class, but certainly much better. And so we thought, okay, if 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, we 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 where 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 maybe they don't have the skills to go from one to ten, 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 be able to compound capital efficiently, because those were the relatively simplistic ideas we had back then. And because we knew we were going to 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, he's 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, you know, maybe you can do the seemingly impossible. So we just found it kind of inspirational. We liked the idea of making a little bit 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.

We've always acquired companies. The first acquisition happened very quickly, I think. So we started Bending Spoons in the summer of 2013. 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 assume that what we were doing before was launched from scratch. But nearly all we've done over the past 13 years was acquire existing businesses, and I'd like to think make them better and 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, you know, we're at a run rate in terms of revenue of almost $4 billion. 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 13 years, we are where we are. We actually had very modest injections of equity, mostly, you know, other than the IPO a few months ago, we had a significant injection of equity, about a quarter of a billion dollars, toward the end of 2025. 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 10 years at this point.

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 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 believed we could improve the user experience. Monetization was almost non-existent. And so we bought it, we rewrote the software completely, redesigned the UI, and introduced monetization. And the app had been developed by a single developer, so kind of an amateurish operation. And obviously, these days we buy sizable companies with professional management teams and institutional investors. But 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 idea is pretty much the same.

I would say that the investment part of what we do is absolutely important. Clearly, we grow primarily through acquisitions or we 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 the 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 superficial. And you can tell by looking at the team at private equity firms, it's mostly small teams of financial professionals. Bending 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 rearchitect the cloud infrastructure completely, rewrite big chunks of the codebase, accelerate product development, reimagine monetization from the ground up, marketing. So it's a much, much deeper transformation to the point that sometimes it's almost like we buy brand, customer base, user base, and try to overhaul everything else very deeply. And that again is represented in the team we have, which is, even if you look just at 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, we all sort of own team of financial professionals because we need that too, but there's this additional piece. And the third big difference is that while pretty much all private equity buys 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, they found that it's almost like we buy companies and then 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 is truth to it. So if you look at how we do things, we generally, within a few months from the moment the acquisition closes, we swap out the entire technological foundation. We have built dozens of proprietary technologies, whether it's AI orchestration, data processing, A/B testing, recruiting, payment management, credentials management, like basically every component of running a digital business we've 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&D, G&A, marketing, who we redeploy very fluidly across all of our businesses to go after R&D opportunities, and when they're exhausted, we draw 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 a downside of our model. So there are similarities with private equity. First and foremost, the focus on acquisitions, but I think the day-to-day operational approach in integration and transformation is quite different. So it's a bit of a hybrid, I'd say.

If the criticism comes from, let's say, if it's a moral judgment, if someone thinks that trying to make a business as successful as possible is bad, I don't have any qualms against a completely valid point of view. I disagree, obviously, or I wouldn't do it. I think in general, the world tends to work better. The economic pie tends to grow larger if businesses are run at an excellent level. But you know, it's a perfectly, I respect the fact that someone would disagree with me on that point. We definitely, we have done it almost every single time. So it's definitely been a pattern. I would say that in general, cost efficiencies have been approximately 50% of our value creation overall. And within that 50%, probably the org part, it's probably roughly a little over half. So maybe I would say of 100% of our value creation, I'd say maybe 30-35% has been about optimizing organizations. One thing we do that's, I believe, misunderstood is people tend to think that we end up reducing headcount simply because we want to cut cost. And while optimizing cost is obviously a significant driver, we actually try, I'd say just as important for us is that we make that org far better positioned to kick ass for a long time. The, in my view, flawed assumption some people have is that the number of people you have in a company is almost, you know, definitively going to determine whether the company produces great product, it innovates quickly. We are of the opinion that if there is a correlation between headcount and, say, innovation or the ability to optimize customer experience, monetization, that's a weak correlation at best, and that what drives those virtuous outcomes for the most part is talent density, whether people use powerful tools, whether the culture is one of, you know, rationality, high performance, whether or not you have a lot of red tape or you actually give people playing space. So what we try to do is bring these companies back to what I would call startup mode. Small teams of supremely talented people. We get out of the way, give them plenty of, you know, very wide mandate, very powerful technologies. I mentioned them quickly earlier. And what we see consistently is that magic happens despite going down in headcount, maybe 80%, sometimes more. Demonstrably, and we publish a lot of this stuff on the various blogs or brands, but demonstrably the rate at which we fix bugs, reduce, say, technical incidents or launch new features goes up sometimes dramatically. So yes, we have absolutely consistently cut headcount, no doubt about it, sometimes dramatically. So we do so also, no doubt about it, for cost efficiency, but equally we have been able through the same means to make these businesses a lot more competitive from the point of view of product quality and pace of innovation. So for us, it's really a win-win. But I understand that it's painful for those involved. We try to mitigate the unavoidable, I think, pain of being laid off, which sucks. I mean, it's a very tough thing to go through, by being transparent, by offering top-of-market separation packages, by being empathetic and flexible, but that doesn't make that transition painless. It makes it a little bit less painful. And if we could do what we do without that objectively bad element, we would certainly be very happy to avoid it. None of us enjoys that part of our jobs, for sure.

Yeah. So, I think you're right in many ways. I would say a big percentage of our acquisitions have been struggling companies. Not all. We have acquired several companies that were growing nicely. I'm thinking Kamut, Airtable, recently we shared the growth rate. But yes, we have a bigger percentage of companies in our acquisition portfolio, let's say, that were struggling than, say, most acquirers. That's, I think, broadly speaking, a valid characterization. And sometimes, yes, the executive teams themselves tell us that, look, if I need to take difficult decisions, you know, in a way, I'd rather you do it. So it's happened. I wouldn't say it's happened often, but sometimes it's happened. So what we look for is, on a qualitative level, three things. We like to acquire large businesses relative to our current size. And the reason is, I described how we conduct these extremely deep transformations and integrations. Those take a massive amount of time and effort. The good news is we found that we don't need, like, the number of people, the amount of time we need to complete those transformations does not seem to scale really, at least not linearly with the scale of the business. And so we're better off acquiring fewer companies and deploying those resources toward transformations that move the needle, as opposed to acquiring 100 companies but not having the time to do anything really well. So we like to buy, say, five companies a year, give or take, that are large. The second thing is we want to feel confident we can predict their performance, at least, you know, five or six years out with confidence. And that's an entire whole discussion on science, but on a high level, that's the answer we need before we decide to pull the trigger. And the third big criterion is we need to believe we can greatly improve those businesses. Hopefully the product, the tech, the org, monetization, marketing, ultimately revenue and cost. You know, it's an earnings game at the end of the day. So those are the three, you know, kind of big criteria. Then how we get to those answers, that's, you know, a lot of many steps and it's quite complex. Well, other than the scale, the scale is very obvious. And once those are, you know, three checks, then it boils down to the math of returns. You know, among the companies that check all three boxes, then we look for the investments that will yield the highest returns so we can compound as fast as we can.

I think it's mostly a byproduct. We don't actually have internal guidelines for our M&A team to look for, you know, brands from a bygone era or anything like that. It's more that I think, at least historically, maybe at least in the last five or ten years, maybe the future will be different. We found that the market tended to undervalue the unsexy things and, in our view, overvalue the new and sexy, sometimes to a fault in a major way. And so as we try to be rational operators, you know, you can never prove it. I'd like to think we've been rational capital allocators and operators. When we're comparing, after having done the qualitative screening and done the math, we were comparing the returns we would get from the AOLs of the world, or I'm not going to name names, but let's say fleshier, newer, sexier things. We found that the latter would consistently give us much worse returns, and we saw no reason to do it simply because people liked it, you know. So, you know, AOL is actually a very good business. It's not, obviously, it's not going places, but 30 million people use it as their, for many of these, as their main email, and they use it all the time. And these are perfectly, you know, they're not less valuable as human beings or as customers as people using the small, fleshy, new email client simply because they like AOL, you know. So we're happy to serve those people, just as we'd be happy to serve, you know, the cooler early adopter. And it seems that many investors prefer to go toward cool and sexy, and we're happy to take the, you know, the less sexy things.

My co-founders and I studied very similar things, engineering, physics. I think that's really our background and maybe driving passion is technology and science. We just felt that applying that to business would be fascinating because business actually offers a lot of challenging intellectual problems. It's also rewarding financially. So we decided to go down that route, but we have, I believe, retained that engineering and scientist mindset and tried to embed it as much as possible in the organization, in everything we do, even in talent. I mean, the way we recruit is completely scientific at this point. And then I'd like to think we're curious people. We have studied, you know, there's plenty of, I think it's more difficult, let me put it that way, it's more difficult to learn quantum physics than, you know, how to calculate an IRR. So I think it's better to have studied STEM, and that's generally a test that tests your intellectual capacity and gives you better problem-solving tools. You can then learn other things if you put in the effort. So we have, you know, there's plenty of books on finance and economics, and, you know, we are big fans of people like Warren Buffett or Tom Murphy or Harry Singleton, Benjamin Graham. There's plenty you can read. It's not rocket science if you try to learn from people who are smart and have done it before, and then, of course, try not to copy-paste blindly, but understand the boundary conditions they had and the boundary conditions that apply to you. There's a lot you cannot, a lot of mistakes you can avoid. So yes, we try to be value, value, not necessarily in the way that it has to be a business that's past its prime necessarily. For us, it's math. It just happens that the market values the in-their-prime businesses so highly that we end up buying more of the past-their-prime businesses, but ultimately we just try to compound efficiently. That's all we're trying to do.

I'm a big fan of Buffett and his colleagues, Dad Wler. I think they're amazing. So I think you always want to be careful with comparing because we're talking, it's almost like you're asking an aspiring footballer to Michael Jordan.