Luca Ferrari - Building Bending Spoons

Most software companies try to maximize your time on their app to juice engagement. Ramp does the exact opposite. Ramp understands that no one wants to spend hours chasing receipts, reviewing expense reports, and checking for policy violations. So they built their tools to give that time back, using AI to automate 85% of expense reviews with 99% accuracy. And since Ramp saves companies 5%, it's no wonder that Shopify runs on Ramp, Stripe runs on Ramp, and my business does too. To see what happens when you eliminate the busy work, check out ramp.com/invest. [MUSIC PLAYING] Hello and welcome, everyone. I'm Patrick O'Shanasi, and this is Invest Like The Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review along with all of our podcasts at join Colossus.com. [MUSIC PLAYING] Patrick O'Shanasi is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc. [MUSIC PLAYING] My guest today is Luca Ferrari. Luca is the co-founder and CEO of Bending Spoons, which he describes as 25% private equity and 75% technology company. Founded in 2013, Bending Spoons fully acquires and operates digital companies like Evernote, Meetup, Fimio, and most recently AOL. Our conversation explores the unique model behind Bending Spoons and the culture required to scale it. Luca shares exactly how their acquisition playbook works for identifying promising businesses to rebuilding every part of them across product, design, monetization, and marketing. We discuss their approach to financing long-term ownership through both debt and equity, Luca's obsession with finding and developing exceptional talent and his decision to build the company in Europe. I found Luca's description of himself as perennially unhappy to be the clearest window into how he builds. It's a mindset that fuels his pursuit of excellence and defines the culture at Bending Spoons. Please enjoy my conversation with Luca Ferrari. [Music] For those that don't know about it since we're in Milan today, it's not New York City. Not everyone yet knows about Bending Spoons soon, they will. Can you just tell us what it is and then we'll go from there? We are at pretty unusual beast. Unique, almost I think, as far as I can tell. I think a good representation will be 25% private equity, 75% tech company, meaning we acquire companies as a key engine of growth, 100% acquisitions, no minorities. And then, unlike a private equity which would typically look to sell them 357 years down the line, we buy off our balance sheet to own and operate forever. And unlike a private equity which typically would make relatively shallow interventions, maybe change the management team, we actually rethink the entire company, try to come up with a vision for the most successful version of that company and work as hard as we can to close the gap between the sales client that vision. And it could be rewrite the software, re-architect the cloud infrastructure, launch lots of features, redesign the UI, optimize monetization and marketing, rebuild big chunks, sometimes the entirety of the organization. So it's very extensive, deep time-consuming work, sometimes radical work. And if we do it right, that creates a lot of value. We can reinvest in making our platform more powerful, so build better proprietary technologies, better access to talent, more knowledge. And go after new bigger acquisitions. Can you say a little bit about the vision you have for the business, in terms of how big it will be, or the number of acquisitions, or anything, but five years hence, I know you care very deeply about the culture of the people here, what the home office looks like and feels like. You have a huge ambition for what you're building. Maybe describe that ambition in that vision a little bit. We felt inspired at the prospect of building the company being our product, building an institution, Bercher-Hataway, that sort of company that people look at and think was a defining company or its generation. And so to do that scale is important. I think it's unlikely that you can be in that conversational, unless the company is large and dominant, but also there needs to be some level of excellence along certain dimensions where the company really stands out. Visavidi others, and for us, it's always been, besides being absolutely exceptional at the functional things, like being incredible at running these businesses, one part that we really want to be awesome at is spotting some of the best inexperienced talent in the world and being the ADL place for that talent to just skyrocket toward the maximum realization of their potential as quickly as possible. We want to be the ultimate testing and training ground for incredibly talented and motivated people. And so the company five or ten years out, I think, will still be a conglomerate of very interesting digital technology businesses, hopefully much more and generally the company would be bigger. And I hope we can be much stronger at everything we do and have even higher levels of talent density and hopefully inspire others to try to raise the bar in how they run their businesses. And by the way, we started in Europe. We like the idea that Europe, it's fascinating that if you think about most of the very large super successful companies globally, you think about almost entirely US or Chinese companies. Certainly, US now China has more. Europe has very little to offer in that regard, but it's 700 million person continent. Very good education. I'm not saying we should have 10 trillion dollar companies, but we don't have a single one pretty much. I think last time I checked, we hope we can be part of that movement showing that you can actually build such a company. We're international company with operations in the US too, but the deeper routes, the original routes can be here too. We're not a periphery of the empire. It was actually Daniel at Spotify who introduced us originally. Obviously he's built one of the great European origin businesses. Why do you think there are not more of them? Obviously you're seeking to change this, but there's not that many. What do you think the deep reasons are? I think the main reason is a matter of default. Why does California has had so much success over the decades? One of the reason is you have seen incredible companies being created and grown in California. You just assume that's where you go and do it, especially as a founder. You don't know much like you are ultimately at least I was. I think that's true of many founders. You are a passionate, determined, maybe talented idiot essentially. You don't know the world enough to actually determine where the ideal location will be. If you even think about it, because typically how many times have you heard of funders doing a location study, where should I start my company? It tends to be momentum. I happen to study here. I know people are there. I should probably just do it. And so a lot of talented Europeans, many of the most talented Europeans who have an entrepreneurial streak, I think they just default to building in the US, which has been fantastic for the US, of course. But there is a gap, I think. And if we had more virtuous examples of people who have built incredible businesses, again, we'd see it in Europe, I think more people would not default to that and think, I could actually build such a business from France or Portugal or Italy. Was that a key part of the original vision that you wanted it to be a beacon for European talent to show the world that a company like this could exist here? I have so why? Why did you care so much? Why not just go to California? It's difficult when you talk about the sense of purpose, what inspires you, I think. We can try to rationalize it, but there's something comes from the gut. We just felt that there was a mission there that was worth pursuing and that turned on our drive, our passion. And ultimately we figured we love to build a business because it's, we love learning, we love challenge. And I think the business arena is arguably the most competitive field in which you can test yourself of any field, even more than sports, academia. So we liked it to start with. What do we fail in Italy, Denmark, Canada, the US, nobody cares? But if we build something remarkable from a country that doesn't see as many successes, that means something extra. It can be an inspiration like I just said, it can help local businesses aim a little bit higher, raise their standards. They can create competencies locally that can have a positive effect. And so we just chose to do it that way. We don't regret it. There were very good arguments for us to maybe start in California for sure. That was a very reasonable point to make. You said this idea of test yourself. If you think back on Benning Spoon's history, what was the first example of you really testing your own limits? That happened constantly. At the very beginning, we actually had another startup called Evertail. And that was a failure. We learned a lot and actually the strategy for Benning Spoon's we came up with it through the failure of Evertail. At the time, with Evertail, we raised about a million euros, all in all, and we see money. Ultimately, the company was about to go bankrupt. We had about 40,000 euros left. That money belonged to the VC because of liquidation preferences, but it was too little for the size of the best fund. And they told us, look, it's just too much hassle and legal cost for us to go through this administrative process of liquidation. You guys worked, we're honest, worked as hard as anyone could demand. Of you, you keep the money. We'll sell our shares to you for a nominal one-year rule. And you probably get something after taxes from it and just go and get a nice vacation. We're seeking the brain and so rather than going on vacation, we took whatever we could. And that was a seed capital for Benning Spoon's 2013. It wasn't a lot of money. All of us lived in the same apartment. Very low burn rate, very low. As always, against still, 40,000 euros you don't do much. Particularly as our vision was to acquire companies. Capac's intensity, particularly at the beginning. Well, you can use that because you are nobody and you're the track track or the cash flow. And so we figured we need a source of cash to kickstart our acquisitive strategy. We figured certainly the easiest way is to just write software build products for third parties. are decent at programming and design, we should be able to do that. It seems like an easy business to start, maybe not to scale to gigantic levels. Especially, a co-founder and I spent a good three, four months, 12, 16 hours a day, just emailing anyone on the planet and cold calling people, just drinking. We offer discounts, we're like, just hires to do something. I swear to God, we couldn't get anybody, not a single soul hired us to do anything. The only contract we got was for about 10,000 euros from essentially a friend of one of my co-founders who I think took Ption As and said, "Yeah, we need an app for our small chain of burger places. We'll give you 10,000 euros to build it." So that was an after-failure. I remember the stress levels with after working our ASAP for three years from the startup, which failed. Having this little money to try to make the dream come true and failing miserably at this sales effort, I had a real breakdown. I remember, I don't cry much, I cry maybe once a decade. (laughing) I cried, I had a moment where I cried at that point. I remember I left the office, I just had to cry 'cause I was like, goodness, it's been like three and a half, almost four years where we've been working like a hundred hours a week and we have nothing to show for it. So that was a massive challenge to my resilience and I owe it to one of my co-founders who I think is naturally more optimistic and has better perseverance than I do. Annie comforted me and we said, okay, at least we're in this together and just keep going. So we did and of course I'm happy we did. That was a pretty low point. Didn't you have to get a job at McKinsey at some point to fund everybody else? The previous startup. Oh, okay. Yeah, it's a cool store, at least I think it's cool. So we graduate two friends of mine, Francisco Mateo who are happening to be co-founders that Ben is supposed to and we have this idea of building this Evertail Company. The idea was to create a self-rising diary of a user's life with AI. This is 2010. So AI was nobody was talking about AI in 2010. And interesting, you were very early in AI too early. In fact, because the product just didn't work well because they didn't have machine learning, at least not waiting. You could scale for users. We had no money whatsoever because all of us essentially come from pretty low class families, whatever. You want to call it without a lot of money. And as much as we didn't have an idea for a business that would require a billion dollars in CapEx, like a lot of startups today, we certainly needed some money, at least to eat and pay for rent. And so we decided, okay, the three of us, we're gonna look for a job. Whoever gets the most lucrative offer goes to work and pays for rent and food for the other two. Once we raise seed capital VC money some hour then this person would resign and join full time and then we go and conquer the world. So we all look for a job and I get an offer from McKinsey, which was by our standards at the time very lucrative. And so I said, okay, this is perfect. I'll be the one paying for rent and food. I'm incapable of not being transparent, let alone lying. So I had to tell the partner and McKinsey that I would be working on the startup on the side. I thought it was on wise in many ways 'cause I was absolutely certain they would withdraw the offer, but I'm like, I just can't, it feels dishonest. Actually it was enthusiastic and encouraged me and said, absolutely, we'd love to have you and if anyone the startup takes off, we should have asked. And thank you. I was very grateful I still have a very fun memory of McKinsey for that reason, like a lot of gratitude. And worked there for about a year then we managed to raise initially health of million euros than another health of million later from a VC and I completed my project and I resigned. - Rolling this to do anything to get going. - I'd never heard that before one person funds the other two to be building. And then you joined them up with your business. - There was no contract, nothing. - Yeah. - 100% trust. - Just trust. I don't know, I just think it's probably a good way to live life. Sometimes you get some sour moments because of it, but it makes 99% of it so much more enjoyable if you don't have to be too transactional. - Between Evertail and Benning Spoon's, where did the insight come from to be an M&A-driven acquireer of businesses rather than building them? - So Evertail was your startup by the book meaning, this idea that probably won't work, but if it works could be huge and very innovative, like nobody had attempted as far as we could tell anything like that before. And so we worked super hard on that project for about three years and naturally as you are a startup or when you do something, I think you tend to network with people in a similar situation for a bunch of reasons. And so over time we got to observe, probably a couple of dozen teams go through similar journeys as we did and through that observation we saw that, of course most failed, which you would expect and maybe three or four had levels of success. And we saw almost no correlation between the teams we considered more talented and more hardworking and those who came out on top. And so we concluded it's not a huge sample, but probably to go from zero to one, luck plays a huge role. There are so many factors and variables that if you're a genius and you work your ass off, the stars will probably not align for you anyway. Whereas at the same time, we also found that our skills at all the functional things, like software engineering, AI at the time for what it's worth, product design, product management, marketing, although they were still pretty crude three years later. They were night and day relative to when we started, we were on a clear path to, I'd like to think excellence. And so we thought being really good at the functional knowledge and skills necessary to run a digital business as probably a matter of, if you're assuming you are reasonably talented, a matter of perseverance, effort, discipline, we can bet on that. We don't want to bet our entrepreneurial lives on getting lucky. So why don't we try to be excellent at the functional things and then buy businesses from people who maybe got lucky or they're very good, but they also the passions a change between going from zero to one to two to two to 10, like it's a different job. And so maybe there are very talented people who have gotten far. They're just a little bit fed up with it. They're not interested in running the next phase of it. We should be able to find situations where it's a great deal for both parties because of these factors. That turned out to be true. And now in hindsight, 12 years later, there is a lot more to it. There are structural advantages in integrating different businesses under the same roof. But at the time, we didn't have that insight, which today is probably more important than what I just described. But what we had identified was enough to drive some level of success for the first maybe five or six years. I'm going to come back to the beginning in the early acquisitions. But since you mentioned it now, describe what you've learned those advantages are that exist. Having, I'll call it a home office that sits on top of a lot of different business units. I'll give you an obvious one and two not so obvious ones. The obvious one is, of course, you get to negotiate with a vendor for cloud infrastructure, advertising partner, better. So that adds probably a couple of percentage points and you beat dumb margins. It's good. It's useful. It's not transformative. Or you can make an R in the investment in a general purpose technology that many businesses can leverage. And although that investment would be prohibitively expensive, irrational to make any one of those businesses individually, it's actually very appealing if you can deploy it across. The two more important ones are at least equally important, but I think more important ones are one. We can move R and D and also marketing resources fluidly across businesses. In my experience, the R and D opportunity when you run a business is quite fleeting. It changes quite rapidly over time. And so maybe your new certain field or that field evolves. And there is no opening to expand the feature set, upgrade your technology. In time, that's going to be table stakes. There's a window that actually yields substantial returns. But hiring people, coaching people, training people, organizing people is very slow. So you really have two choices. Either you make it happen in a few months, but you're going to do massive damage to your team, your culture, your talent, this is going to be low. Try not to do right. It's going to take years. At the same time, as you go after an R, the opportunity, basically you build the features. Every business has a kind of a saturation point where there's nothing more, at least nothing more, very substantial to build. But then you are stuck with a larger team. And of course, it's costly, emotionally taxing for all involved to shrink that team. It's difficult. Because of all these factors, in my estimation, most companies are ears behind in terms of the optimal staff that actually ears behind what they should be, could they control the people factor perfectly instantaneously. Some management teams are better than others. It's really just an inherent inefficiency of a single product model. But because we can pool at least part of our R&D resources, and we really work on hiring people are super flexible, adaptable with it. There is a whole batch of things you need to do for this to be feasible. We can move them very quickly and attack these opportunities. And we draw as the opportunities are not there any longer. This makes us super efficient, both on the offensive and on the defensive. Another major advantage of our model, take ever note. It's a very nice business, a nice product, beloved product. Most people would consider the prospect of working at ever note, just average appealing. Like it's a nice, probably nice company, but it's not as excited as I would be thinking about open AI or the next big thing. So on average, a business like ever note, no matter how charismatic, intelligent it's leaders are, will attract somewhat average talent. There will be a Gaussian function and some people better than others. But Benius Poon says a model that's very appealing to people. First of all, it's growing fast. So it feels like you're going places. You have variety. So you know that you can test your skills and fine tune and expand your skills that across a variety of challenges and businesses and technologies. It's more and in a way from the talent attraction perspective much better than an ever note stand alone. So all that's been equal, we can attract stronger talent. Layer in top of that, the ability to make massive investments in processes, knowledge and the tools required to attract and predict talent, where a massive investment in AI applied to predict future performance based on CVs, corporate ladder test results. It's a very expensive investment to make. It's difficult to justify for a company that maybe only hires 20 people a year, smaller. And we can build on top of that inherent advantage by doing even better on, we're basically we have access to better talent, plus we'll be better at selecting within that talent pool than most companies would. So that gives us a major talent edge that's just not attainable for companies. And for more, I'm sure again, OpenAI probably has access to many of the best talents. But like 99% of companies, cannot say that we're better off this year alone. This 2025 was almost at the end of the year. We'll be receiving about 800,000 unique job applications will be hiring 250 people. So it's running 3,000 4,000 super selective and it's not because I'm smart or anything. It's just inherent advantages of the Bennings Bruce model and of course, an employer brand built over a decade of investment and people work here saying it's amazing. It's an amazing greater. You can't shortcut it. It takes forever, but it couldn't as a standalone company even if you had the patience. I heard somewhere that for a long time on Slack, your label was recruiter. It's just pretty cool. It's still it's still it's. You mentioned the idea of building an employer brand for a decade plus. Talk about those two things, how they go hand in hand and what you've done that's been most successful at building the employer brand. By far, talent and honesty. We think about the jobs we offer as our most important product. So you need to know where your customer is, what you're offering, how you're differentiated and have the courage of really focusing on that sharply. I find a lot of companies are almost afraid of someone not liking them, some team member getting offended by some practices and they are I think they are unappealing in general because they're too vanilla to boring. They're nothing in a way. They're everything and nothing and certainly they're not appealing for the most brilliant and driven people who want very clear, exciting opportunity. So we have focused pretty much from the beginning of getting better over time added on being the ideal place for incredibly talented and hungry, determined professionals. We make a promise to them to surround them with incredibly high talent and city. Just mentioned how selective we are. The entry point we continue to be selective throughout. That certainly forces us to have difficult conversations and our moments of stress, but overall it's a clear positive. Yes, it's a more intense, challenging workplace, for people who want to be the best version of themselves professionally as quickly as possible. It's almost a unique opportunity. So that's our customer. That's the person we want to surround ourselves with. Why is testing yourself so addictive? What is it about it as a function that you and the team so enjoy? It's difficult to tell. I suspect though it's a common trait of a lot of people who have achieved greatness in their vertical. I'm thinking for some reason tennis comes to mind. When I look at Novak Djokovic, Rafanadal, I don't know them personally. They both strike me as people or absolutely turned on by the idea of testing their limits and pushing against those limits. I don't think they wanted to win for the sake of saying, "Oh, I won 23 grams, lamb turnumns. They love the idea that I was supposed to be impossible. And you know why I'm going to prove it's not." It's one of the ways some humans are wired, but the truth is a lot of humans is wired that way and those humans are those who tend to break through, excelling their fields, whether it's academia sports or business. So if you feel that way yourself, if you want to win an excel in an area like we want to do with our approach, that's the kind of person I think you want to surround yourself with. Have you learned anything surprising about yourself or about how the world works in all these years of testing yourself? One thing I've learned, it's cost me a lot of sanity and caused me some sleepless nice is that consensus is overrated and even dangerous, at least when you're trying to achieve something. I don't like the model of the bright brilliant asshole or anything like that. I think you can not be a consensus seeker while being a perfectly respectful, nice human being. I think that's the model I would espouse. But in general, if you're striving to stand out in your field, if you're very concerned about aligning everybody around that particular vision approach, not causing anybody to dislike you, criticize you, I think you're absolutely doomed to fail. Unfortunately, I'm naturally wired to enjoy consensus. I quite struggle with friction and criticism by nature. And I think at least personally, and certainly my capacity, the company that slowed me down caused me some pain that in hindsight, I'm warranted and didn't bring any good to anybody. I was felt pain and others benefit as a consequence. And instead, when you have a clear idea, you believe that's a right approach. And of course, you have listened to input intellectual honesty, openness. So it's not a matter of pride, just a matter of intellectual conviction that I think being able to just accept disagreement, pissing some people off and just going very straight toward that goal is a superpower. Not perfect at that for sure, but I'm much better today than I was when I started, but maybe at least the first seven or eight years, I think I was absolutely terrible at it. Thankfully, others on the team were better. And so as usual, in a team, you complement each other. I think a lot of management teams are too worried about having a percentage, for example, of their team disagreeing with them criticizing them. Instead, I think they should really try to, if they believe they've got a solution to path ahead, they should be uncompromising in that regard. So if we rewind time now to the early days where you've got this core insight that zero to one is really hard and maybe somewhat random, you have this skill set that probably is really valuable in one to end, and you're going to go acquire businesses and apply the talent and skill set to make the products way better, bigger, faster at everything. What is the first couple years of that process like? Like how are you looking for companies? How do you have enough money? I'm sure you must have started small. What were some of the first acquisitions? Talk us through the early lessons and early activity in the M&A markets. The beginning again, we had those 40,000. 40.000. So we were trying to get do some consulting, like I said, which never worked. Basically brought no revenue. Pretty much. The first acquisition, I think we closed it within the year, so pretty quickly. And we paid 10,000 for it. I don't remember what it was called. It was an iOS app to personalize your keyboard, ultimately made 20,000 off it. Very good return in a short period of time by a tiny scale. And then that 20 went into a couple of other acquisitions and maybe turned into 40. But again, similar nature, small product, amateurishly built, certainly no institutional investors, no investors of any sort, definitely no professional management teams, typically one person. I got that. Yeah, exactly. In parallel, we also launched a handful of products from scratch, learn things, because if you don't acquire almost anything, because you've got no money, you're also not learning. So we were trying to learn, hopefully make some revenue. We had a couple of mile successes enough that extended our runway. So many small things like that. And we kept adding and compounding, but slowly but steadily 10k turns into 20k and 40 and 80 and we've been compiling a pretty fast rate that if you look at our per share revenue or EBDA growth over the past four years, where we are a decent scale, because I bought 1.3 billion this year. It's still about 75% per year. We're still compiling pretty fast. 10 years go by and you look back and you're, oh, wow, I remember we were making half a million a year. Now we're making a billion. So in those early days, what were the key lessons that you were learning? What did you start to realize were the right attributes of an app, a piece of software, a company that you might acquire? What were the things that you were after? It's always been the same things on a high level and that would be so far we've always focused on digital technology. We haven't bought super market chains. Nor do we plan to. I feel we want to stay reasonably within your circle of competence. Ideally here and there, you want to take a step outside of it. You need to keep pushing the boundaries because that will keep your time expanding as you expand within the time. But I don't think it would be wise, especially as long as the model works well. It's efficient to take massive leaps outside of the circle of competence just because so digital technology scale scale is relative, but because our approach is so hands on so time consuming, I mentioned we can sometimes we radically rethink a business or at least several components of it. We will do maybe five positions a year could be one to be 10 max. If it's really a stretch and each some more than others will really go super deep and rethink the details. The time investment and the effort does not scale linearly with revenue. So for us to do an acquisition that will bring in half a billion in revenue is not five times as time consuming as one that will bring a hundred million. Maybe it's on average a little bit more time consuming because it tends to be more complicated, but nowhere near linearly. And so we want to do fewer acquisitions but bigger. So first criteria is scale and again at the time 10k looked like a big bet. How do we feel like as a lot today we're actually hoping to invest easily a billion plus but conceptually the same thing. The second thing is we need to be able to predict the future performance of that business. Otherwise there's no way we can make a confident investment. We've gotten very sophisticated in times with statistical models and lots of assumptions and probability distributions back at the essence of it. We need to buy stuff where we know where it's going. At least with sufficient confidence. And the last one is we need to believe we can make meaningful substantial improvements to that business. Now that it's necessity but it's difficult for us to imagine being able to make an offer that's super exciting for the seller and then being okay this is perfect. By probably they wouldn't sell it to us for that price. These are the criteria and they have remained the same but the level of sophistication are understanding of this criteria over time it's incomparable. Maybe we can talk about every note as a great case study because I used to use it all the time. It was my like place of record for keeping my notes and book highlights and all these things and people have heard of the brand. It was a big acquisition for you. I'm curious what you think of as like the milestone acquisitions in the history of Benning Spoons. I'd love to dive into that one. Just to hear an example of the whole story soup to nuts of how you found it, what you saw, what you did, how you thought about price, what your team did, what's happened since. I mentioned earlier at the beginning it was all what you would call asset deals, individual apps and whatnot. And then we had a period of maybe three or four years where we saw that very basic small scale model work was going to saturate at some point in the not to distant future. And we figured we should do this at a bigger scale with structure companies with management teams and large teams of professionals and social investors. But will we be able to do as well or at least enough there and we were quite I think we lacked confidence to take the leap immediately and so we started losing a bit of focus and look at alternative strategies while taking tentative baby steps into that next level of the same thing really but just I guess it's a bit like I played locally now when I do an international tennis tournament to go back to the tennis. Will I be able to compete and probably yes if you're doing super well locally? Of course you'll not be the best at that yet but I think it's you can empathize with there being a little bit of hesitation and I think Evernote was the first such company like clearly within that definition and it was very successful and so it gave us and so was it for the sellers by the way I think it was a great deal for both parties. My guess is that we paid 50% more than the next best offered so it was really a win-win any good strategy needs to be somewhat win-win otherwise it will not go far. We were invited to that process at the time it wasn't something we took for granted because we were not so well known so many times we missed out on process and sales processes that happened and took a look at it I think we were very fast in making it what turned out to be the winning bid and we just saw a very good brand although certainly it's lightly tarnished but still the quarter of a billion people had used Evernote so you can't say that of a lot of products. It's a strong brand an important use case a lot of customers with thousands of thousands of notes using Evernote to run their lives really and so that means potentially good retention and the product had not probably kept up with the times as well as you as a customer would have lot to see of course you can only realize that fully once you're on the inside and really open the hood and you get a sense of that as a user and I was a user actually before I acquired it. I've been a user since 2014 I believe and so we bid we wanted we began our usual transformation process on a different scale but essentially at a team of some of our best experts functional experts growth product design and engineering. Going to met everybody we spent a lot of time with everybody on the team and worked on projects and really got acquainted with the need to greet the details of the business probably speaking and then developed a roadmap for how to make Evernote more successful and got to work. It's a completely different business today. I think in two and a half years we have released probably about 250 significant product improvements. It's difficult to be 100% quantitative product improvements because there's no perfect definition but my estimation we have been improving and innovating probably three to five times faster than before. We've been able to do this with a smaller team really working on keeping all the positions that were critical getting rid of projects and initiatives that we thought were tangential and building out adding a lot of value working on talent density, the cultural impact orientation and rationality really trying to make sure that what we do moves the need to learn. It's a million things you bring in as a business with our platform but we rebuilt almost entirely code based the cloud infrastructure there's almost nothing at least nothing of the core components. It's now far higher performance notes sync up in less than 10% of the time in some cases one percent of the time. I remember that big of a problem when I was using it that's why I stopped. It is super fast. We would not tell the difference at all compared to the products you could probably consider the best in the broader project like maybe you think notion is top notch in the broader productivity. I think you would try to ever note today you would consider they do different things but the quality of the experience you consider probably on par. So we had to close a big gap there retention is at an all time high despite prices being higher because now ever not substantially more it varies by country and it's probably average say 60% more expensive so it's substantially more expensive than before but surely retention is better because yeah we did lose 10% of customers who were already not so sure and once the price goes up I'm out of here but all the more engaged loyal customers still in board and customer satisfaction by any quantitative metric is better than it's ever been before but it was a very time consuming effort not something I think completely beyond what say a private equity could do without having its own R&D team and having to maybe be ready to sell within a few years and again we can do it 100 companies each year but we could do three or five or six how do you know when there's pricing power if prices are six percent higher you've made it a better product so maybe that's why the price can go higher but how do you think about price charge to and users across your universe of applications that you own it really depends on each case I'll give you another case that's quite different from ever note and that would be meet up so meet up historically you could only use it as an organizer you could only use it if you paid for it and since we acquired it we introduced a free tier so you could organize we actually do quite a lot for free kind of qualifies as a price decrease in a way like we give away more for free and we actually increase the price for the more advanced two cases for the truly dedicated based on my observation there's room for being more sophisticated about pricing which is different from increasing prices being better at segmentation what's paid what's given away for free personalization communications experiences that ultimately all planned into monetization and the optimization of user LTV our direct experience is that there's a wide range of levels of sophistication in the market I'd like to think Ben is supposed to be at the very top of that sophistication spectrum and whether that translates into higher prices or lower prices or same prices I don't know it certainly translates into a very different overall approach to monetization just as a quick aside why is it called Ben Experience so when we started we knew that we weren't going to be a one product company we still wanted the name to connect to something for us a lot of companies are named after somehow after the problem they're trying to solve their problem all of them but or the product they're trying to deliver of course that was an option for us we figured okay why don't we look for a name that's more connects to some principles or values that we find inspiring one of my co-founders material is a big fan of the metrics watch the movie that night before I'm not sure but anyway it told us why don't we call it bending spoons it's watch the movie and there's this little bold guy who Ben's spoon with his mind and I think it's cool initially we didn't like it I still have spreadsheet with different names the bench suppose I think we give it like four out of five stars there were a couple others that got more stars the one I remembered in hindsight thank God we didn't pick it appeal we're doing only apps initially now we do all sorts of technology softer but appeal I think it's awful for some reason the look up from 2013 thought it was brilliant yeah so it got five stars at a five but we picked Ben's spoons and the reason why we liked it was it connected to two principles or values they're still very dear to us one is call it the power of the mind the idea of bending spoons somehow at least to me it inspires this vision of a powerful mind that can do things that appear impossible and we're big believers that the human brain has incredible potential if you work on it and edit and try to really give it the tools and the second reason why we loved it was that even if you have that brain it again it just intuitively feels to get to the point where you can bend spoons you've probably worked really hard at your craft and we like the idea of almost anything in life that has value you got to work at it I think it's true with a family romantic relationships your craft as a professional your abilities and athlete I think almost anything that will really give you satisfaction requires work the storage and plus it was a unique name we hadn't heard of any company called Ben's spoons until we figured it's partly memorable let's go for it I love it and I love that movie so now knowing the reference it's great going back to the Everett acquisition you mentioned you paid 50% more than maybe the next highest bidder how do you know the right price to pay like how do you think about pricing assets as you buy bigger and bigger ones we can talk about Vimeo we can talk about AOL these bites of the apple are gonna get bigger and bigger price matters of course you have the ability to do a lot after buying it so maybe that allows you to pay a higher price but still I'm sure you want to pay a good fair responsible price how do you think about it one is how do you determine your returns as a function of price the second one is how do we stay disciplined so we will really not pay more than we believe is right based on our expected returns opportunity cost what else we could be doing with that capital and what returns so the first one is a matter of sophistication and the second one is a matter of psychology really I think discipline patience and the third one is how well do we negotiate how efficient are we at positioning the ultimate price on that curve the fastest but stupidest approach would be to immediately offer the very most you can pay the opposite of offering every decal is low price is probably equally stupid so we want to find the right balance interestingly actually are much closer to the former we believe it's better to have a reputation for someone who offers a very fair price immediately but who's not going to be very willing to negotiate much so the first one how do you determine that return as a function of price curve you got to be very sophisticated at knowing what you're doing having first party data for benchmarking asking the right questions having good models but the output of the model is only as good as the assumption to put in it and we certainly have very sophisticated cohorted models and whatnot but main advantage is in being able to run this business is a lot better we don't win because we're good at predictions we win because we can run them better so we can offer a good price but it's certainly marginally important to making good predictions so you want a 12 years of experience running many businesses from the trenches in the details private equity I think teaches you a lot more so you understand why things went a certain way with certain business your wiser when you set the assumptions for your next acquisition in a way that I think if you stay on the financial layer or kind of or I talk to management every week you think you understand I don't think you really do there's a cost to pay it takes time but then on the bright side you're basically smarter and then predicting the future when you find yourself in a similar situation again so we assumption setting is critical for us we have many assumptions each as a probability distribution and we debate assumptions extensively without ever looking at what the model will spit out as a consequence that's forbidden because we think that if you see the PMC L basically the business plan as you do it there are also some biases or it doesn't look good enough and you're like oh maybe this is conservative let me put you shut we do not look at the output only the inputs with the bait analyze dig for more data once we're happy that's the best we can do at this stage we run a Monte Carlo simulation and then we look at this distribution IRR MPV and that's the truth nobody can say now that I see it I think maybe we were a bit pessimistic with the assumptions no too late this is not the truth this is what will guide our negotiation so that's phase one and then you make an offer as I said we try to make an offer that sometimes the maximum will to pay or close to it because we think although we could probably get a better deal in the moment if we started lower then we don't want to establish a reputation for people you can push around and get more out of we're more like the Warren Buffett model of I'll give you up what I think is actually a very good offer and I'm okay if I hear no but don't think you can get 25% more out of me just asking and then you got to be disciplined when they ask for more than you're willing to pay you absolutely need to not have fallen in love with that particular business and say okay you know what that's not to be we'll move on to the next one what's your walk away rate like for every AOL Vimeo ever note that you buy how many did you want to buy that you ultimately didn't we need to define this because we look at actually thousands of businesses each year we don't make an offer to thousands of businesses I'd say we probably make an offer to twice as many as we buy you know what we have never lost a bit before there has never been a business we made an offer for and someone else got it those we didn't buy were ultimately the seller just chose not to sell to anybody so that tells me our offer is a typically super competitive we also tell us we're probably not very good at negotiating because I think some level of failure rate would indicate a more optimal strategy I guess you you fail you learn you get better can we talk about the history of the financing of the business because like you said you've done very little direct equity capital raising before you've done some debt as most of this just been build up of free cash flow from earlier businesses until you have enough to buy the next thing and just rinse and repeat yeah in short the most sophisticated version is completely true what you just said for the first five years then we started using that pretty basic that from commercial banks not very high leverage ratios 3.5 times he'd be down a good day it's only lower trailing every day in the last 12 months that helped accelerate before we couldn't use that because you need to be have an established track record is because before they take you to the code since that it's been essentially that invested earnings and that we have raised a bunch of equity but mostly to fuel secondary transactions because if you're in business for a long time you start to get into a good scale people say okay I invested in this company and I'm talking really just team members because from the beginning we enabled people we pay just cash no variable pay of any kind and people can choose though to receive some of their cash pay in equity at a discount it's very unusual by the way and so in time people have accumulated positions and that equity is worth nothing if there's never any liquidity so we started organizing secondary transaction every 18 months one year two years we've had maybe five four probably since 2019 as well mostly equity has been raised to finance those transactions but occasionally the first capital increase of any significance was in 2022 I think so yes we have dilution from capital increases very modest off the top of my head I'd say maybe 10% we could also not have done any of those at all we'd still did them because we figured in a couple of cases it helped us get over the hump to close deal we couldn't without that a little extra with that we were maxed out but also we figured if we bring in a little bit more in terms of high quality international investors that would be helpful credibility far power if we need to go after a huge acquisition quickly just optionality but we're generally very cautious we accounts to dilution I think if you really believe what you're doing you should be painful to increase your capital base I don't know if it was ever noted or some other one we talked about ever notes and maybe pick a different one I'm curious for another acquisition whether it's we transfer or commute or anything else AI photo sharing one remedy which I was just looking at out before we started this morning are there other acquisitions that have taught you personally the most about your own process about doing this well let's stand out in memory there was one time where let's say we bought a product at the peak of it's called a viral moment this is really not applicable to the type of businesses we buy today but at the time it was a thing it's many years ago now and then as soon as we bought it the basically that viral wave was reaching and had reached the peak and that completely changed we thought we had been conservative they completely changed our assumptions and led to drastically inferior returns versus what we expected and that taught us to be absolutely paranoid when it comes to the sources of user acquisition so basically either we buy a business where almost all the value lies in existing customers or users like people okay these have been acquired it's just about now managing them as well as possible or if a lot of the value is predicated on substantial additional user acquisition or customer acquisition then we need to really clearly understand the drivers of that expected acquisition and make sure that these drivers are things we can predict for example we know we can make pretty accurate predictions of word of mouth rate under normal circumstances but not under sudden viral moments we don't feel very confident making predictions of future rates of user acquisitions through paid advertising for example so that was a big lesson learned and another one we learned we actually went after grinder the LGBTQ+ dating app in 2019 so the app was owned by a Chinese firm and C-Fuse was fortunate to sell so I lost to short it was a big bite for us at the time were much smaller it would have quadrupled the company we didn't have an equally substantial track record as we do today we went above and beyond raise the capital almost won the deal ultimately we lost it because someone has offered a bit more and we would have offered more still but we just had capped out on available sources of funds so that was a failure we worked took us about nine months my main thing and the main thing for several colleagues at the time we were very small we had an M-A-Team of one person so it really paused our growth had we bought it it would have been an incredible acceleration afterward but it taught us to be very careful to put all our eggs in one basket and so in hindsight I think we could have still tried to get it but maybe not obsessed so much over it considering how unlikely it was to make it happen and try to place another few bets that year if you look at our growth those couple of years it's way slower than almost any other year and that's the key reason like we put all we had into making that one thing happen it didn't happen we hadn't done anything else I've done some things but nothing that really moved the needle so it taught us to be think more in terms of probabilities not that we weren't before but I'd say we've gotten almost obsessive I've seen the world in terms of statistics with that model of the world act accordingly can you talk about AOL a little bit obviously that's a name that literally everyone will have heard of and I'm fascinated to hear the story of you acquiring the business so people know AOL as the way to reconnect to the internet back in the day in the 90s even the 80s I think actually I think they started pioneers at some point AOL was what Google was in the 2000s was the hot new thing so they had this outside in it seems like a failed merger time Warner and whatnot and then they had different homes it's actually a very good business it lost all the customers that they had to lose over the decades and today it's a email inbox and a web portal with the aggregator of news and other content it's a very good business with tens of millions of active users very loyal users gain there's a lot of selection bias people who want a Gmail have decades to go for a result people who really love that particular experience they have lots of stuff there and at the same time we think although the team has done a pretty good job I think at managing this business there's a next level to be unlocked in terms of publishing the product optimizing the offering optimizing monetization it's just a very good business that I think superficially people think oh it's probably a legacy old it's probably worth nothing but actually it's wonderful business and in fact again a probably name names for a lot of our companies in the broader messaging or email the industry or segment and if you just read the news you would think are doing super well they're much larger but actually if you had access to user count pnl including in time looking at trends they are just not nearly as good like it doesn't even begin to compare a well is actually the fifth most used email inbox in the western world crazy which is it's something it's a pretty competitive category so is it Gmail no if Google ever wants to do that we have to take a look it's a very good business that will be even better I hope that's in time as we pour our hearts and souls into improving every faster than it one of my mentors who's done a lot of investing in building software businesses over a long period of time said that one of the ways that he made the most money or was the most successful would be that he would enter in product situations where there were 12 things going on and there should only be three that there was always just like too much stuff too many features too many products in the company have you found that to be true at all that especially with companies are a bit older that there's been this creep of stuff that gets added that's not necessary is that like a common element of your playbook to take 12 down to three I don't know it's necessarily common because not all companies do that but we have seen it and it's why true I thought it was a contrarium view but not that I know your friend thinks the same maybe it's not as contrarians I thought it was but yes I think people in general overestimate the value of rnd let me qualify they think that generally pouring money into building stuff pays off it's really not true at all what we find is that there's a very small number of things that pay off and some we and most things are waste of money and while there is an element of you don't know before you do it so for sure a lot of it you do for example if you start from while your customers need really focus on that rather than maybe what your engineers think is cool or offensive visions that are very little to do with the core problems or solving. They're probably actually already taking big strides in a direction of greater efficiency. And by the way it's not just about keeping costs more under control but it's also doing the thing that matters better. Ever know today as a lower cost based than before but I promise if you take 10 users at random power customers power users, nine will tell you that it's actually higher performance more resilient, the better feature set. And part of it is we've really focused on while these customers painfully need it. That helps you do more with less. How do you think about taking capital from a fund that's a 10 year VC fund or something or a private equity fund versus a ballet gifford that's got capital that lasts forever when you're thinking about the right partners. All else equal we do prefer a permanent capital and it's not so much because even permanent capital could ask you to liquidate. It's just that they don't have to anything the fact that they don't have to reduce the probability that you find yourself in a situation where it's just an unnatural complicated moment. Incentives can become a little bit perverse. We haven't experienced that before but I know stories of others having done that but I think there's an evergreen source of capital. I think you're less likely to find yourself in that unpleasant situation. I will add I cite more with investors on these entrepreneurs. Although in a way I'm more of an entrepreneur. Certainly I think a lot of entrepreneurs take money from investors and have a level of entitlement that they should never be asked to provide a return. Oh but why do you ask me to sell now? It's only been four years five years. I think that's either naive or intellectually dishonest. Regardless of the particular bylaws that investor is subjected to where maybe they could stay forever ultimately. An investor is trying to achieve some form of IRR at with some time frame. So you should remain very respectful of the fact that when you take anybody's money if you ask me about certainly institutional money, you can't find it shocking or disappointing or then which about it in the entrepreneurs circles that they're asking putting some level pressure we do to sell. You're in such an interesting seat because you're both investor and operator and so you have the shared perspective that you're often buying things as an investor but then running them as an operator. If you think across all the investors, pure investors that have come and studied bending spoons, some of them had made equity investments, secondary investments, etc. What distinguishes the best investors? What do they do that's most different from those that are let's say average? I'd say most good investors. They recognize patterns. So I've seen a certain business model work and I used that to select their investments. If done right this is a very successful way of investing. And then there are the bad investors and the amazing investors, none of which is a pattern recognizer. So they actually assess each business in an ad hoc manner on its own deep fundamental merit. But it's much more difficult. That's what divides the truly outlier investors from the bad ones. Those in the middle maybe even leaning toward good are pattern recognizers but in the truly incredible ones you sit with them, they're not saying oh you are the uber of the I sick. Yeah, you're the Berkshire for this. They understand the almost the laws of physics to make a metaphor that makes so that the apple falls and that gives them certainly a lot of confidence but also the ability to see what others don't because ultimately a lot of the time good investment is not determining that something is good. Like a lot of companies most of us could tell they're good but if everybody or even not quite a lot of people think they're good, probably the price embeds that goodness and it's not a great deal. It is what it is. It's like a lot of companies today in AI. Again, I'm not gonna name names but some probably deserve their valuation. Some will be served or even cheap but most even the good ones are probably too expensive simply because everybody wants to invest. So in a way it's the same thing. The truly outstanding investors will be able to find something that's really good but few people think it's good and the only way to do that is not to apply pattern because by definition if it fits a pattern then it's either by the pattern or good by the pattern everybody is on board. It has to not fit the pattern and you have to find ways of determining it's good. It's very difficult intellectual. In creativity, imagination, logic, rationality, it cognitively is next level. In that specific effort, four bending spoons specifically, where have the best investors really dug in to get that physics understanding of your business? That's different than how other things work. Like we're the best again. Since I'm the best, I really good at understanding people. At this turning, it was really smart and not promotional from those who are not so smart but very good promoters. And so when you see a business as an extra-entraged crack record and someone explains to you in a way that makes sense, it's not just a good story but it makes logical sense. That's a huge indication that probably there's something there. First of all, you now know why things have worked out and you can determine whether they're likely to continue working out and secondly, if you're investing in someone who's made good decisions for the right reasons, not just out of luck. There's just more likely to navigate the future variables that will be thrown at them better than most. I know investors who invested, for example, in Amazon, early days, who told me one, particularly, would tell me that the main reason what he did, and he made a big bet on it and it was a huge success. He did believe in the e-commerce model and all that but he believed that very few people he had ever met had the clarity of thought, the rationality of just basis. And so a model he believed had legs coupled with a person he thought was a brilliant leader, a very bright problem solver that alone set that opportunity apart from a lot of other stuff. Yes, it would be difficult to have wide margins for a long time but it was confident that the company would be much better than at least it was priced at the time. So I think understanding people and their cognitive abilities is quite difficult. It requires, in and of itself, great cognitive abilities. I find that if someone is eight after ten smart, they can only discern the sevens from the sixes from the fives, but the eight and a half, the nine's, the 10s for them look like the same like a big batch of oh, they're so smart. And so to be able to distinguish the 10s from the nine's and the eights, you need to be probably close to a 10 yourself, of course, experience and other elements to which make it very difficult. They're not just brilliant for a point of view, logic and analysis, but also rationality. Trying to really ignore this person is really pleasant or charismatic. Yes, pocket. What's really beneath that? It's difficult. We assume us have been evolutionists made us animals of gut of emotion, but emotion investing, they're not good friends, I think, or at least good investing. Another thing that you have to deal with in a unique way is this cocktail of incentives and motivation for different parts of the business. You have business units where a team is running an Evernote, for example, that's different than a spooner that's in the home office that's being moved around and doing lots of different things. What have you learned about setting incentives for people to get the outcomes that you want? Fairly complex structure. I don't know if this will disappoint you, but we don't. Everybody is paid a fixed salary, no variable pay, no stock grants, nothing. They can choose to invest part of their cash pay at a discount, not a crazy but a pretty general discount at the top-core level. And that's it. The way we maximize alignment of effort is by hiring people, we believe, our high integrity that's great professional pride and then just treating them with the utmost respect. And I think most people will try to do what's right and do what's right for the business along the lines of the Monday to give you gave them. So if you see ultimately your optimizer for many spools, not Evernote, nine out of ten people if you're hard well in the culture is right, will take it to hard and do that. In fact, I believe sometimes setting financial incentives, of course, if people do well, they're likely to get more responsibility. I are salaries. Certainly there's that, but it's not as immediately tied to a result next quarter or something very measurable is of a throw observation in time. If you're great to your job, you probably get more do more. I think that sometimes when you set typically incentive plans with KPIs and what not. First of all, it's very costly. Takes a lot of time. For that to be our eye positive, it's not enough to add value, then to add more value than the cost that's implied. It's absolutely guaranteed to create at least some perverse incentives because nobody can set perfect incentives. The more it's too complicated, it changes too fast. For sure. So even if you are a genius, whatever you set as incentives will be in perfect. So there is an additional inefficiency that whatever extra efficiency needs to overcome before even into black territories, opposed to red territory. I think also those kind of incentives tend to hinder relationships. They tend to make things more transactional. It's more difficult to have a proper problem solving session where all we're thinking about is how do we win together? I think most people will have it in the back of their minds. Okay, how do I get the better bonus? It's difficult to be entirely resistant to that feeling. And so I'm sure it could be done better, but we chose the simple way, which is treat people respectfully and just get rid of all that stuff and assume you'll do the best you can. I'm sure you're always dissatisfied with the state of things and what things to get better all the time. What about bending spoons today? Are you most dissatisfied with? I'm that kind of person, by the way. I'm apparently unhappy, which I think sounds awful because in a way I feel very fortunate. In truth, I feel very fortunate. I'm apparently unhappy for some reason. This content, which is a huge superpower and a curse at the same time. You could admit what is not good or at least not as good as you could be. One of the things that's critical for our growth is hiring and coaching. I'm absolutely positive. We offer literally one of a kind level jobs. Some of the best on the planet. Absolutely certain. Incredible talent density. You learn faster than anyone else, anywhere else you get. An opportunity to take on responsibility that's crazy. Most of our general managers run businesses on average, 50, 100 million in revenues. If there were a scale up, they would be considered a large scale up. Many of these people are like 27, 28. Most of them are, I think, very few are about 30. A unique opportunity is excellent financial. opportunities too, whether it's very good salaries and investment opportunity in a company that's growing fast. We feel very privileged of getting a ton of great applications, like I said, a huge number. I think we should be getting more better, we should be better at identifying the raw talent. I know we're rejecting a lot of great applicants who are actually better off some of the people who are higher because we're just not good enough at spotting that talent in someone who has such a short track record, maybe out of students, you graduate. That's an area of massive frustration in a way. At the same time, very proud of what the team has done there and frustrated we can't yet do better. And I know that's one of the keys to growing fast and achieving what we start to achieve. So it's certainly a major area. I'm always frustrated with our societies. There's too much regulation we're really working on the round staff at the institutional level. People try to create economic growth and prosperity through more rules just telling you, yeah, if we tell them exactly where to go with lots of rules, surely will be prosperous. They don't understand that it's quite the opposite. You've got to get out of the way and create as free and open a playground as you can. We keep adding rules. Elon Musk once said something that I thought was brilliant and I fully subscribed to it. He said, we should have a rule that every new law is automatically removed say three years later unless someone can make a really good case that's created a lot of value. So we wouldn't have 10,000 1000 page long civil codes or whatever. We're basically trying to prevent a rare corner cases. I'm pleasant. Sometimes tragic corner cases while making 99.99% of the normal cases less efficient, more painful, some utterly impossible. But because they're not as newsworthy because they're typically widespread and normal, those inefficiencies are not as interesting to talk about. We'd aggregate that just a massive tragedy, a much bigger tragedy than the one individual tragedy of one corner case. Ultimately, we cast a regulation, the corner case wins and we regulate it away. But we make life much worse for everybody else 99% of the time. This frustrates me because I think we're just shooting ourselves in the food as society essentially. What's your balance of time around this idea of being constantly discontent? What's your balance of time of what I'll call maintenance hours of the business? Things that are repetitive meetings with teams, internal stuff, keeping the trains running versus space that you create to tinker with the business, trying to think, stretch that comfort zone that you were talking about earlier. The question behind the question is, what does your week look like? How do you spend your time? Various bi-periodal lots. For example, when we close a large transaction, often there with a task force in the trenches meeting the new team and for weeks or even months sometimes that will take up 50% of my time or something for some of my time. If we're working on a big fundraise, which has raised the largest that round of any private company in Italy in history. And like we said, we raised $700 million at an $11 billion valuation in equity. These two initiatives certainly took a substantial paramount time when we're not in fundraising mode. The day goes down to trickle. Maybe have some calls for investors, but much less. So it varies. But I would say probably a first split would be 50% of my time talent. I check each candidate before we extend an offer. I extend the offer. I talk to many of the new hires. I help with talent density. I help trying to push for being demanding. So that's probably 50% of my time. 50% of my time is on every meantime, probably financing and external relations, I would say. 50% of my time is these transformations of companies we newly acquire. And 50% of my time would be other colliet long tail platform work, which is probably where I would put that thinking creatively about improve the strategy and I work all the time. So I probably work as two FDs like I think most people in my position would. But it's probably these four categories are comparable in investment on every age and time. What did you learn during this biggest ever debt race? Most of the people that I talk to for this are raising equity capital. I haven't had a lot of conversations with people that have raised lots of debt capital for something like an acquisition. I'm curious about the whole process and how you would compare and contrast equity versus debt capital markets from a raising perspective. The mindset is quite different because an equity investor tolerates the risk of losing money vastly better because they have an upside that's essentially uncapped within reason. A lender is almost entirely intolerant to the possibility of losing because their upside is that 3% spread, 5% spread, depending on the exact financial instrument, it's still a limited and generally fixed upside they have. It's all about not losing it. So a lot of the questions are more oriented toward understanding the potential worst case scenario and the risks. Acquit investors are more oriented toward a 10. How big could this be? How quickly could we get there? The surprising part is a lot of banks, a lot of lenders are actually quite visionary. I heard people say well they're probably more boring because they actually know a lot of them are brilliant and visionary so they're quite curious about the model and how far it could go and understand very quickly why it works. I thoroughly enjoyed my conversation with lenders at least as much as those with equity investors. Perhaps because they have this they have to be so paranoid about the downside. This breeds them a thoroughness, a thoughtfulness that's not always the case with equity investors for whom maybe that intuition of all these teams, this thing could go far is more important like catching the big wins is more important that and so they can be wrong more often. So there may be a little bit more quicker in their judgment a bit more. But I think lenders are quite an interesting type of investor to talk to and generally it works that you talk to a couple of encore lenders, some of the biggest banks, typically those with a strong investment banking arm too, they help you figure out not kind of shape around, they commit some of the money immediately so you know you've got some of it covered and you know where you're going and then you start bringing under the tent more players with other important roles and then lesser roles and at some point it's quote unquote just providing capital and typically some of these capital is basically it's with that lender, it will say with you until maturity five or seven years down the line, some of this capital you may want to syndicate, the lender tells you okay I'll give you a billion dollars but we agree that in the short term we'll be going out to sell away essentially this billion dollar to many providers each with one ten fifty million each and they'll hold it for five years or seven years but I'm just giving you a bridge to that moment you need the money now you're doing M&A for example and we don't have time to talk to 20 parties plus it would certainly leak that you're buying that target so I help you get there but then we agree contractually that will be transferring that credit from me to these other lenders so that phase is also interesting and it's quite optimized because that markets are huge as gigantic and vastly more efficient probably than the actually much smaller say VC capital markets and so the process of how you take that credit from the point of view of a lender and syndicate it out is super standardized by now you create a deck you record a presentation you shop for one hour maybe three times with batches of lenders like it's super super standardized very efficient I'm so curious what you think about what I would call almost like a religious debate right now in the world of software which is how AI will affect the sorts of businesses that you've bought historically will it enhance them will it hurt them because it's easier to create replicas or copies or new versions we talked about remedy earlier which is an app that you bought before chat Gbto that I'm sure has benefited tremendously from the advent of AI how does this new tidal wave of technology impact your old businesses how you think about new businesses just you're take on it in general yeah it's a complex discussion and I think you're asking maybe a time frame of five years because AI changes the very fabric of our society 50 years out or something like a long time frame in ways that are both exciting and scary but in the medium term I think for many suppose specifically I think it's mostly good thing because we don't care too much about within reason the risk to each individual piece of our business basically most of our business units are 20% of our revenue or less a dramatic decrease in one of them is still yeah we've been growing at 75% a year got rather not of them decline but some do some will maybe one or two will decline fast it's undesirable but not existential so for our model it's highly diversified lastly a lot of what we do is being better functionally better at running this company meaning having a higher quality output at lower cost across the functions engineering design product growth AI is an accelerator of both quality and efficiency if used properly but it doesn't do it by itself maybe it will in 10 years but today we've seen it clearly as we have invested internally in excellence through AI in our operations a lot of it is custom integrations proprietary technology a lot of culture work on getting people to use it the right way so like with every innovation in the past we'll see a small percentage of companies being at the forefront of leveraging that most companies being laggards and I'm pretty confident Ben is supposed to be at the very cutting edge of using it so we're already making strides there that if anything the gap in ability between us and most companies will widen for years but again I think it's likely to mostly benefit an aggregator and consolidator like Ben is assuming we stay disciplined with pricing while being very disruptive for certain verticals and some will be disrupted much earlier so I think we as a society and investment community will be able to start seeing things an update our model of reality and predictions based on that now can it be disruptive for many SaaS businesses absolutely I think the time where we open up chat GPTN we tell it okay build me Gira as far away it's not months away it's not even a couple of years away AI today can't do a lot for you beyond say research copy writing and maybe some basic kind of production but it'll do more and fast we were working with AI in 2010 so we're We're very early, I'm a big believer in AI. very big. However, even if it could build Gira today, it's not that easy to explain to it what you want when it's so complex. So I would not underestimate the inability of the user to get out of it what they need. These products being honed to customer needs for a long time. You're already using them. There is no investment in them in terms of data. So not only does the tool need to get to a point where you can replicate that and with the same guarantee of performance, very difficult. Like getting to something that works the same 95% of the time, we're super far from it. But that's an infinitely easier challenge than something that works essentially on a present of time. Influently easier. But also you need to be able to guide it to build it the way you want. And as long as software is ultimately a relatively small share of wallet, if you think about it, it's not an expense people will optimize first. It's not like a car that literally you plan your finances around before that truly eats into the overall size of the market. I think we're talking a lot of stars need to align. I think it's probably many or so. You mentioned earlier that ultimately your main product is your company and the people that work here are the key people to attract the jobs or products themselves. What are some of your favorite ways of making sure once you get these amazing people, we talked a lot about data science and recruiting and the pipeline and the crazy number of applicants and so on. Once they're here, making sure that they get the most out of it and you get the most out of them, which is mutually beneficial. What are the sorts of traditions and things that you do that you think have most contributed to it being the kind of place you want to work? I think ultimately most important things to be very clear and what kind of company you want to be your principles, your values and then hire people who embrace those and then you yourself as a person who's maybe more visible than others try as hard as you can to be the best paragraph of those values as you can be. That's more important to any manifesto or initiative or proclamation. There are certainly things you can do that on the margins help foster those values a little bit further. Personally, a few things we do that I think are unusual we love are one is called state of the spoon. So I say here we have some of the equivalent of an Apple keynote, but it's just internal and most of our teams take turns on stage presenting their most proud achievement and also failures and lessons learned of the past six months or they're planning for the future. There is an element of comedy and self-deprecation which makes it I think quite entertaining. You laugh a lot. It's three four hours and at the end of it I have my jaw is painful because I laugh too much. It's just fun. We organize all sorts of almost cabaret of things. It's a great tradition and it just helps us be proud of the things you do. Remember not to take ourselves too seriously or not saving lives. You meet and learn about colleagues you maybe hadn't necessarily been close to before. And another one we do is a early retreat where we bring everybody to a remote exciting typically exotic destination for seven eight nine days on a company's time and time. It's just a vacation but we colleagues the last one so I remember in which order what we went to say shells more issues that I mean it can republic in the past we went to Japan or straight and everybody's there being together making friends it's expensive naturally but we think it helps establish a level of trust bonds with colleagues and ultimately a company is people so if you bond with colleagues or bonding with the abstract concept of the company to an extent it's not the same thing it's not enough but it's part of it. We believe that it pays dividends in terms of again we'll lose to sacrifice to be honest about problems to do your best. Why do you think there are not more bending sprints? It's kind of like asking why are there not more burksures like there's only one buffet. Why do you think there haven't been more people that have taken advantage of this ecosystem this huge tam of companies that are more mature now that you can acquire that have installed user bases and low growth lower growth. There's always a first private equity wasn't a thing until it was a thing and today you have trillions of dollars in private equity. You could have done private equity before KKR did private equity. Nothing prevented you from doing private equity in the 1930s to my knowledge nobody was doing private equity so at some point someone come up and comes up with an idea it makes sense it's efficient it works others flocks to compete sometimes that ruins the opportunity regardless you have a market. This may be the case we'll see I think we have far superior competitive than a private equity because essentially a private equity every acquisition is almost a we start a fresh in a way in our case we do well because of the platform and the structure it would take many years for someone to build the employer brand the talent pool the culture the technologies to get to really compete so I'm actually not which is one of the reasons why you see me being pretty transparent about some of the principles I thought about it and I figured if I started over knowing all I do which someone else typically wouldn't at all because what I say here yeah it's the tip of the iceberg but then from there to actual day to day yeah but even if I started over with all I know and even if someone said oh I trust you do super well here's a billion dollars to get to where we are now say 12 years after the foundation of band is for us it would take me maybe not 12 years but easily seven or eight like it's a huge slog you hired two people you spent a year coaching them and then you hire four and they coach them and you help you and you build the technologies slowly takes time to write software and polish it presumably more will try I would say that's to be expected I also think there are some things are harder to do than other things it's being painful again a private equity is very difficult but if you're bright you understand business finding someone will give you not a hundred billion dollars that's the best of the best over decades but enough that's that you can have a business and it's worth trying is not that difficult there are so many private equity firms and ultimately you just need to do well enough that you don't look bad like you're around average and many will die but some even statistically will do well enough the very few entry are low and so you have a proliferation out of proliferation of wannabe is some will prove to be great some will be great out of luck and so again you have more competition but trying to build a venue is if you understand what you're doing which is a prerequisite we've had a chance it's dauntingly painful many years from the ground up cultivating the little garden there is no shortcut to it so I think it's just not a model that when people see it a lot of people have known about it for years as a talk to investors and I've seen nobody try because they just understand it's just too painful I have loved doing this with you it's so fun to hear you be so transparent about what you've done to build this thing it's such a unique business any unique place it's fun to do it here with you here in Milan when I do these interviews I ask everyone the same traditional closing question what is the kindest thing that anyone's ever done for you when I was a little kid I was almost pathologically shy to the point that I was let's say diagnosed with autism I think the diagnosis was not necessarily particularly scientific but that's to say I was so introverted and shy I spent years in elementary school talking to nobody pretty much so I go to middle school in Italy at middle school between the age of 10 and 13 I think the first school year goes by and I have talked to essentially nobody in my class literally and we're late in the year I think it's probably May we're on a school trip in the hills just taking a stroll with our teacher and probably seeing some ruins or some Roman thing pretty common thing to do in Italy a bunch of ruins and all of a sudden to classmates of mine come over just hug me and this is a tie and they were the two outgoing popular guys in the class it's just talking to me and they on the bus they just drag me with them in the back and we start singing and I'm terrified and happy at the same time because I did want to socialize is I just I didn't know how and they keep investing in this relationship for a long time and they were 10 or 11 so little kids until months later I felt confident in myself and I had turned into a reasonably effective social person I could not be the most social not the most outgoing but you wouldn't tell that I had been almost pathologically shy to the point that my mom brought into a doctor and I audit to those two and what I learned during the third and last year of middle school was that one of them got mad at me for something stupid like a girl I don't know kiss me not him stupid thing 12 years old and it lasted five minutes but in those five minutes it was furious and he told me you remember two years ago when Alberto and I did this and that and helped you and involved you and got you out of your shell we didn't do it because we thought you were cool but because this teacher told us that you needed help and he did it to hurt me to say that actually I'd never felt more grateful in my life because it's very difficult if you think about it for someone 10 years old to actually implement that request from a teacher to go with uncool guy go through this log of months where the guy barely talks inviting him after classes to go to his place to play video games they literally changed my life it's probably the single thing that ever happened to me that I'm most grateful for incredible closing story I absolutely love it thank you so much for your time thank you Patrick my pleasure if you enjoyed this episode visit join colossus.com where you'll find every episode of this podcast complete with hand-edited transcripts you can also subscribe to colossus review our quarterly print digital and private audio publication featuring in-depth profiles of the founders investors and companies that we admire most learn more at join colossus.com/subscribe