Bending Spoons CEO 卢卡·法拉利：4 万美元起家、收购产品市场契合与私募股权为何无法竞争

(00:00:00) You are the reason that Nasdaq exists. They went from zero to $1 billion in revenue in just 10 years. Bending Spoons CEO Luca Ferrari. We have never lost a bid before. Well, AOL has a new parent again. Milan-based tech company Bending Spoons announced it will buy ticketing platform Eventbrite. Bending Spoons is stirring up the market. They go from fixing one zombie app to reviving 20 of them. Half a billion people use our products. We're trying to build a generational company. Please welcome Luca Ferrari. Hey, here he is. Nice to see you. Ciao Luca. (00:00:46) Ciao Luca! You got fans. All right, Luca. Andiamo Luca! You have a great company. Don't make fun of Luca Ferrari. I'm not, I'm just... This is a great Italian entrepreneur, so shut the f*** up. Absolutely. Absolutely. Luca, I asked you for Meloni to call you. No, I got somebody yelling like it's Super Mario Brothers in the audience. We could have another presidential moment here at the All In Podcast. So if she picks it, if she calls you, then just run the phone over. Got my phone here. Okay, just in case. Yeah, it's ready. I mean, there's a lot of us that have actually been tracking you for a while. Um, I originally heard about you because you were in Milano, where, you know, my wife's family is from. Uh, and you had this incredibly progressive, methodical approach to growth. (00:01:31) You did this fantastic, um, podcast with, um, uh, Patrick O'Shaughnessy, which was great. I encourage all of you to listen to it. And you explained, uh, the arc of Bending Spoons. And I'd love for you to explain to folks the first few years and just all the misery and failure, the, the nadir of the company, and then the beginning of the ascent. Yeah. So the, you know, most of the, I mean, the pain, there's been plenty of pain throughout for most entrepreneurs, I think, but the, the, the biggest failures were in the previous startup. So with my co-founders, we launched, uh, an AI company in 2010, very early, too early, clearly, uh, uh, crashed and burned, um, three years later, uh, we're left with about, uh, (00:02:18) $40,000 in, uh, capital we'd raised from the VC. And, um, um, um, we, you know, clearly there wasn't a lot to salvage other than our relationship being stronger, uh, and, uh, and, and that money that the VC, uh, pretty much, uh, uh, gifted to us as they, you know, didn't want to go through the liquidation process too, too much, uh, in legal fees and too many headaches. They had seen us work pretty hard. Uh, and so they told us, you guys keep it, we'll sell our shares to you for $1, like, uh, nominal value and you go and get a nice vacation. Uh, we're clearly a little bit sick in the head and so we took the money and enthusiastically turned it into, uh, seed financing for Benny's Fools and, and, and we, you know, we came up with this. (00:03:04) 40,000 exactly in, uh, 2013 and we, we had this strategy, which has remained pretty much the same. Obviously you get smarter, you refine it in time. Uh, that was, the idea was we, we are not very good at finding product market fit or maybe, you know, luck plays a big role. Probably both things are true, uh, but we have become pretty good at engineering, uh, design, monetization, marketing in just three years of hard work. And so we should be able to be among the best in the world at that and we should be able to buy product market fit from people and, uh, and, uh, and, you know, they get a good price. We get a good asset. We can make more valuable and then, uh, we, we deploy more capital into making our, our platform. What was the first acquisition and how much did you pay and how did you get the deal? So the first acquisition, uh, was, uh, we paid $10,000 give or take, and it was a, (00:03:54) um, a mobile app for iPhone specifically. That you used to personalize your, your keyboard. Very simple. One, uh, one, uh, uh, man, uh, kind of developer, uh, sold it to us, uh, obviously a very amateurish operation, not that difficult at the time to, to make it better and more successful. Uh, but you know, What were you buying? Like you're buying one times revenue, you were buying the revenue, you were buying the app, like that one specifically, I think had a negligible revenue. It wasn't even really monetized, which of course is never the case for, for scale businesses. But it had users. It had users. So what we bought at the time was, uh, an app with a bunch of users and a good positioning on the app stores. So they, it would get an influx of new users. Um, and that's, you know, remained broadly speaking similar over time. (00:04:43) And, you know, we keep looking for great brands, user and customer bases, or we can, uh, uh, you know, improve everything ideally and make those assets even more valuable over, over time. We just do it at a much bigger scale these days, but the, the underlying concepts have not changed. Did you rebuild that app? Did you take over the code base and redo it? Just help us understand technically what's going on in the organization from that business through to some of the bigger ones today. Yeah. Is it a, is it a code business? Are you, are you doing engineering product design marketing all of the above? Yeah. Most of what we do is, is engineering and product. We have a core team of this point about 800 people. And, uh, I would say probably three quarters of them are other engineers or, yeah, researchers (00:05:29) or product designers, product managers. Most of what we do is actually improving technologies and products. Uh, and, uh, and of course, you know, that, yes, that app, we, we wrote it completely and, but it's very early days today. We're much more sophisticated. We, we, what we do is we, we bring in a quality and operating system of 50 plus proprietary technologies. We've built, uh, kind of an engine to run technology businesses very effectively and efficiently and really our core product. We swap out the technological foundation of the businesses we buy with that one so we can run it much better. And also the, uh, the people we transition across our various businesses always play by the same rules. They're more efficient cause they find the same. And so these tools cut across what? Like HR, finance, tech ops, dev ops. (00:06:14) Pretty much everything. Yeah. I mean, orchestration of AI models check, recruiting tools check, AB testing platform. It's the coolest. And then do you bring all of the technology spend up to the top coast so that you're doing one deal with AWS, one, all the licensing becomes scaled across one entity? Yeah. That's a, that's a lever for quality creation. I'd say that's a relatively small one. It probably adds, I don't know, one, two percentage points in EBITDA margins. Uh, uh, the, you know, the more important aspects are being able to drive revenue increases through better product tech and monetization, sometimes marketing, uh, cost reduction through linear teams of more talent dense teams. Uh, and, but yes, vendor optimization is, is helpful. You were doing the Elon X playbook before he did it. I mean, like there's some stories that were written about how you right-sized Vimeo's workforce. (00:07:00) You right-sized the bright. He called me before doing the X, uh, no, I'm joking. Oh, he did. Oh no. Okay. Uh, advice. But explain, explain how do I cut all the people? No, no, he didn't do that. I don't know Elon. So. Luca, how did you figure out that you could cut 80% of a team and it still works? How do you figure that out? Is that accidental where you just, I think pushing to a threshold? I think it's a, it's something we, we learned, uh, partially because early, early days when we were acquiring smaller businesses, typically these people would sell us the assets, say the product, but not the team. Cause for them, it was very small teams. They, you know, wanted to move on to whatever other project they had. And so we didn't really know any better. We were establishing teams internally to carry on the work. (00:07:45) And the number of FDs was much smaller than the original foot. No, no, no. Well also that, but then when we ended up buying businesses with established teams, we had perhaps naively built teams to run comparable businesses that were much smaller. And so we couldn't explain why you necessarily needed more people partly. Yes. Uh, through experimentation, uh, we have found, uh, call it the sweet spot. Obviously it's never perfect, but we, we, well, overall at city, the, the key thing for us is we want our businesses to be, you know, run at a 10 out of 10 level. And we find that generally you're more likely to get that, uh, that level of performance. If you have very, very small teams, super high bar for talent and sense of ownership. You have a 40 odd billion dollar market cap ish right now. I think plus or minus. Um, I don't know, actually. (00:08:30) I haven't checked the ticker since we IPO. I think it's roughly, roughly in that zone. Um, which is incredible from starting with the $10,000 acquisition. When do you trend? When did you transition from, uh, scaling on cashflow to then using debt and using more sophisticated financial engineering? So you can go after these bigger fish and how, how is it? So historically, uh, we, we, we started using debt in 2017, I believe, either 2017 or 2018, uh, very basic bank loans, TLA's. And then, um, as we, and so free cashflow, the reinvestment of free cashflow had always been a thing for us. We have redeployed pretty much a hundred percent of our free cashflow toward acquisitions, uh, since the beginning, uh, that from 2017 and, you know, and, and it was rescaled. (00:09:17) We got more credible, a little bit wiser and more sophisticated. We went for, you know, TLBs and maybe in the future, there'll be bond issuances and other more complex instruments. We haven't used a whole lot of equity. Actually, when we IPO'd, we had only quote unquote, only raised the about half a billion dollar in primary equity. Uh, and we were at roughly 20 billion in valuation. And even that half a billion dollar, we had raised pretty much all of it in the previous six months or so. So, so almost all of our track record we've achieved through reinvestment of free cash flows and debt. But going forward, I think particularly as a public company using equity tactically here and there could be a good, good idea. So with that equity, um, you're taking loans, I guess, uh, five, six points over LIBOR. So 10%, 12% loans. (00:10:04) And then you buy a business like Airtable, but that, that means you have to pay a hundred million dollars in debt payments per year. If interest rates go up and it's a 90 some odd chance they're going to start going up. What does that do with the business? Does it throttle a little bit? And then my second question, people have been pretty enamored by the progress you're making. Uh, and I think you're now facing, uh, some bending spoons competitors. So maybe you could talk, are you seeing more people show up at these auctions and it's not just you and like two other players? Yeah. So, um, that is an, an accelerant to our growth. Uh, we would still grow up pretty fast if we only use free cash flows, but our free cash flows, but definitely being able to use that is, is a good thing. (00:10:49) Uh, prudent levels of debt. And, and, and I would say, uh, I will give you like two parts. Uh, first the risk with the existing in debtness is all of our debt. Currently the, the, the average cost, the blended cost is about 9%. Give or take and it's fully hedged. So increases in, in, uh, interest rates would not impact our cost of debt. Uh, it matures in 2031. So we are in a position to pay, paid back completely before maturity. We're currently at two and a half times leverage approximately. Now, if, uh, interest rates were to go up substantially, then new debt would be, would be more expensive. Um, I think that would be under most scenarios, a net positive for us for a couple of reasons. Our returns on levered historically have been pretty high. Consistently above 25%. (00:11:35) Again, unlevered. So what do we pay 9% or 12%? Of course I'd rather pay nine, but it's not, it doesn't break the model. Uh, and, uh, you know, and the second aspect is typically when interest rates go up, the value of, uh, of, of, of assets goes down. And so as a serial acquirer, I think we're more likely to benefit more from the lower valuations than the higher debt. Now that depends. I'm generalizing and simplifying a bit, but, uh, overall we feel we are fairly well protected, um, and, you know, robust when it comes to, to indebtedness. When it comes to competition for acquisitions, um, we have all of the processes we have participated in, have had other, other buyers or almost all of them. Um, I'm sure competition will intensify or I'm sure it may intensify. Who knows? (00:12:20) Um, it could also get weaker. We're seeing private equities, web historically down software actually raised less capital to do the same. And so on balance, we may be better off. It's also, I think important to note that it's, it's really painful and time consuming to replicate what we've built. Cause a lot of it is based on, you know, those technologies which you can't build overnight. You don't even know what to build really. If you haven't gone through many years of painful experimentation, mistakes, try and repeat. Um, you, a lot of the value we create is thanks to those $800 people. We have painstakingly selected over time, the culture of high performance and a scientific approach to business. The business we have developed, those things are, there's no shortcut. I still remember hiring the first one person and then two people and then four people. (00:13:05) You could probably do it in five years rather than 13, but not in two months. So I think we will face competition, but I'm pretty optimistic. If I may, um, in our industry, the venture capital industry, and even going into public markets, we covet the founder. And if a company loses its founder and the founder authority, they have like Elon to say, hey, we're not going to make the model X. We're not going to make the model X. We're going to convert those to optimists. Those kind of bold bets only made by founders. You have a slightly different philosophy here. You don't want founders inside the company. You're not looking for that founder authority in each of these brands based on what I've heard you say. Um, so what is the expectation for your brands? Do you want to create cutting edge, you know, version twos of event rights and Vimeo, or do you just want them to grow at a predictable rate and throw off that cash flow? (00:13:55) So talk about the founder role. Yeah. So I think if you can have a founder with that, you know, level of, uh, of passion and, and that mentality is, you know, nine times out of 10 will be a major net positive. Uh, the generally when we end up acquiring companies, these are businesses that have been around for 10, 20 years, even more than 20 years in some cases. And, and for the founders, if they're still on board, sometimes they aren't on board for them, it's really a moment of, okay, this is a chapter on closing. I'm going to move on. So the, the, the real question there for, for us, we win. If that business does better with us than it would have under previous ownership. Uh, obviously if we could have, uh, exceptional founders stay on board and pour their hearts into it, it would be even better, but we can still do well by being a better home for that business. (00:14:45) Then that business staying with the same, uh, ownership group and maybe losing the founder anyway. Um, so it's not that we don't want founders, but once, you know, companies are sold that people are generally looking to move on. Can you bring us into the M and a deal desk? So like in the room, walk us through your screening process. Are we, how do we, how are we doing this? What are we looking for? Are we looking for synergy and integration with the assets that we've bought before? Are we looking purely at cashflow? How do we stack rank these things? Just walk us through the deal desk. Yeah. So I think there's a qualitative criteria we use to, uh, slim down the long list of businesses that would be interesting targets. Uh, one is scale. We, that process of very deep integration, uh, and, and, and profound transformation takes a lot of operational effort. (00:15:32) So we can do a million of these. And by the way, the amount of time and effort it takes to transform a business we've found, it doesn't really scale linearly with revenue. So we're much better off acquiring relatively few sizable companies than a million. A million small ones. So we like, we look for scale. We look for predictability in, uh, in earnings and it's a big topic in and of itself, but we like businesses where we are pretty confident. We can project there at least, you know, the next five or six years directionally. Um, and then we look for businesses where we can create a lot of value. It could be technology, org, uh, product monetization, marketing, ideally most of these. Does value include the integration with these other assets that you have or value just means economic value operation? Well, let me just ask a detailed point of that. Like if you own AOL, you could put ads for Vimeo or Eventbrite or Miro on AOL. (00:16:20) Um, if you own Vimeo, you could probably have a sales team that's selling ads on AOL that you can use. How much synergistic effect is there? And if there is synergistic effect and you've got all this capacity to do design, build, product management, agentic orchestration, testing, AB testing, why not also build organically at the same time and leverage the network effects of the existing devices? So historically we have created almost no value from, let's say customer facing synergies, what you described, uh, plenty of behind the scenes synergies. Like I said, it's all built on the same technological foundations. And then there's this large core team of people. We move around fluidly, uh, going forward. And by the way, the reason why we haven't unlocked a lot of value through customer facing synergies is being that, um, we, I think the portfolio wasn't necessarily large enough for good overlaps to materialize. (00:17:14) But as it grows more and more, for example, now Airtable and Miro are both quite appealing to a lot of enterprises. I think what you are describing could become an additional value creation, uh, uh, dimension. You haven't tried or you've tried and it hasn't worked? No, we have, we've tried and it's worked with marginally. So maybe it's helped, uh, 3%, but now like the bulk of it has been bringing 10 out of 10 excellence in operations, product monetization, uh, technology. Look away on an individual business basis. And then why not build organically products? Yeah. So, uh, the, first of all, you can't do everything. I mean, Elon can, I, I, you know, my colleagues, colleagues and I, uh, we don't think we can. Maybe we should be more ambitious with ourselves, but, um, and so. (00:18:00) You've got a lot on your plate. Yeah. There's so many different kinds of products already. We, we launched a lot of new things on top of existing brands, but it's not like completely radical innovation. We don't do a lot of that. We try to stay focused on, on one thing to try to be the very best in the world at it. Also at the scale we are at, at this point, we're, you know, on a pro forma with Miro close to a run rate of $4 billion in revenue. It's difficult. Like if you look at the percentage of new startups or products being launched that would move the needle, it's, it's very, very small. So what's the, you know, we would have to deploy a lot of our resources and very unlikely to work. And you can, sorry, let me just, can you just talk about the thing you and I talked about this, um, point on the talent exodus that happens in Silicon Valley companies when they start to stall out. (00:18:46) And that the talent maybe that's working on the business isn't the quality of the talent that you've built in your, your core platform. How much of that is assessed in that M and a process that you might was mentioning? Uh, well, it's, it's, I mean, it's difficult to assess from the outside in, but you can form, uh, uh, first principles, opinions, businesses that again are more in a saturation phase. They tend not to be as appealing to some of the most entrepreneurial engineers or designers. Um, and so you can assume that the level of talent will be maybe good, but perhaps not, you know, anthropic would have, um, not saying anything shocking here. Uh, a very unique kind of talent, but we'll talk about that another time. Yeah. Okay. Uh, we, we have a big advantage in attracting talent because if you work at Benis films, it may be one of the very few places in the world where you can spend, say one year rebuilding the, uh, email infrastructure for AOL and then seven months helping, uh, rethink, uh, subscriptions on, on Vimeo and then build a platform technology to manage payments all with the same employer, mostly the same colleagues, same culture. (00:19:48) You get broad technical scope. Exactly. So career opportunities, just stay motivated because it's fun and new. Yeah. Uh, very high talent density begets high talent density. So there is an element of your two cycles. So we have been able to attract some people last year, 800,000 applications. We hired fewer than 300 people. Are they all in Milan? Where are they? No, no, we, we are fully, you know, very international as a company. Milan for historical reasons remains like the biggest, uh, pool of, of talent, but, uh, London, for example, is coming up faster. Madrid will, will be hiring people, plenty of people in the States, I think starting, starting next year. Brings up an interesting question. Um, Europe as a tech center, um, isn't exactly, um, something that venture capitalists, even late stage, uh, investors are pursuing. (00:20:33) And they kind of look at the market there as maybe slower, uh, and maybe just not as good of an opportunity. Is I think their decision rather be in Silicon Valley or American companies, uh, or perhaps Asia. So what's it like being the most aggressive successful company then in Europe or one of them? Is there, uh, I think you're right now. I think it is the, I mean, uh, well, I mean, Spotify obviously is much better, but Klarna you're in the top 10 probably, uh, clearly in the top 10. So, um, what's the talent pool like there? How is it different specifically Italy? I noticed when Chamath goes to Italy, maybe the, there's a little bit less working going on. An extra button. He, he goes from three on buttons to four. Yeah. The buttons go down and the number of hours in front of a laptop. (00:21:18) Like Italy changes Chamath. We see it. How do you keep these Italians working? How do you do, what's the secret? No, but tell us about the talent pool and running a company in Europe. So I think, uh, I think Europe has a lot of problems. Uh, but I think there's a pretty good talent, uh, half a billion, uh, uh, people living, let's say the main part of Europe. So it's a lot of people with pretty good education. It's not Stanford, but it's solid. Uh, and, uh, and a lot of these people have a chip on their shoulder to prove we're not necessarily less smart or capable. So you do find a lot of good people. Uh, I do think there is a, the fact that Italians don't work hard is mostly, uh, a false stereotype. Yes. Uh, I, we find that, uh, I mean, my wife, she doesn't work with me. She works in other companies. She works, uh, a lot long hours at our company. (00:22:05) We work pretty hard. We generally find that when we acquire companies and we work with existing teams more often than not, the, the, the, the, the team we bring in works substantially harder. So, um, I don't know. We just try to hire people who are intrinsically motivated, very ambitious. Uh, you're just hungry, entrepreneurial and, uh, and then give them, you know, a good reason to, to do their business. And then, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I think, uh, I (00:22:56) They were at McGill's. They were at CMU. Well, it could be an advantage. Yeah, well, that's sort of what I'm getting at. It's a huge advantage. I mean, when I, when I interviewed, uh, Charles Koch, you and I talked about this, what I found so fascinating is he built that business, probably the most extraordinary wholly owned business on earth, from nothing, effectively, in Wichita, Kansas. And I say it's like the Wichita mindset, because he basically kind of ignored everything that was conventional, and he was able to do things his own way. I don't know anyone that thinks and does things the way you do them that are based in Silicon Valley, and that might be the reason, because you're in Milan, and you're not kind of indoctrinated into cultural thinking. I mean, look, I'll just say what's, what I find so incredibly interesting about your company and what you're building is in, in all of our generations, we've seen this, these incredible examples of companies that have run your playbook, but in traditional industries. (00:23:48) Um, Amphenol, Roper, Danaher, Berkshire, and we've never seen a successful implementation of it in tech. And, uh, I think you're the best scaled example. I mean, Expedia tried, Barry tried. I think it was a little complicated. Um, so it's really exciting to see that this thing can work, because the, the, the structural issue is always, how do you underwrite these cash flows? And I think you're proving that they're underwritable, that these things can go out for seven, eight, nine years. And especially now, if you look at PE, the PE guys are basically like, we don't know what the f*** is going on. Right? Yet you're still able to go and transact and you're announcing deals at a pace where these, you know, a lot of the PE folks are. Or, so how, how do you, how do you manage this risk? Like, it's clearly, it's not a risk. You think it's a tailwind for you. Yeah. I think the, the, the, no, the private equity is completely different because they keep these companies separate for the most part to sell them. (00:24:38) And so they could never have that technological foundation because once you plug it in, in a company, what do you do when you sell it to your private equity competitor? Do you license it to them? So that's, you know, remove that. They can't have a pooled team of engineers, designers, because if they put them on the, on the, uh, on a business and then they sell it, what do they do? Do they take the team out and that it's the team, the business is almost worthless or do they sell the team with it? So it's just the model is completely different. And, and I believe these structural differences are a big reason why we have been, uh, I'd like to say successful. Um, so it will never work with the traditional private equity, which has other advantages. You can deploy maybe a lot more capital cause it's a little bit more, you know, hands off, but, uh, but you can never achieve the returns. I think we, we have. All right. I want to say thank you. An incredible business you're building. Congratulations. Well done. (00:25:23) Luca Ferrari, everybody. Luca Ferrari, everybody. Thank you. Thank you. ! Thank you. Thank you.