Siddhartha Ahluwalia 00:01:45

This is the first podcast, uh, that I’m doing. outside India. I’m traveling outside India to record it, right? And the first episode of Neon Show, right? Probably, which is like, we have done podcasts with folks outside India, which are like through Zoom calls, which you can say, but I’m traveling first time.

 

So, so excited to do it. For audience again, this is Siddhartha Ahluwalia. Super, super excited. to have this episode of Neon Show with you. I’m your host and also founder of Neon Fund, a B2B SaaS fund that invests in seed stage enterprise SaaS companies coming out of India, building for the globe.

 

I have here with me Luca, founder of Bending Spoons. Luca, I can’t tell you how much excited I am to do this podcast in Milan today at your office. Uh, thanks to your amazing team for setting this up. Uh, really glad to be doing it. But for audience, you know, I would like to start by, you know, if you can tell us more about yourself, more about Bending Spoons as an intro, and then we can dive into specific areas.

 

Luca Ferrari 00:02:47

Sure. And thank you for being here and for, uh, wanting to do this with us. It’s a, it’s our privilege and pleasure. And of course, welcome to Italy, to Milan. We’re happy to have you. Um, and we don’t do this Often, but, uh, I think it was fun for us to arrange, uh, for this recording. Um, as, as for what concerns myself, well, you said it, my name is Luca.

 

I have a background in engineering come from a tiny village in the Northeast of Italy, and, I’m one of the co founders, currently the CEO at Bending Spoons. Bending Spoons, we are a technology company with an unusual approach rather than launching products from scratch. We have built a platform of technologies, expertise, talents, company culture. That’s fully optimized for acquiring digital businesses where we see some untapped potential and then, trying to run them a lot more effectively and efficiently, and we do so with an incredibly hands-on approach. So we’re far from a passive acquirer. We will try to rethink. The product, the technology, the marketing, the organization pull every lever we have available to make that business better.

 

So an unusual combination. I’m not aware of any businesses quite like Bending Spoons. We’ve been doing this for a little over a decade. Our products have served over a billion people. Currently, we have around 150 million monthly active users and many millions of customers revenues in excess of 600 million.

 

Siddhartha Ahluwalia 00:04:29

So the revenue is in excess of 600 million. Wow. So you’re already like a public company scale.

 

Luca Ferrari 00:04:36

Well, you tell me. We are privately held at the moment, but I guess maybe at some point.

 

Siddhartha Ahluwalia 00:04:44

And, and you have raised very little capital. And the capital that you have raised is very recently in the last 12 months, right?

 

Luca Ferrari 00:04:51

Yes. So up until the summer of 2023, we had never raised any significant amount of equity. Then last summer we raised about 50 million dollars in equity. Overall, the round was a little bit bigger, but there was a secondary component to it too. And then again, earlier this year in 2024, we raised a little over 150 million dollars in equity again from institutional investors.

 

Siddhartha Ahluwalia 00:05:23

And what will be the company valued today?

 

Luca Ferrari 00:05:26

Well, the last round earlier this year, it was a little over $2.5 billion. Today would be worth more than that. But you know, the order of magnitude.

 

Siddhartha Ahluwalia 00:05:36

Yeah. But, but let’s say giving it a fairly on an average 10x revenue multiple, you would be valued if you were a public company today at $6 billion.

 

Luca Ferrari 00:05:45

I think would be valued more as a public company. But when you, so valuation is important when raising capital, clearly one of the most important things, not the only one. And I think the smaller the dilution, the more important other factors become. And although the… in absolute terms, 150 million dollars. It’s a substantial amount of money, of course, relative to our scale it’s not a tremendous amount of money. And so we prefer to keep valuation more moderate and, and privilege selecting certain types of investors and making sure certain terms and when it comes to governance were in place. We believe this favors the company and our share owner base at large with a long term view.

Even if valuation could have been a little bit higher have been pushed for that as a primary objective.

 

Siddhartha Ahluwalia 00:06:41

And what were the profits of the company today? Like, and you have been profitable from day zero.

 

Luca Ferrari 00:06:45

Yeah, we don’t disclose that, but, but in the hundreds of millions.

 

Siddhartha Ahluwalia 00:06:49

Wow. And so essentially you never needed any external round of funding, I would say.

 

Luca Ferrari 00:06:55

No, we, we have used, uh, debt pretty straightforward bank debt, uh, quite a bit, never to extreme leverage ratios normally up to maybe three times at most, I would say. Uh, I, by the way, I think we should, we should have done more of that and we will try to do more of that in the future, but, uh, talking history here.

 

So that has been a, an important catalyst of growth and then naturally reinvesting our earnings into the business.

 

Siddhartha Ahluwalia 00:07:26

Got it. And I believe you are not yet touched your forties yet, right? You are still in your late thirties.

 

Luca Ferrari 00:07:32

Yeah. I think, anagraphically I am. 39. Yeah. I, I did choose not to get older a few years ago.

So I’m, I’m 28 on like, if you ask me, but I was born 39 years ago.

 

Siddhartha Ahluwalia 00:07:43

We got it. And how did you manage to do that? Stay 28.

 

Luca Ferrari 00:07:48

No, I, I mean, I’m just joking, but, uh, I don’t mind getting older, but yeah, I’m not as energetic as I was 15 years ago.

 

Siddhartha Ahluwalia 00:07:56

Yeah. But what I’m trying to say is you still have like 20 years more of building Bending Spoons.

 

Luca Ferrari 00:08:02

That’s a lot of work.

 

Siddhartha Ahluwalia 00:08:06

And essentially the model that you have, right? Most founders, what they do is when they start one company, they scale it, take it IPO. And then they say, I want to do another thing. But you can do the same thing inside Bending Spoons because your model is like that. Whatever you want to do, whatever…

 

Luca Ferrari 00:08:23

Yeah. I don’t think I’m. I’m attracted by variety in that way. I, I’m more attracted by trying to contribute to, say, one masterpiece, make that the, my contribution, uh, rather that being the best it can be rather than making multiple, less remarkable, presumably contributions. I, I could see though, if I felt stuck, like that we failed to achieve. Or we wanted to achieve and there was no way out.

 

Then I would perhaps have that sort of mindset in a way, maybe that was how I felt with, with a startup. I, I contributed to founding and running over a decade ago were, well, we failed, so there was no other way, but restart as a separate project in that case, as much as I would’ve preferred for that one company to be my life’s work, of course I had to, to try something else, but if I have a choice, I’d much rather keep making Bending Spoons better for the longest time I can.

 

Siddhartha Ahluwalia 00:09:33

So, so essentially there is no scope of you starting any company ever again, another company?

 

Luca Ferrari 00:09:43

I’m never saying never, I mean, life is complicated, but I would say right now my, by far, my, my preferred path forward is to keep contributing to Bending Spoons for as long as I have the energy for, and I’m the right person for, which is, which may not be forever.

 

I mean, I don’t think I’m necessarily. The best candidate for this job for, in fact, every given year, I wonder if I am. And as a company, we run a survey, my direct reports, a small selection of senior colleagues, and one partner from each of our institutional investors, they fill out a survey. An anonymous survey.

 

There’s only one question and,and it’s, well, technically it’s two. One question is, do you think Luca is the right candidate for being CEO next year? And and then there is another one saying, do you mind elaborating? And the answers are only yes or no. If more than a couple of people will say no, we will initiate a search for an alternative internally and externally.

 

It has not been the case so far, and it terrifies me every time. But that’s just to say, and I think it’s true, not just for myself, but most, if not every colleague here. At Bending Spoons, nobody feels like it’s you know, their position is owned by them owed to them. We try to deserve it by being the best version of ourselves.

 

And even if we And even if we are, sometimes someone else is more suited. And I think it is only right that they then take over.

 

Siddhartha Ahluwalia 00:11:20

And you are so efficient as a company with only 400 employees, team members, you are able to do $600 million of revenue. I think this is more efficient than even Google.

 

Luca Ferrari 00:11:33

Yeah. I mean, I’d rather generate tens of billions of dollars a little bit less efficiently.

So, well, you know, the revenues are just a number. It’s not that they weigh on your shoulders and you’re like, Oh my goodness, a billion. I can barely stand, you know, like, so, well, yeah, we, we do try to be, radically efficient in everything we do.

 

Siddhartha Ahluwalia 00:11:59

And now I want to go back to the journey, right? Your first startup didn’t succeed and you started Bending Spoons after that, right? What was the idea that you didn’t want it to do another maybe B2B SaaS company, but like a company that would acquire them. How did this idea of Bending Spoons came after the failure of the first one?

 

Luca Ferrari 00:12:24

Yeah, so maybe, maybe it’s useful to give a little bit of context. What Evertail, the startup was called Evertail and, uh, we’re trying to, this is 2010. And we’re trying to build a self writing diary of a user’s life based on AI. At the time, AI was not in vogue. It was only talked about in academia. People barely knew what machine learning was. We, a lot of it was still, uh, uh, structured algorithms rather than today’s largely black boxes. We work with different world. Anyway.

 

So we wanted to build this product. We went about it the, by the book way, you rent a garage, get in, close the door and make sure not to get out for six months, you get out with a product that you feel is kind of polished. And you know, you hope the world embraces it and it’s the next big thing.

 

We did exact pretty much that not, not quite the garage, but a small apartment. And it’s a long story, but the short of it, we worked on it for almost three years, worked so hard and nobody uses it. And so we’re like, okay, uh, we’re running out of money. Cause in the, in the process, we we had raised about a million euros in venture capital money.

 

And we were left with about 40, 000 euros. It was… It belonged to, to this VC because of liquidation preferences. However, it was too little for them to bother going through the legal hurdles of liquidating the company. So just, they just essentially gifted us the, their shares, and we liquidated the whole thing and we were left with something less than 40.

 

Maybe there were some taxes to pay, but not much given that we had lost so much money. But and so that was the seed capital for Bending Spoons. A little less than 40, 000 dollars thee and that’s 2013. Now the learning was, and, and it came both through our own experience with our failure and observing and studying many other startups at the time.

Our hypothesis was that to find product market fit with something very new, most of it was luck. We felt talent and hard work came nowhere near guaranteeing you would. I mean, maybe, maybe there are some incredibly rare talent. Some people can see it, but I’m talking like 99.99 percent of people.

We felt finding product market fit was overwhelmingly luck. And then you also needed talent. Talent and hard work. And then we hypothesize that becoming outstanding at, let me call it operating a digital business. So software engineering, AI research that came later, but product management, UX design, marketing, monetization that part was mostly talent and hard work.

 

If you were smart and were willing to tenaciously, diligently worked at it for many, many years. You probably become better than most companies at it. And so we, uh, we, as we didn’t want our success to depend on factors other than our own abilities and efforts, at least not to a major degree, We chose to build a Bending Spoons in the way I mentioned. So outsourcing, finding product market fit to the market. There’s plenty of people looking to do that. Plenty of VCs and angel investors investing so that bets are made.

 

And rather Bending Spoon’s coming in afterward to take something good and try to make it even better than good. And so that was the vision, uh, pretty much as we founded the company in 2013. Certainly we refined our approach a lot over time, but the seeds, the main traits were there immediately.

 

Siddhartha Ahluwalia 00:16:45

And what were the first two or three acquisitions like, and how did you finance those acquisitions?

 

Luca Ferrari 00:16:52

Well, we financed them with the. The, the, the less than $40,000 paid the rent, meager salaries for, there were five people at the, at the time.

And four of us lived in the same small apartment. So it was really, uh, frugal, more than frugal. The first acquisition, we paid for it about 10, 000 dollars and it was a, an app to personalize your iPhone’s keyboard, 2014 probably. Yeah. Make it eight or nine months into Bending Spoons.

So that was the first one we turned that thousand dollars in a few tens of thousands. Of course, it’s easier on a small scale. And then reinvested into hiring a few people, improving at what we do and slightly bigger acquisitions. And then 11 years later, you know naturally not an overnight success. A lot of compounding being a little bit better with each passing day, scale increases.

 

Siddhartha Ahluwalia 00:18:06

And, uh, what was the first acquisition of scale that you did, like maybe more than 100, 000 dollars?

 

Luca Ferrari 00:18:17

So I don’t remember the first one being the first one bigger than a million dollars. I will say. Splice, for example, our video editor 2018, uh, so a few years after foundation that was in the millions of dollars. There might, there might’ve been others a little bit bigger than the threshold you set and smaller than Splice.

 

Now I don’t remember frankly, exactly, but I think Splice perhaps you could look at it as a bit of a turning point. There’s never been a major inflection point for Bending Spoons, mostly. Each year has been a little bit better than the previous year. But I would say Splice was perhaps, you know, the first acquisition from my substantial seller, GoPro, the action camera manufacturer, at the time by our standards, a very substantial business.

 

Siddhartha Ahluwalia 00:19:16

And you always acquired consumer, mostly consumer software businesses.

 

Luca Ferrari 00:19:22

Yeah, we. We, we saw an opportunity in consumer software over time. We have done more kind of professional individual user kind of businesses, product led B2B and we’re looking with interest into enterprise.

Although that’s not an area where we have built a muscle, but that’s a, that’s a muscle we’d love to develop in time just to expand our target markets. But yeah, we, as long as it’s a digital business we tend to be interested.

 

Siddhartha Ahluwalia 00:20:00

And today, if by product wise, you have to see which are the top three or five products that contribute maximum to the revenue and by what percentage?

 

Luca Ferrari 00:20:10

So we, we own around a hundred products. The biggest one by revenues is Remini, AI driven, photo enhancer and generator.

It’s around 20 percent of our revenues. Evernote is close, also around 20%. Splice comes after, maybe 12 to 14 percent and then we have Meetup. StreamYard and many others. It’s a long tail of many many contributors. There is no single champion though,

 

Siddhartha Ahluwalia 00:20:48

But the majority of the revenue, 50 percent is just by the top three products.

 

Luca Ferrari 00:20:53

Yeah, three four products. It’ll be around 50, 60 percent

 

Siddhartha Ahluwalia 00:20:56

Got it. And as you think of you know in the next few years becoming a billion dollar revenue company, you know two three billion dollar revenue company. Do you think this ratio will remain the same or you will go and acquire a $300-$400 million revenue product.

 

Luca Ferrari 00:21:11

It’s a big debate we have I think I My position, which I may, you know, I may be proven wrong. I may change my mind is that we should focus more on big targets than on small targets, because we, our approach is so operationally intense. We, every time we perform an acquisition, we get our hands dirty, trying to look at the business almost from a blank slate, make a pretty deep changes. There are extremely time-consuming, challenging, even painful to do. They don’t get a lot easier if the business is smaller. So it’s probably better to take care of relatively fewer acquisitions, but make sure each matters more. So a long way to say, I believe we will do… We have been doing bigger acquisitions all the time.

So I think that trend will continue. But perhaps as we, as we go there, we’ll see there are better ways, but right now that’s the hypothesis.

 

Siddhartha Ahluwalia 00:22:12

What’s the biggest acquisition by dollar value that you have done till now?

 

Luca Ferrari 00:22:15

We don’t share a purchase prices, but in the hundreds of millions,

 

Siddhartha Ahluwalia 00:22:20

I believe it might be Evernote or one of the top three products.

 

Luca Ferrari 00:22:26

Well, what I can say is that these days we tend to look at things in the price range, $50 million to $1.5 billion. That’s the as a range we operate at. But if you had asked me two years ago, it would have been a lot lower. And hopefully in a couple of years, it’s a lot higher.

 

Siddhartha Ahluwalia 00:22:41

And on these assets that you acquire, usually what’s the revenue multiple you tend to give on these acquisitions? Or is it different across different categories?

 

Luca Ferrari 00:22:54

No, it’s, it varies. Uh, there are many factors. We, we, we try, we try to project a future, value creation, cash flows. And you know, it all depends. Can the business grow a lot? Is it declining? What, what about organic traffic? So there is no single, the range is quite wide.

What I can say is that to my knowledge, every single time we have bid, we’ve made an offer we have either acquired the business or the owner chose not to sell it, that’s to say we have historically been by far, to my knowledge, the best bidder. So, and that’s because our approach, our deep integration enables us to create more value than nearly all other acquirers, including all financial acquirers, such as a private equity.

So we tend to be the best place, the best house for, for, for a business when it comes to a seller’s perspective. We have, we’re, you know, very decisive, fast, and again, that to my knowledge so far, a hundred percent of the time, the highest paying bidder. So I guess any multiples that someone has in mind, we may be able to top those, but it’s, it’s not a hard and fast rule, of course.

 

Siddhartha Ahluwalia 00:24:18

And in the journey of compounding to 600 million of, of revenue, what’s been your biggest lesson, right, in scaling these products?

 

Luca Ferrari 00:24:29

 

Oh, there are many lessons, but I believe in general, trying to, trying to be Independent thinkers. Emulation can be useful and we certainly emulate a lot of virtuous Ideas and behaviors, but if it’s your default mode as opposed to being imaginative, entrepreneurial, you’re unlikely to find ways to, to be better than most and therefore build something remarkable.

So trying to stay independent in your thinking, try to be as rational as possible. We make it it’s a company value actually to strive. Of course, we’re human beings. We have emotions. Emotions are great by the way. They’re, they make life interesting. So, but when it comes to making a business decision, ultimately we need to be able to park them aside and, and be clear minded.

 

You’re never perfect in that, but just being aware of your biases, fears, preferences, and trying to offset them is quite valuable in a world of irrationality, rashness, imprudence, and illogical and irrational behavior in general, which is the standard. So that’s another, it’s a, it’s a fairly general lesson, but it’s much more powerful than some more tactical things.

Then yeah, the value of people we have always believed. So I, I can’t really say this is something we’ve learned as we went, but I guess we have confirmed it. It’s important to once you have a strategy that makes sense or has a chance of winning the quality of the team the culture you establish are by far the most important factor in in determining how well you do. And most companies, most management teams will tell you they take great care of creating a great team and a great culture. But in reality, the level of investment they make in it does not… it’s not consistent with that claim. So that’s also something we try to do extensively. Perhaps these these points

 

Siddhartha Ahluwalia 00:27:01

And it’s been like you know maybe if you can share the early years like what was how did you grow the revenue and what was the revenue if you can remember during the first four five years that can give an audience a better perspective of what it took to take it here.

 

Luca Ferrari 00:27:16

Well In 2013, we started the company around the summer, very little, few tens of thousands of dollars, probably, then I would say maybe 2014, certainly less than 1 million, my recollection. And then, uh, you know, maybe a couple of million, it was probably around 10 million in 16, 17. And then, you know, a few tens of millions kind of goes up, pick your.

You can, you can, you know, you start from a very low seed and then, you know, get your CAGR, spread it as you will. There has been no year that was an outlier. Some years we’ve grown faster, slower, but there was never a year where we kind of 10x or something like that.

 

Siddhartha Ahluwalia 00:28:10

But I would assume it would be like consistently 2x every year on year. That would be the right thing to say.

 

Luca Ferrari 00:28:16

Yeah, more, more earlier. In the later years still pretty fast growth, perhaps not quite a hundred percent on average. I think the last couple of years, probably more like 70 percent revenue wise.

 

Siddhartha Ahluwalia 00:28:30

As an outsider, what seems to me, one of the reasons for the success of Bending Spoons is that as a founder, you’re not attached to your product because you are objectively acquiring them and giving them, you know, hey, do we take them from here to there and what is required? And if it’s not working, you can cut it off. Whereas founders will start these companies. And when you started a company, there’s a sense of attachment that I need to make it successful. And my identity is my product.

 

Luca Ferrari 00:29:04

Yeah, I think it’s a. It’s probably an accurate assessment. I, I am and I think, I think a lot of my colleagues are extremely attached to our product. It’s just that we see the company as our product. We want Bending Spoons to be ideally the best company out there. It’s quite subjective, of course, but you get the point, the mission, I suppose.

And, and, and the products we have are a part of that, naturally, in many ways critical to, to accomplishing that, but they’re not, none of them individually is a necessary element or a prerequisite for, for, for that vision to be fulfilled which is a structural advantage we have over single product companies, I think, and it goes back to being able to be a bit more rational.

And there are many other structural advantages with our model. Also being able to… We can take risks with products because if we make a big mistake on one, although we’re not happy, we, we survive it. If you just have one product and you can, and you make a big mistake, you can, your project can, can crash and burn perhaps irreparably.

So we can be more efficient with allocating resources. We can learn in one business and import that learning to another business there are. And of course there are disadvantages too, focus is very useful when doing business. And if you just do one thing, when you wake up in the morning, if all you do is Evernote, it’s easier than if you do many things.

So as usual, nothing is perfect. We found our own way, which is in some ways better than other, but, uh, you can be tremendously successful with just one product as lots of companies have proven. So I’m not, you know, I wouldn’t say this is the best way. It’s just one way. And if interpreted correctly with a bit of luck, it can be successful. I think we’ve shown that.

 

Siddhartha Ahluwalia 00:31:09

And one of the reasons I think is you cannot be labeled like most companies that become large of similar scale. They can like Clavio can be labeled as a company supporting Shopify, right? And so they can never break that mold. They have to start a different brand. If tomorrow they have to build a cloud computing business.

But for you I think that’s an inherent DNA advantage that you have if you want to start a cloud computing business, you can start it by acquiring and building it at Bending spoons.

 

Luca Ferrari 00:31:41

Yeah. We don’t even try to place our, our brand Bending Spoons on to product businesses. We, we let them be autonomous in that regard.

 

Our, our brand is only meaningful toward investors and job candidates. The Bending Spoons brand. We don’t want it to be necessarily meaningful to consumers. I mean, it may be one day, but that’s really not a goal. I guess in that we are similar to Procter and Gamble in consumer goods, physical consumer goods. They, they have hundreds of well known brands. But if you pick a hundred people in the street, probably 90, don’t even know what Procter and Gamble is. And it’s one of the most important, successful companies in the world. There are different ways you could do it. Like Google has a smaller set of products, still a lot, but relatively speaking. To some degree, you know, they’re kind of branded the same way and somewhat integrated, not all, but most of them. So again, a very successful model, clearly you can do it different ways.

 

Siddhartha Ahluwalia 00:32:48

And does a team member have to work on one product or they can work across multiple products?

 

Luca Ferrari 00:32:54

Well, we’ve got a bunch of teams, we call them platform teams working on horizontal technologies, knowledge, services. Some are, as you would expect, accounting, finance, legal recruiting. Some are perhaps less expected, you know, A-B testing, monetization, some developer experience. So these people working on these teams, they, in a way they work for no product and all products at the same time. Then we have teams serving or working on a specific product or a small set of products.

Typically a team member working on one of these teams at any given time only works on that particular product. However, in time, they’re likely to move to other product teams.

 

Siddhartha Ahluwalia 00:33:44

And what about the sales and the marketing machinery? Is it common across the products or is it dedicated? Let’s say if you have 300 people in your product in tech and 50 to 100 people in sales or marketing. Then are they working on different products or one for one?

 

Luca Ferrari 00:34:00

It’s a mix but primarily it’s specific to to a product and they work on that team. There are certain parts we have centralized. For example, we have a team called media design and they, they’re kind of a, a bit of a name of an in house creative agency.

So they can produce a high quality visuals of all kinds and our product teams will leverage the help of these team to, for example, create advertising campaigns or certain in-app content like animations, but let’s say the, the more, let’s say the more strategic marketing decisions, like how do we price this product? What kind of customer we’re going after? Mostly it’s within the products that these are made, although it’s always a collaborative endeavor.

 

Siddhartha Ahluwalia 00:34:56

And how much, you know, especially on the sales and marketing and even on the product side, do you borrow from before, like what has been done before the acquisition?

For example, let’s take Evernote. So after acquisition, like how much did you change? The monetization, the pricing, even the tech and the product of that particular product.

 

Luca Ferrari 00:35:14

Well, we, we will review everything. Um, of course we try to learn as much as possible. There’s, there’s always a lot of good, uh, otherwise a company wouldn’t have been successful and relevant.

We try to bring a fresh view. And if we find that certain things can be done differently, we try to make those changes.

 

Siddhartha Ahluwalia 00:35:37

And have you seen like the, the company that one of the companies that you acquired after the acquisition, have you taken it from let’s say $1 million annual revenue to a $50 million annual revenue? Has that been a case ever?

 

Luca Ferrari 00:35:50

It depends. I would say in some cases when the product was not mature, say Remini, for example, we 10xed it. But for the acquisitions or of mature products, products that have been on the market for many years or multiple years, no, not, not nowhere near that level of growth.

Like Evernote, we have grown it a bit, but it’s not, not by leaps and bounds or even, you know, more recently say acquired a StreamYard, the number one, recording and live streaming software. We do expect to be able to grow revenues quite substantially but but not like triple them or quintuple them or something like that.

 

Siddhartha Ahluwalia 00:36:36

And is there a research team inside which is let’s say at any point in time researching on 100 different products, 100 different categories on what to acquire? And then the acquisitions teams picks on the research team and start talking to them.

 

Luca Ferrari 00:36:50

It’s the same team. I… That part of the business is probably not too different from say a private equity. So we have a small team focused on acquisitions. They last year, the, the, over the past 12 months, they have looked at over 3000 companies. So they will up funnel. They will look at a lot of things quite summarily, of course.

And then you kind of filter by certain criteria, size, assumed fundamentals, likelihood that it may be on sale. Then you reach out and, you know, feeding the pipeline there. It’s just scouting the internet, talking to investors, advisors, banks, entrepreneurs, and then you later for a small, small subset of those, you try to establish a view of roughly, you know, if it can be competitive, then you maybe you reach out to a key stakeholder, whether it’s the CEO, an entrepreneur, a key investor, and see whether there is an interest in discussing a sale.

Sometimes there is a sale process ongoing and advisors call you to participate. So there are different scenarios. That part I don’t think we are particularly unusual or unique or or capable. I think where we are better is at developing accurate projections, so where the business could go. And by the way, it could go either way.

Sometimes we see that things are not as rosy as maybe less sophisticated buyers think. So it can also be that…, we step away quickly, but and then the, you know, the, the main advantage is structurally for some of the reasons I mentioned earlier, and, and also in terms of competencies and technologies, we believe we tend to be better operators than most. And, and so we can share part of the extra value with the seller by offering a better price than most can’t.

 

Siddhartha Ahluwalia 00:38:45

And do you think, let’s say for example, let’s take Evernote again. In that case, you were aware that this industry is getting disrupted by players like Notion and especially like now note taking can be integrated inside ChatGPT.

 

Luca Ferrari 00:39:02

Well, we, we don’t look to say, win in a way that we need to own the most amount of share of the market or our product needs to be the most well known in Canada or whatever, like it’s, it’s a relative game. We, we seek returns and what we need to accomplish is do better than the price we pay entails pretty much. So we could do very well with a business that’s declining as long as we are going to do better than say the previous owner ever would be able to or the other acquirers ever would be able to and you know, assuming everybody offers reasonable, somewhat rational prices, then we should win out and we should still be able to, to get good returns. So our, the assumptions we had behind Evernote was not we only do well with this deal if now we obliterate Notion and gain market share back from Apple notes or whatever, like, sure, we will try to do that if possible, but it’s unreasonable to expect that to be your median scenario. You know, so our, we think we can do well by improving the product tremendously, improving monetization tremendously, improving the marketing, the operations we believe will do well, even if as is likely, Apple Notes continues to be a good product that appeals to people who have relatively simple note-taking needs and are not interested in paying for a more advanced product. Even if, as is likely, Notion continues to be a very good product in which many people put a lot of effort to improve it further, like, we think we’ll still do well.

Yeah if we can do better than these companies then it will be a homerun But I don’t anticipate that will necessarily be the case.

 

Siddhartha Ahluwalia 00:41:04

I think this is a very important point that you made right? When most entrepreneurs are attacking a category and even when investors are backing them they want them to be the number one product in that category. And if they can’t see that to be the number one even among the top three products in that category then probably it’s not a return on investment for the investors and they program the entrepreneurs like that.

 

Luca Ferrari 00:41:28

Yeah I think it makes sense from a point of view of a seed investor or venture capitalist when you look at it on a portfolio basis, it might be the case that you’re better off with each company, each bet going a hundred miles per hour, whatever decision that picked and so that more will fail than if each had been more cautious had kept optionality higher, had been more calculating, but then the fewer which ended up winning will win bigger.

That might be a better bet on a portfolio basis, although for each individual company, each individual team, it significantly reduces the chances they actually win. It’s like, okay, there may be a door there. I can’t really tell. I’ll go a hundred miles per hour. If the door is there, I’ll get there faster.

If it’s not there, I’ll just crash and burn and it’s over. If, if I’m on that car, maybe it’s not what I want to do. I’m willing to end up third or fourth, but actually finding most likely finding a door. But if I’m not the driver, I just, I just have a hundred cars and there are no moral concepts at play.

It’s just, it’s just math. Then I’ll be like, yeah, everybody drive as fast as you can. Hopefully, you know, most will hit the wall, but I’ll have a couple of cars who find the door and they will be first almost for sure. Cause they’ve gone a hundred miles per hour, money hiring, and just not stopping to think, just go, go, go. It makes sense. It’s not irrational. We’re just a different kind of company.

 

Siddhartha Ahluwalia 00:43:04

Yeah. And I think if more VCs and entrepreneur build with that, with more consciously that hey, let’s aim to be the 10th best product in that category. And then we can evolve the product or build more products, we wouldn’t see so much crash and burn.

 

Luca Ferrari 00:43:17

And to be clear, we, you know, we love to be first every time we can. Remini is far and away the number one product for AI based, image editing, image generation in the world. It’s to my knowledge, the second most used generative AI product in the world. It has over a hundred million monthly active users.

It’s only second to ChatGPT as far as I can tell. There are many AI startups or products that are much more in the press for some reason, but very few people use. Remini is huge, actually. So when the opportunity to get there by deploying capital efficiently is there, we’d love to get there, but it’s not an imperative.

Like we will do everything in our power to make sure Evernote is the most used note taking up in the world, even if it means burning hundreds of millions of dollars or like that is not the way we think about it. But if there is an efficient path for it to win, of course, you know, that’d be great. We will try to find it.

 

Siddhartha Ahluwalia 00:44:16

I think that’s the most sustainable way to build companies and build better products in a organic way. Yeah, I think so. Yeah. Luca, uh, one of the things that we discussed offline I want to bring here online, right? How have you thought about Building the enterprise side of the software business?

 

Luca Ferrari 00:44:35

Right. So we as of today we have only minimal, let’s say investments in enterprise. We do have some enterprise customers and a tiny tiny salesforce, but we’re talking a handful of people So it’s really a negligible part of the business. We do…We would love to, to build that muscle, to establish that expertise, to create a sales force going forward.

 

As we believe we might be good at that. Although not initially, there is a lot of learning to be acquired certainly. And, and over time that would enable us to further expand our addressable market. Now probably the best way of doing so will be to acquire a company that has either it’s an enterprise software business or has a substantial component there.

We wouldn’t want it to be so big that if we do poorly, it jeopardizes the overall Bending Spoons. So the size would have to be just right. But we’ll be opportunistic about it. If we see something that suits that description, we will try to get it.

 

Siddhartha Ahluwalia 00:45:36

But it’s a very different DNA. It’s a extremely sales driven DNA, bonus driven DNA, and a lot of feet on the street.

 

Luca Ferrari 00:45:44

Yeah, absolutely. I, I have no doubt it will be a challenge, nor do I expect we will necessarily succeed. I think our being rational, data informed, scientific in our approach. And our Kaizen mentality, continuous improvement, always trying to be better tomorrow than we are today will fit sales well. It’s not a game of one individual super charismatic salesperson winning it for you.

It’s more a process, iteration, optimization, repeatability. As far as I can tell, I’ve talked to experts in the field and it also has seems to be the case if you think first principles because you can never, you know, hundreds, you cannot hire hundreds of people who each will be heroic in their sales efforts and get it done. Like you have to have a method. So I think we might be good at that over time. We’ll see.

 

Siddhartha Ahluwalia 00:46:43

And you stress so much early on in a discussion about product market fit. How do you describe internally what product market fit is?

 

Luca Ferrari 00:46:53

Well, I’ll separate this: The way we look at it and the way one should look. So if I were an early stage investor, if I were to launch products from scratch, scratch the way I would look to see whether i’ve gotten product market fit is do I have retention?

Do I have word of mouth? Those are the two most telling signs if you have retention and word of mouth over time typically, you’ll build a large user base and probably customer base. And you’ll have, you’ll enjoy a substantial rate of organic traffic. Given that we acquire already established businesses, we, we have the luxury of looking at the results of product market fit downstream, which is: Do you have a substantial user or customer base? Do you have a substantial rate of organic traffic? So those are pretty obvious to spot and it’s not there that we add value. Anybody can see those, I think.

 

Siddhartha Ahluwalia 00:47:48

And is, is there a science within the company to figure out, let’s say you mentioned you are evaluating 3000 companies at any point in time to figure out which are the top 30 companies with the highest product market fit?

 

Luca Ferrari 00:48:00

No, we, we don’t really try to buy the companies with the best product market fit. We do assign value to it, but ultimately something is only good to us if the price is appealing relative to the value we can let’s say generate or the, you know, the, the value we can realize through that acquisition. So if a company has a, let’s say that for, let’s be a bit simplistic, but I think it kind of suits the conversation.

 

Let’s say we, we say we measure product market, the intensity of product market fit by looking at retention. And so the higher say gross retention is the better product market fit is we, we do see and agree that higher retention is better than lower retention. We will assign value, potentially lots of value to it.

 

But if the price that’s required to acquire the asset increases more than the extra value coming from the extra retention, then we will not acquire that asset. We will acquire an asset with lower retention. So, it makes no sense for us to filter primarily by the intensity of product market fit. Rather we will try to have a hypothesis of how competitive we can be relative to other acquirers and how eager to sell the current owner is.

Those are more like, those are factors that are more likely to correlate with value creation for us. Then certainly, you know, intensity of market product market fit might be an interesting extra one to kind of shorten the list a little bit further.

 

Siddhartha Ahluwalia 00:49:40

How much you would attribute timing and luck to have played a role in your success?

 

Luca Ferrari 00:49:48

Well, it it wildly depends on the time frame, time frame over which you ask me, if you ask me on an infinite time scale, I will tell you luck is 99, basically 100%.

Cause I, I happen to be born. I happen to be born at a time where building a business is possible in a place where it’s maybe not the easiest in the world, but not the hardest either. So there’s, there are so many hurdles, so many ifs that turn out to be at least acceptably favorable to me specifically that luck is basically all of it.

If you ask me how much of our performance over the past five years, do I attribute to luck? Actually, not too much. I think majority has been diligent, discipline. I’d like to think smart execution of a reasonable strategy. So yeah.

 

Siddhartha Ahluwalia 00:50:47

But do you think starting Bending Spoons at the right time helped to build it what it is today, like 2013, 14 timeframe?

 

Luca Ferrari 00:50:56

Yeah. 2013 is better than 1884, but probably worse than… I think we, we would’ve done better had we started it in 2005, for example. So I often look at situations that were available in the past that may not be available today. Generally, the economy gets more efficient in time.

There may be aberrations. But by and large, the trend has been consistently toward greater efficiency. So as an actor that specializes in improving efficiency in a way, like I’m again abstracting a bit, the greater the level of inefficiency, the more we can thrive. So had we had a similar insight 10 years earlier or five years earlier, I think we would have done even better, but it’s still good.

We, we could have, like, as I said, we could maybe have lived when it was just not possible to do it too early, or maybe we could have come at maturity or to having this insight 20 years from now, when maybe, maybe there’s no opportunity left any longer. Who knows?

 

Siddhartha Ahluwalia 00:52:05

So what you’re trying to say is if somebody wants to start Bending Spoons in 2024, they would find it much more tough because the number of inefficiencies are getting reduced, especially due to AI.

 

Luca Ferrari 00:52:17

Yeah, it’s certainly harder today. And also because we exist, you know, so we took us 11 years to build the platform we have today, 11 years to build a credibility, the access to capital. So if someone built, if started Bending Spoons two years ago, I think they have zero chances of outbid us on a deal.

Maybe they can do some smaller deals we’re not interested in. And I think we have executed pretty well. I think it’s quite hard to execute a lot better. So the opportunity is maybe it’s never zero, you know, it’s like saying Google did search. There is no opportunity in search. There’s always a little bit of an opportunity set aside major transformations like AI changes everything i’m talking to under somewhat stable boundary conditions. I think if the opportunity when we started was 100, now it’s probably 10, but it’s not zero.

 

Siddhartha Ahluwalia 00:53:16

And how, how does AI changes the landscape for opportunities?

 

Luca Ferrari 00:53:19

Yeah, it’s, it’s tricky. My view is at least in the next five or 10 years, it probably improves it for us. So in the long run, I think AI disrupts our lives to a point where I’m not even sure talking about different businesses makes a whole lot of sense. I’m quite concerned about disruptions, exceedingly painful disruptions in our societies.

I don’t know how far in the future that is. It’s not one year. It’s not 80 years either. And then, you know, even further down the line, there is a question of AI being so dominant that we don’t matter and what that, what does that entail for humanity and, and life, you know, let’s say, biological life. That’s a separate story altogether. But in the imminent future, the next few years, I think it, It’s an advantage for us for a bunch of reasons. First of all, it’s a major threat for a lot of businesses.

And if you are a single product business it makes you more willing, I believe to sell because yes, you may do well, but you may also be destroyed. Whereas for us having multiple ones, we can, that risk is kind of spread out and we can take it much better. If on average it’s, it’s a criteria in terms of value creation. Number two reason why I think it helps us, we are focused so much in creating absolutely outstanding teams of people. Top performers in every function and AI makes capable people more capable. It, I, unfortunately, perhaps it increases all sorts of divides. Barring governments spreading, you know, opportunity and wealth.

But in the wild, it increases divides. It makes a great engineer better by 10 times. And the mediocre one was already one 10th the ability, if the mediocre one produced one and the better one, 10. Now the 10 becomes a hundred, the one 10. Now the difference is not nine. It’s 90. You see, so that’s true for most professionals, I believe. And so because Bending Spoons has built teams of outstanding professionals, the advantage will grow.

 

Many established companies will struggle to adopt AI and transition because it’s so difficult culture wise, emotionally, operationally. So for us as a new acquirer with a fresh view and having done it before, I think will be easier. So I believe we’ll be. It’s an advantage. Also being able to leverage AI as builders.

We have an amazing team of AI researchers. It’s quite hard to hire capable AI people. There, there’s only a handful of people, of companies in Europe which have the appeal to new graduates or people in AI as, as Bending Spoons does. And so for 99 percent of companies, they will struggle to attract capable people in the field.

For all these reasons, I believe we’ll do. We’ll, we’ll be at an advantage because of AI in the next, say, five or 10 years, but further down the line who knows.

 

Siddhartha Ahluwalia 00:56:24

And how much attribute you would put on starting from Italy? You could have started from anywhere, right? You were ex McKinsey alum, so you knew the world. It was not that you were restricted to a small city.

 

Luca Ferrari 00:56:37

Yeah. I don’t know if I knew the world. I’m, I think I’m more naive than most people by nature. We actually started Venice Prunes in Denmark, in Copenhagen. We moved it to Italy around one year into the project.

 

Siddhartha Ahluwalia 00:56:50

And why did you do it?

 

Luca Ferrari 00:56:52

For two reasons. Why? One, we thought Italy had a lot of talented people, not because Italians are more talented or less talented, merely it’s a pretty large country. I know relative to India, most countries look small, but nearly 60 million people, quality education. But there were relatively few opportunities for ambitious, talented people to do something truly remarkable.

And so we felt it could be a win win. We could have access to amazing talent and these amazing talents would have access to a much better, more fulfilling opportunity. So that was the let’s say the, the business reason. And then there was a, call it a mission reason. We felt Denmark is a small country with plenty of nice, successful, you know, at, at its scale, successful companies and kind of thriving economy.

Italy is one of many, most, you could say countries where the potential, the untapped, the level of untapped potential is quite substantial. And we felt if we could be one of the best companies in the world, a significant, significant global force in business with roots in a country such as Italy, we could be of inspiration for, for other people in, in Italy and other countries, and again, it could be Spain, Portugal, Greece, India, you know, like most countries really, where you didn’t have a lot of local champions. And so young people believe it cannot be done.

And that is the seed of a thriving entrepreneurial culture. Seeing others having done it before you. California used to suck too at some point. And then a bunch of things happen, primarily Fairchild semiconductors, and then it’s kind of a snowball effect.

 

Now, I’m not saying Italy is going to become California, God knows. I mean, maybe who knows, but probably not, but we can make it better. And so that was the more of I would put it more into the mission bucket of if we do super well then this will magnify whatever impact we’ve had In the process so we moved here.

Siddhartha Ahluwalia 00:58:47

And your HQ is also based out of Italy now?

Luca Ferrari 00:58:50

Yeah, we we have only one physical office. We hire all over the world, although primarily in Europe. We may open new offices in the future with, there are no specific plans to do so as yet. Italy probably have about, I would say maybe 30, 40 percent of people base here maybe, maybe closer to 50. And then the other 50 percent is all over the place. So we’re happy to, happy to have made the move. And, and going back to your question, I believe we would have succeeded elsewhere and there may have been even better places. I’m sure, you know, we consider many countries actually, but Italy has been a good choice for sure. Better than most.

 

Siddhartha Ahluwalia 00:59:41

You said first is talent. Yes. And what would be the second and third from an external factors point of view?

 

Luca Ferrari 00:59:48

No, I would say primarily talent. From a business perspective, primarily talent, yeah.

 

Siddhartha Ahluwalia 00:59:53

Got it. And let’s say tomorrow Bending Spoons decided to be a public company. So where would you have listed then?

 

Luca Ferrari 01:00:03

Well we haven’t made up our minds with regard to that. I think we will probably list in the US because there is really no requirement. You can list in the US from Italy. What we think is important in terms of inspiring unlikely places, such as those I mentioned earlier, is primarily where do you have decision makers, where do you have research and development, where you have like whether your Stock is listed on the NASDAQ or some other stock exchange I think it’s kind of minor. In fact, you could argue it’s It’s doubly cool that a company based in India or Italy or Portugal or Greece or Romania lists on the Nasdaq. So we might do that. Plus you can list on multiple exchanges. So you could also list elsewhere.

 

Siddhartha Ahluwalia 01:00:54

Yeah. And what are your views from an external builder about India?

 

Luca Ferrari 01:01:01

I don’t know too much about it, to be honest. We, we, we do have one or two colleagues from India who happened to, to move here, hard to tell.

I mean, I’m sure there’s even more talented people than in Italy and probably there is a comparable opportunity to build something remarkable I know you have some significant tech companies coming up and some established ones

 

Siddhartha Ahluwalia 01:01:26

And some of the things that I wanted to ask you, right? Because what we are today contributes is majorly contributed by our childhood, right?

I can tell it for myself like being an entrepreneur starting companies and then starting a fund. I saw my father as a small and medium businessman staying in a tier three city in India, fail four to five times at businesses. And I saw him that business can’t kill you. That…

 

Luca Ferrari 01:01:54

if you don’t let it

 

Siddhartha Ahluwalia 01:01:55

yeah,

 

Luca Ferrari 01:01:56

I guess,

 

Siddhartha Ahluwalia 01:01:56

unless until you go in debt or do gambling or something.

 

Luca Ferrari 01:02:00

Don’t let it burn you out or something.

 

Siddhartha Ahluwalia 01:02:02

Yeah. Yeah. But, but business can’t kill you. And that motivated me to start right after my college. Like what, what was your Childhood? I can ask DNA or upbringing that made you what today?

 

Luca Ferrari 01:02:17

I’m very thankful to my parents. I’m an only child. Loving parents. Certainly can’t complain. It’s hard though, to trace any advantage when it comes to entrepreneurship, to my upbringing, because I came up in this tiny village, as I mentioned in the Northeast of Italy, 900 people live there.

People that are mostly were farmers, truck drivers, plumbers. My parents were hairdressers. None of my, nobody in my family had got some say a university degree. So it’s not that… my, my horizons were pretty small. So my dreams were fairly abstract in that regard. I think I… in hindsight, it’s, it’s fairly easy for me to see. I had it in me like a strong desire to build something. Or try at least to contribute, building something wonderful, significant.

 

But I, I, I believe if you had asked me when I was a 12, 14, 16, what being entrepreneur is, I, I probably had heard of the word. I didn’t even know what it meant. I…when I went to university, I met a group of people who had a much wider, far-reaching views than I had on the world. And they infected me with, with that knowledge.

I remember quite clearly, fairly early in my university years, maybe second or third year, someone showed me TechCrunch and I, I I’d never even seen a similar, at the time it was called a blog, now it’s kind of an online, an outlet for information that’s a little, a little bit broader than that with plenty of journalists and researchers, but…And I remember falling in love with the idea of building technology and businesses. It was love at first sight.

But before that, I, I didn’t know I’m, I had a phone very late internet, very, very late in my… during my high school before I didn’t have internet. So it came late. As I said, I was pretty naive and I guess a late bloomer in that regard.

 

Siddhartha Ahluwalia 01:04:48

And your university, was it in one of the big cities in Italy or was it in a small town?

 

Luca Ferrari 01:04:53

I went to university in Padua, which is one of the, it’s not probably the, biggest, most prestigious university in Italy for I studied engineering for engineers is in Milan. It’s a, it’s a technical university. The, the Padua one is considered a good one. One of, one of the best, probably not the best. So I studied there and then I, I was fortunate enough to get access to a double degree program, which enabled me to get a second, a master’s degree in Denmark, Copenhagen, you know, where I then happened to briefly work as a consultant,, launch and fail with the Evertail, the, the startup. And then, as I said, we founded Bending Spoons there and moved it to Italy later on.

 

Siddhartha Ahluwalia 01:05:39

And why do you think many tech companies, like you are the largest tech company in Italy and I would say one of the largest top 10 in Europe. Would that be a fair assumption?

 

Luca Ferrari 01:05:48

Well, there’s, it really depends on how you define a tech company because, you know, there’s plenty of much older technology companies. Software companies. I would say maybe those among the companies TechCrunch would talk about, you know, that were considered startups and probably, yes, I don’t, I haven’t seen.

In Italy, easily, I would say, but in Europe I’m not sure. I haven’t, maybe I didn’t check. I don’t know.

 

Siddhartha Ahluwalia 01:06:12

Yeah. But why do you think that more people are not starting companies in Europe? Like, why is Europe not seeing the same scale as probably, you know, Europe is pretty large, right? And talent density is quite good. The resources are there.

 

Luca Ferrari 01:06:33

It’s hard to tell. Some of it may be simply… Some of these phenomena are somewhat exponential in nature and exponential functions grow pretty quickly. Maybe Europe now is where the US was five or 10 years ago. And so if you continue comparing it to US, it looks dismal, but it’s only at its natural step on the growth pattern.

I don’t know because I really do not invest any time into looking into this. Maybe people who do and have the data will have a different view, but that could potentially be an explanation. I’m sure there is an element of culture that plays against Europe in this regard. I feel, and I’m generalizing on average, I feel Europeans tend to be more traditional in nature, more risk averse.

More process and bureaucracy-oriented. Americans are more pragmatic, more entrepreneurial, more innovative, more aggressive with the good and the bad that comes with it. And when it comes to building new companies, those attributes tend to win out. So I think that plays a part probably so that all else being equal Europe would still do worse, I believe.

And then a lot of these, there are a lot of factors that mutually enhance. For, for example, the more capital, you know, the more projects and that forms more talent and then more new projects and more capital comes in. And, and again, that goes back to the exponential nature of the, of what I discussed earlier.

But it’s not just exponential, it’s not just about the, the math of it. It’s also that there may be certain competitive advantages that get established. It’s unusual to talk about competitive advantages when you talk about an ecosystem, but they may apply to. And so if it’s possible that in the US you have established certain assets now that make it hard for other locations to compare, to compete at the same level. So that the kind of the saturation point is higher in the US than you will find it in Europe.

There are also other advantages the US enjoys. For example, it’s a larger market. If you launch a company in Italy, your market, whatever software you’re building will be maybe 5 percent of the US market. And so you have to immediately work in multiple languages, making sure you appeal to a more diverse customer base, you comply with a more diverse set of laws that can be a fairly substantial hurdle at the margins in such a competitive environment.

Whereas if you launch a successful technology product from Kentucky, more or less naturally, it will spread all over the US. Also, the media online people, like if, if people start talking about it, it’s English, people are on X or Instagram, and they’re all connected. You don’t even know where people live in the US.

Whereas, again, in Italy, have a different set of journalists of influencers. So there’s all sorts of disadvantages. And when you put them all together, They probably make a fairly substantial difference.

 

Siddhartha Ahluwalia 01:10:00

And you would also attribute it to the risk taking and celebration of failure in the ecosystem.

 

Luca Ferrari 01:10:06

Yeah, certainly. As I said, in the US, people who succeed, they tend to be applauded. In Europe, Italy, particularly, people who succeed, the first reaction tends to be, Hmm, is there something fishy behind it? Like, that’s, there’s no reason for it, but that’s what a lot of people will start thinking, and only after they have established there is no fishiness, then maybe they’ll applaud you, perhaps, or move on to whatever next target of their envy or concern is.

 

Again, I’m generalizing. There’s plenty of people applauding and it’s not by any means extreme, but again, in a competitive globalized world, each of these factors maybe individually plays a 5 percent role, but when you stack up five or 10 of these, it starts being a massive advantage for say the US versus Europe.

You see it in regulation too. There is a lot of, all of the regulation you see coming up in Europe comes from a good place. Like we try to protect consumers, even companies, society. So I agree with that sentiment. The implementation ends up hampering. Often hampering innovation and progress, you see across the board of all sorts of regulation, not just now with new AI regulation, but labor laws are so much more convoluted and restrictive, and they stem from an idea that let’s try to protect workers.

The opposite happens in the U.S. You have lower unemployment, higher salaries. So again, it comes from a good place. And it ends up perhaps hurting more than helping on average. Again, there’s plenty of rules that make sense and others that don’t.

 

Siddhartha Ahluwalia 01:11:49

And then in the beginning, right, right now it’s a thriving ecosystem because you are the company that people look up to. In the beginning it was tough to hire tech people, tough to build a company from Italy.

 

Luca Ferrari 01:12:00

Yeah, we knew we couldn’t hire people with both talent and quality experience. So we immediately geared up to hire pretty much only inexperienced people. And still do to this day, we have become specialists in hiring talented, but green people. And creating the conditions for, for their talent to blossom very rapidly for their potential to, to be fulfilled a much faster than most places I would say.

 

Siddhartha Ahluwalia 01:12:40

On an average today, how many new people you would hire every year?

 

Luca Ferrari 01:12:44

Oh, we don’t really have targets, but for example, the last couple of years, I would say we probably added maybe a hundred people per year, give or take 50 to a hundred.

 

Siddhartha Ahluwalia 01:12:54

Got it. So it’s not like you’re doubling every year.

 

Luca Ferrari 01:12:57

We try to hire as few people as we can.

 

Siddhartha Ahluwalia 01:13:00

And these are usually freshers from universities?

 

Luca Ferrari 01:13:02

Yeah, almost all of them.

 

Siddhartha Ahluwalia 01:13:04

Wow, all of them freshers?

 

Luca Ferrari 01:13:06

Yeah, 99%.

 

Siddhartha Ahluwalia 01:13:07

So you must have a really good system in place to filter out. To filter out? To filter out people, because let’s say 10, 000 freshers are applying. How do you select the best 100?

 

Luca Ferrari 01:13:18

Oh yeah, I mean, it’s a pretty cumbersome selection process. We take a lot of flack for it. Going through the selection process for Bending Spoons is probably four times the time investment or 10 times the time investment as for most tech companies. There are online tests and then more online tests and then a couple of interviews. It, it, it takes hours upon hours.

However, for someone who’s ambitious with their professional growth, I think it’s worth it because, well, first of all, hopefully it’s an interesting, fun learning opportunity. Just to go through the selection process, you get feedback and, but if you get selected, then you get to work with the truly amazing teams, which is true in some places, but not most places.

And in my experience over now 14 years of, of building companies and, and, and doing business, the quality of the people you surround yourself with is by far and away the number one factor in determining your your growth as a professional, but also as a person. The the pace at which you pick up new skills, the levels of which you can push your problem solving, your emotional resiliency, all of these things, mostly they happen because you’re exposed to virtuous examples and you emulate them.

That’s how humans learn. This is far more important than working on precisely the type of problem you want to work on, although that’s nice. And by all means, try to get there if you can, or having access to a, you know, good books, you can read, like all those things help, but by far who you work with, and ideally who you live life with too, but we’re talking work here, determines who you’re going to be in a good and a bad way and how quickly you get there.

And so it’s a lot of work to go through the selection process and for us to you… manage it, but ultimately, we think it benefits Spooners. That’s how we call one another by helping them reach higher high heights than they otherwise would.

 

Siddhartha Ahluwalia 01:15:33

So is it fair to say any candidate who gets selected would have invested 15 to 20 hours in the interview and pre-selection process?

 

Luca Ferrari 01:15:42

Maybe it depends on the role. Some roles are more, entail more time-consuming tests than others. And it varies over time. I don’t want to be inaccurate, but probably the order of magnitude is right. Maybe not quite as many hours, but. But it’s more than five for sure.

 

Siddhartha Ahluwalia 01:16:00

And what do you think are the areas now you have like mastered the art of acquiring consumer software companies?

 

What are the areas that you want to dabble in future? You mentioned a little bit about enterprise software that you can think like make Bending Spoons a 10 billion dollar revenue company in the next 10 years.

 

Luca Ferrari 01:16:19

And first of all, I, I don’t think we have mastered what we do. There’s plenty to learn. In fact, our, our mantra is to, I mentioned the Kaizen before.

 

I love Toyota. There’s their, their, their history of creating this culture of, uh, self-criticism, continuous improvement, coming to work every day with the idea that you can be better, the team can be better, everything can be better. Even if by only 0.1%. That adds up over time, it’s a mentality, it’s a way of living, so we are… We think we’ve done reasonably well.

It would be hypocritical not to recognize that, but we feel we could have done so much better. Uh, and we, we look at almost everything we do as a major opportunity to, to do better, having said that, if you’re talking about adding entirely new weapons to our arsenal, I think, as you said, enterprise sales is an interesting one, which would be a major new tool, it would open up a whole set of new opportunities. I think an area where we want to be even better is coaching a new hires, new spooners into greatness faster.

Well, I believe we’ve been quite effective at helping people develop amazing skills over time, but I’m pretty confident we could achieve this at least the same result a lot faster if we were more structured, more deliberate in the challenges we have them go through, the specific support we make available to them. So that’s a massive area of opportunity in, in, not just in my view, in the view of many, many colleagues too.

 

Siddhartha Ahluwalia 01:18:09

In, in a conversation, and this is probably the last question that, that we are discussing today. You mentioned price a lot of times, right? The price has to be right. The price has where were you inspired? Like, is it like more about getting inspired from Warren Buffett’s and the Charlie Munger’s of the world on getting to the right pricing and what are your internal memos or documents that refer to it?

 

Luca Ferrari 01:18:33

So Warren Buffett, Charlie Munger are certainly great Investors, and there’s plenty to learn from them. I like to think that the price point is fairly obvious ultimately, merely from the point of view of returns, just math, it’s an equation and price is a variable. So anybody who disregards that is, is not thinking right in my opinion. Even if, even at the early stage where I understand the, the goal is to say you’re a seed investor investing the one or two mega winners that is more important than paying a cheap price for those.

I get the point, but if you were to to fix, you know, if you fix the quality of your investments, if you were to pay 10 percent on average, you would do better. So the price always has to be a consideration. Ultimately investing in theory is quite simple and it’s all about making a good prediction of what something will be valued, valued in the future at some point, and then paying the appropriate price for it or the lowest possible, but certainly not higher than your hurdle for returns.

So that, that really, that, that’s all of it investing right. Now, being successful at it is difficult because you need to be able to make those predictions, projections, and that’s devilishly difficult in general, in some fields for some companies more than others, then you need to be disciplined, patient.

Even assuming your predictions are good you may still fail, get deal heat and and just start dreaming of possibilities that are out there because you really want to do it. And then you, you know, Warren Buffett says, if an investor had only 10 investments they can make in their old careers. They’ll probably be very successful. Almost anybody.

The biggest problem is like, can you stay patient and disciplined? So that part is also challenging. But the theory of it is pretty straightforward. You can, it cannot not include price in our case. We’re also operators. It doesn’t change the considerations we need to make upon acquiring a company, which are exactly the ones I, I express now, but the better we are as operators, the more we can impact the future trajectory of a business in a good way, the better the price we’ll be able to pay and therefore the bigger the pool of assets we can acquire and the better the returns we can, we can accomplish, but that’s kind of a separate topic. We need to be the best operators we can because it makes everything else easier, but ultimately the parameters for choosing a, an investment will be the same.

 

Siddhartha Ahluwalia 01:21:24

And, and do you follow certain, what I would say principles that you have created for pricing? And another thing is you mentioned that you are better than others at predicting what this asset will look like five to 10 years?

 

Luca Ferrari 01:21:40

Well, I can’t be, I can’t be sure because I don’t get to see the projections for, for other people. It’s, it’s based on my conversations with the, with some private equity firms, with some other investors. I think we are more sophisticated than not all of them. Certainly, but many, let’s say.

 

Siddhartha Ahluwalia 01:22:00

What goes behind that?

 

Luca Ferrari 01:22:07

I think we have an unfair competitive advantage, which is we are also operators. Okay. It’s like, if you are a, if you work with cows, and then you for, and you’ve done that for 10 or 20 years, and then you go to the market and you, and you have to pick cows that will be good, good cows for whatever you need the cow for.

I suppose that having lived and worked closely with cows for 10 or 20 years will help you find patterns of what correlates with the, then certain desirable outcomes. Many, you know, private equity firms typically, they, they’ve mostly, they’ve done deals. Of course, then they are, they sit on boards, they see things, but it’s not quite as good as being in the trenches, getting your hands dirty.

It’s again, it’s a trade off. They can do more deals. So both models work, but merely when it comes to the point of, can I project the future of these business? Well, I think having operated dozens, if not hundreds of digital products deeply will serve you better than having seen as many or even more on a shallow level.

 

Had we only worked on one product, then I think it would be better to have seen hundreds at a shallow level than one deeply. But given that we’ve also seen hundreds and operated hundreds deeply, ultimately, I think we’re at an advantage in that regard.

 

Siddhartha Ahluwalia 01:23:35

And out of the hundreds plus acquisitions that you have done in, in case of, in how many cases or percentage should I ask you have been able to predict successfully that this will be the outcome and it has been.

 

Luca Ferrari 01:23:47

Well, it’s always a matter of, you’re never exactly right. So it’s a matter of how closely you, you approximated it. Most of our acquisitions have been successful which is not the same as saying that we most, we typically predicted the outcome accurately. I would say. And just for the sake of simplicity, this, so this doesn’t become just annoying for for the audience.

But I would say typically we guess right, let’s put it that way, but it’s not unusual that we’re off by a good margin, but if we, first of all, we carry out multiple acquisitions, so you can afford being a little bit wrong on occasion. And then if you make sure to have a substantial margin of safety on each, even when you’re wrong by a little bit, it’s still okay in the end, which is Warren Buffett to your point is a great fan of applying a healthy margin of safety in every investment decision. I subscribe to that theory.

 

Siddhartha Ahluwalia 01:24:48

Thank you so much Luca. I enjoyed this conversation a lot because I learned a lot and I hope you know my audience learns a lot from this conversation. Thank you for being so candid. Sharing so openly about your journey, your lessons, the mistakes, right? And how did you build such a large institution? And thank you for being so humble.

 

Luca Ferrari 01:25:09

Thank you for having me. It’s a pleasure. And I’m flattered also on behalf of Bending Spoons that you and your audience may find some of this stuff.

 

Siddhartha Ahluwalia 01:25:17

I would say it has been completely worth it for me coming from India to Milan to record this podcast.

 

Luca Ferrari 01:25:24

Glad to hear. And I hope you enjoy your stay.

 

Siddhartha Ahluwalia 01:25:26

Yeah. Thank you so much.