This EU Firm Made Billions Buying Up Forgotten Tech

0:00Support for the show comes from engine. Running a small business means every dollar has to work hard, but if your team is still booking travel the old way, it's costing you more than you think. Engine is the fastest growing travel and spent platform in the country, built specifically for businesses like yours. Book a trip in as little as two and a half minutes. Earned up to 10% back on hotels and in 2025, engine customers save more than 300 million on travel, with zero booking fees, no contracts, and no BS. More than 1,000 businesses join engine every month. Join them and get $500 from your business sign up and start traveling at engine.com slash founders. Hey guys, it's Ed just so you know we recorded this conversation live on Substack last week. So if you would like to catch the next live stream and tune in in real time, make sure to head over to profgmedia.com where you can subscribe and I'll see you on the next live stream. Welcome to the profg markets founder series.

1:02What do you do with a software company that was once a household name but has fallen on hard times? Our next guest has built a business around answering that question. His company acquires struggling businesses like Vimeo, like AOL, air table and event bright with the goal of overhauling how they operate cutting costs and making them profitable again. And over the summer this company went public on the NASDAQ at evaluation of more than $18 billion with the stock jumping 40% on its first day of trade it. That IPO turned what was once a relatively obscure Italian company into a public market story that investors around the world were suddenly paying attention to. We wanted to understand how this model actually works, what the company does to turn struggling software businesses around and what it's like to take the strategy from a private company to a public one. This is my conversation with Luca Ferrari, the co founder and CEO of Bending Spoons.

2:07Luca, thank you so much for joining us on this episode of the Prof. G markets founder series. I'd like to start at the very beginning in 2013 where you're not actually in Italy, you're actually in Copenhagen, you're in Denmark and that's where Bending Spoons begins. Tell us the origin story of this company. Very few people know this but I with my co founders almost the same people we launched start up in 2010 also in Copenhagen. We were using AI clearly too early to right to automatically write diaries for people and we did that for three years, raised a million dollars and failed miserably, couldn't make it scale. Although I'm pretty proud of the product we built but sometimes that's not enough. And so in the ashes of that company we were left with about $40,000. The BC who had given us the money basically sold their shares back to us for a nominal $1 and they apparently appreciated with work hard and being honest and they didn't want to go through the liquidation process and we ended up liquidating the company ourselves and basically got those $40,000 out of it almost completely.

3:23And I was a seed capital for Bending Spoons so that's 2013 again Copenhagen, moved the company to Italy about a year later but that's where we were at the time and the strategy we're still running these days and the keying size behind it for the most part had originated from from that failure obviously get smarter in time but most of it was in place back then. So you had a tech company you say an AI company I would assume that they're calling it machine learning back there and I assume that there was not a lot of hype around that sector that's obviously changed. It doesn't work then you have $40,000 left over which you take out of that to start this other company called Bending Spoons what actually was the idea behind Bending Spoons and also I think people probably want to know what's with this name Bending Spoons. So what over those first three years of that failed startup we saw our skills in engineering marketing product design improved tremendously absolutely didn't feel we were anywhere near world class but certainly much better and so we thought okay we if we if we work on this skill set and other relevant skills and build our own tools we should be we should be able to get to world class levels at some point and at the same time we saw that finding product market fit going from zero to one.

4:42So to say seem to require a lot of stars to online because we met so many startup teams where people work really hard and we thought they were brilliant and still couldn't make it work and sometimes in other cases it did work. And so we should be able to find people who are maybe tired of running a business or maybe they don't have the skills to go from one to 10 who will you know will sell to us and if you're really really good at doing this we should be able to pay a price that's appealing to them and still be able to create enough value to generate strong returns and be able to create a lot of money. And be able to compound capital efficiency basically so do those were the relatively simplistic ideas we had back then and because we knew we were going to grow a vast of fully vast portfolio diversified portfolio different products we had to find the name for the company that wasn't related to the particular product. And so one of my co funders Mateo is a big fan of the movie the matrix and I think you had watched it the night prior or something and in the morning it came all excited and said we we should call the company bending spoons inspired by there is this scene in the movie of a little guy bending spoon with his mind supposedly.

5:47And we liked it because it reminds us of you know the mind is powerful if you set your mind to something you know maybe you can do the seemingly impossible so we just find it kind of inspirational we like the idea of making a little bit of fun of poking a bit of fun of ourselves you know and not taking ourselves too seriously so that was also a cool name in our view and it's stuck. So we'll get to what you guys do today which is you are essentially buying a lot of these different software companies and we'll get to that but in the early days my understanding is you guys are building tools you're building software products you're kind of like an app studio in the early days. Tell us a little bit about how what you were actually building back then and how it eventually led to this seemingly slightly different business model where you're actually going out and buying companies with money that you know now you have but back then I assume you $40,000 is not much you can buy with that.

6:53We have always acquired companies the first acquisition happened very quickly I think so we started bench from the summer of 2013 the first acquisition was in 2014 I don't think from that point on where there's ever been one year were less than 90% of our revenue came from businesses we had acquired so I'm not sure where the studio thing comes from but I think it's just that the first acquisition we did that people recognized was ever nothing to do with the first acquisition. So we had only 30 or 30 people just a feeling that what we were doing before was launched from scratch but nearly all we have done over the past 13 years was acquire existing businesses and I'd like to think make them better more successful we have launched occasionally we have launched products from scratch more so in the early days because we had no money and so you know it was both the only thing we could do but also it was more likely to move the needle at this point you know we're at a brown rate and for surviving the levels for billion dollars it's more difficult to get a lot of money.

7:53We're going to launch something that can you know reasonably move the needle but the first acquisition happened like I said very early and we paid $10,000 for it so very small but you know the power compounding is such that it turned 10 into 20 and then 20 into 40 fast forward 13 years we are where we are we actually had very modest injections of equity mostly did you know other than the IPO a few months ago we had a significant injection of equity. About a quarter of a billion dollars in the end of toward the end of 2025 so really up to that point time most of the growth was through the investment of our free cash flows and then that which we have used for almost 10 years at this point. So tell us a little bit about that first acquisition how did you identify this company that was worth $10,000 same amount of money that a lot of people would pay for a call and what did you do with this company to turn it around what was what were you bringing to the table.

8:58That one was a lot easier than things today because it wasn't even a company really this was a mobile app for iOS I still remember quite distinctly that it was an app to personalize your iPhone's keyboard. I don't even know if such apps exist these days but in 2014 I think around that time Apple launched opened up API to be able to do that and a bunch of apps came out and we saw this one and we thought it had a bunch of users and we thought it could be both the product was not that good maybe had users because it was a first mover and had achieved a good positioning on the apps or we could believe we could improve the user experience. The monetization was almost nonexistent and so we bought it we rewrote the software completely redesigned the UI and introduced monetization and it was built the app had been developed by an individual like a single single developer so kind of an amateur operation obviously these days we buy sizable companies with professional management teams and institutional investors.

10:06The key principles trying to be superior at the key functional expertise necessary to run that business superior relative to whoever selling it to you stood obviously the bar to be stronger today is much higher but the idea is pretty much the same. This gets to the heart of what bending spoons actually is and I think there's a lot of confusion as to what this company is because on the one hand there's this software element where you guys are using AI you have this software background you kind of come from this Silicon Valley culture but certainly a stalled up culture but at the same time you're doing what many other asset management firms and private equity firms have done for decades which is your finding company. You're buying them you're acquiring them you're taking up large positions and then you're taking up a strategic stake in the company and then turning those companies around this is what investors have been doing for decades this is this exists this is an entire industry which I think I would call it private equity so in your mind what actually is bending spoons because to me it seems like it is at the end of the day it's an asset management firm.

11:26The city investment part of what we do is absolutely important clearly we grow primarily through acquisitions for a single acquire. The part that would distinguish us from any private equity I've seen. I would say there are three very important differences and one is that we are not a fund we don't buy to sell the never sold material business so we buy to hold and operate forever. The second perhaps more important difference is that when we acquire a company at this deep product equity is I'm aware of or I've seen operate they do intervene obviously they may cut cost maybe intervene on monetization they may change the executive team but the interventions are relatively relatively superficial and you can you can tell by looking at the team at private equity firms it's mostly small teams of financial professionals. Ben is from takes a different route we do those things as well but but we take a different route on in that we.

12:31We rebuild the org often completely or in large part we may re architect a cloud infrastructure completely rewrite the chunks of the code base accelerate private development. Remaginment decision from the ground up marketing so it's a much much deeper transformation to the point that sometimes we it's almost like we buy brand customer base user base and try to. Overhaul everything else very deeply and that I mean that's represented in the in the team we have which is even if you look just to the core team. Forget for a second the acquired teams that's roughly 800 people and overwhelmingly their softer engineers. The scientists product managers product designers so naturally you know most of the work we do is that sort of we also are we have our own. Team of financial professionals because we need that to but there's this additional piece and the end of third big difference is that. While pretty much all private equity is by businesses and they keep them separate to sell them down the line sometimes they put a couple of. Cindergistic businesses together but that's the extent to which they they put things things together we integrate everything super deeply onto the same platform I investors some time ago told me that.

13:39After due diligence in Venice was that they. They found that we all it's almost like we buy companies and then we they get straight down to a product installed on a shared operating system. I think it's a bit of a simplistic metaphor but there is truth that so if you look at how we do things we. Jolly within a few months from the the moment the acquisition closes we swap out the entire. The state technological foundation we've built dozens of proprietary technologies whether it's a orchestration data processing a B testing recruiting payment management credentials management like basically every component of running a digital business with built in house natively integrated and that's. So up that for whatever third party vendor things the business is using we have this court centralized team for R&D GNA marketing. We redeployed very fluidly across all of our businesses to go after our opportunities and then. Under exhausted we draw them so we keep cost efficient. So to the point that it would be almost impossible to sell one of our businesses even if we wanted to so that's a downside of our model so there are similar ideas with private equity is.

14:44For some for most focusing on acquisition but I think the the day to day operational approach is in integration and transformation is is quite is quite different so it's a bit of a hybrid that's. One of the cliches but it's also true about the private equity strategy is that you buy a company and then you dramatically cut the costs of the company which usually comes in the form of layoffs and that is something that you guys have demonstrated is. Well this is a pattern that is pretty consistent across the companies that you acquire it's also something I think that people some people criticize you guys for rightly or wrongly but. When you look at some of the strategic decisions you've made like we transfer staff for example two months after you bought it 75% of the of the employees had been cut I mean house central is head count reduction to the strategy and what do you make of one.

15:44In fact that that does sound very also very similar to the private equity model and to the criticisms that people might have that well you're cutting head count if it's a moral moral judgment if. If someone thinks that trying to make a business as successful as possible is bad I don't have any defense against likes a completely valid point of view I disagree obviously or I wouldn't do it I think in general. The world tends to work better the economic pie tends to grow larger businesses around excellent level but you know it's a perfectly I respect the fact that someone would disagree with me on that point we definitely we have done it almost every single time so it's definitely been a pattern I would say that in general cost efficiencies have been approximately 50% of our value creation of all. And within that 50% probably the or part it's probably roughly a little over half so maybe I would say of the of 100% of of our value creation that say maybe 30 35% has been about optimizing organizations one thing we do that's I believe me is understood is people tend to think that we end up reducing head count simply because we want to cut cost and while optimizing costs.

17:04So the cost is obviously a significant driver we actually try I'd say just as important for us is that we make that or far better position to kick ass for a long time the in my view. So if I have a lot of assumption some people have is that the number of people you have in a company is almost you know definitively gone the terming whether the company produces great product you know it's quickly we are of the opinion that if there is a correlation between head count and say innovation or or or the ability to optimize customer experience monetization that's a weak correlation at best and that what drives those virtues outcomes for the most part is talent density. Whether people use powerful tools whether the culture is one of you know rationality high performance whether whether or not you have a lot of red tape or you actually give people playing a space so what we try to do is bring these companies back to what I would call startup mode small teams of supremely talented people we get out of the way to give them playing you know very wide mandate very powerful technologies I mentioned them quickly earlier.

18:13And what we see consistently is that magic happens despite going down in head count maybe 80% sometimes more demonstrably and we publish a lot of this stuff on the various blogs or brands with the masterly the rate of which we fix bugs reduce say technical incidents or launch new features goes up sometimes dramatically so yes we have absolutely consistently cut head count no doubt about it sometimes dramatically so we do so also we do so also no doubt about it for for cost efficiency but equally we have been able through the same means to make these businesses a lot more competitive from the point of view of product quality and a piece of innovation so for us it's really a win win but I understand that it's painful for those involved we try to mitigate the unavoidable I think pain of being laid off which sucks I mean it's a very tough thing to go through by being transparent by offering type of market separation packages by the empathetic and flexible but that doesn't make that transition painless it makes it a little bit less painful and we if we could do what we do without that objectively bad element we will certainly be very happy to avoid it no none of us enjoys that part of our job structure.

19:29My understanding is also that you are you are specifically finding companies that are struggling struggling on basically every metric struggling with their profitability struggling with their business model and these are companies that otherwise would have been stagnating and probably perhaps would have done the layoffs anyway. I guess this gets to the next question which is how do you identify what company is the right company for your business model for integration with your software products and your software team what makes a company a quireble I think you're writing many ways I would say a big percentage of our positions have been struggling companies not only have acquired several companies that were growing nicely and thinking commute air table recently we shared the. Go through it but yes we have a bigger percentage of companies in our acquisition portfolio let's say that we're struggling then say most acquires that so I think it broadly speaking a valid characterization and sometimes yes the team the exact teams themselves tell us that look I if I say I need to take difficult decisions you know in a way let's I'd rather you do it so it is it's happened I wouldn't say it's happened often but sometimes it's not.

20:48So what we look for is on a qualitative level three things we like to acquire large businesses relative to our current size and the reason is I described how we conduct is extremely deep transformations and integrations does take a massive amount of time and effort the good news is we found that we don't need like the number of people the amount of time we need to complete those transformations does not seem to scale really at least not really. So we're not really looking at the scale of the business and so we're better off acquiring fewer companies and deploying those resources to work transformations than move the needle as opposed to. According 100 companies but not then not having the time to do anything really well so we like to buy say five companies a year give or take that that are large the second thing is we want to feel confident we can predict their performance at least you know five or six years out with confidence and that's an entire whole discussion of science but on a. High level that's the answer we need before we decide to pull the trigger and the third big criterion is we need to believe we can we can greatly improve those businesses hopefully the product that detect the org.

21:59When it's the show marketing ultimately revenue costs you know it's an earnings game at the end of the day so those are the three you know kind of big criteria then how we get to those answers that's you know a lot of many steps and it's got complex well ordered and the scale the scale is very obvious. And once those are you know three checks then then it was down to the math of returns you know among the companies that check check all three boxes then we look for investments that will yield the highest returns so we can compound as fast as we can. We'll be right back. Support for the show comes from engine the companies winning right now aren't cutting travel they're booking smarter here's the reality the average business travelers men's 45 minutes booking a single trip on a legacy platform with engine that booking time drops for as little as two and a half minutes and it's AI powered personalization gets faster the more you use it multiply that across your team every.

23:02Every trip every year that's not a perk that's a competitive advantage last year engine customers save more than three hundred million dollars on travel and with the engine X card get up to 10% back on any hotel booking. 33,000 businesses have joined now it's your turn get five hundred dollars in your business signs up and start traveling at engine.com slash founders engine X visa commercial cards are issued by fifth third bank and a member FDIC earn up to 10% back and points on eligible engine travel purchases actual. It's very by purchase category and may change points of no cash value and are redeemable for words for our program see full rewards terms for details got engine.com slash X slash rewards dash terms. We're back with Luke a Ferrari when we look at some of the names of the companies you've acquired especially like a well and Vimeo these are sort of once great companies or once come you know companies that were previously known to everyone sort of dollings of the tech industry.

24:10That have gone out of fashion I would say is that part of the strategy is taking these once big name brands and transitioning them or is that just a coincidence. I think it's mostly a byproduct we don't actually have a internally guidelines for M and 18 look for you know brands from a bygone era or anything like that it's more than I think at least historically maybe at least in the last five or 10 years maybe the future will be for I we found that the most important thing is that we can do it. We found that the market tended to undervalue the unsexy things and in our view over value the new and sexy sometimes to a fault in a major way and so as we try to be rational operator you know you can never prove it I'd like to think we've been rational capital locators and operators. Well we're comparing after having done the quality screening and and then the math we're comparing the returns we would get from the a well of the world or I'm not going to name names but say flesh year newer sexier things we found that the latter would consistently give us much worse returns and we saw no reason to do it simply because people liked it you know so you know L is is actually very good business it's not I and it's not obviously going going places but 30 million people use it as their.

25:28For many of these as their main email and they use it all the time and these are perfectly you know they're not they're not less no less valuable as human beings or as customers as people using the small flashy new email clients simply because they they like a well you know so we're happy to serve those people just as we'd be happy to serve you know the cooler early adopter and it seems that many investors prefer to go toward cool and sexy and we're happy with that. So I think we need to take the you know the last sexy things this is one of the reasons I'm I'm fascinated by your business and it's a big theme on our show which is that the best investments are the unsexy investments you want to capitalize whenever on has for various stupid reasons written some company or some stock is some investment off it seems like you are capitalizing on that dynamic that is a very very very investment minded strategy and you are someone who comes from you were building companies you were building software products.

26:36What is your background in investment in financial valuation because it does seem like a very very in a lot of ways it's it's what classic value investors have done and you seem to be in that camp what got you to this point given you kind of had more of a software background my co funders and I started the very soon things engineering physics I think that's really our background and maybe. Driving passion is technology and science we just felt that applying that to business would be fascinating because it's actually business offers a lot of challenging intellectual problems it's also rewarding financially. So we decided to go down that route but we have I believe retain that engineering and and scientist engineering scientist minds that and try to embed it as much as possible in the organization and everything we do even talent I mean we the way we recruit is completely scientific at this point.

27:39And then I'd like to think we're curious people we have studied the other explaining I think it's more difficult let me put that way it's more difficult to learn quantum physics than you know how to calculate an I R so I think it's better to study stand and that's generally test that tests your intellectual capacity and gives you better problem solving tools you can then learn other things if you if you put in the efforts or we have you know explain a books on finance and economics and you know we're big. Fans people like or embuffet or Tom Murphy or Harry Singleton Benjamin Graham there's fun you can read it's not rocket science if you if you try to learn from people who are smart and have done it before and then of course try not to copy paste blindly but understand the boundary conditions they had and the boundary conditions to apply to you there's a lot you cannot a lot of mistakes you cannot avoid so yes we we try to be value volume I'm just really in the way that it has to be again a business that's be able to do it. Beyond a past is prime necessarily for us it's math it just happens that the market values the in their prime businesses so happy so highly that we end up buying more of the past prime businesses but ultimately just try to compound efficiently that's all we're trying to do you mentioned Warren Buffett and that's exactly who I was going to bring up because there seem to be a lot of parallels here you talk about you're not flipping companies you're not trading companies you're buying companies and the

29:07line is to hold them forever and I have to say I mean the first company that comes to mind when I think about this business model is Berkshire Hathaway and I look at what Warren Buffett did starting with very very small companies sounds like I think he took a less strategic position in a lot of those companies but he still took some strategic positions as well. It sounds like that's quite similar to what you're doing but you're doing it in a tech and software enabled world is that kind of division for bending spoons or do you think that is an app comparison. I'm a big fan of Buffett and and and and his colleagues that washler I think they're amazing so I think you've you'll just want to be careful with comparing because we're talking it's almost like you're asking a and aspiring parent and Michael Jordan exactly it's like sure obviously yes it be great but at the same time we need to stay humble and I'm not going to say we have done you know one percent of what they did but but brother speaking I think it's an app comparison that forever owner ownership mindset rational investing trying trying not to let the trends of the moment sway you unless there's a good reason for it.

30:14I think a huge difference would be that that you know Berkshire has historically being a more passive acquire like they try to be very good at selecting the right companies and then letting them operate doing more of the same where on that particular dimension where almost the exact opposite end of the spectrum where we like companies were our ability to make big changes and and the very integration into our technology and people prefer will make a difference but yes it will be a dream to be able to build a company that's almost an institution of that scale. We'll see we're certainly here to try so you start in cover again then you move to Milan you are in Italy I think that this this IPO put Italy on the map in terms of business. News we rarely hear about Italian companies unless we're talking about luxury cars or storied storied brand names to what extent does being in Europe player role in your business. There are a lot of European companies that have decided we're going to move to the US because there's more opportunity here we're going to I had like the CEO of Salonis on recently who tried to move a lot of his operations to America.

31:24Tell us a little bit about operating in Europe and the extent that it has impacted your business and your strategy. For the currently yes we're had port into Milan Italy and but most of our people and actually more than 50% of our teams in the US and 6% of our revenue and most of the business required are in the US or definitely very international with a huge US food free. For the print up we continue to be a European company let's say at least formally and certainly a big chunk of our R&D and our headquarters. We decided to build a company in Italy specifically quite consciously our startups in my experience are built out of inertia like we happen to graduate here let's launch startup we that's what we did with the failed AI startup or machine learning or whatever on a call once we decided to start this once in Copenhagen we put some thought into where we should be building a company chose Milan Italy quite consciously for two reasons one was just say just a commercial selfish reason and that was Italy 60 million people good education actually lots of people is cheap on their shoulder to prove you know that we're not less intelligent or less capable we thought we can but very few great job opportunities we thought we could

32:43find a lot of capable talent and it would be a win-win for them to join an ambitious projects with hopefully would be a huge company one day and for us we would be able to surround ourselves and great people great strong teams and hopefully have better chances of succeeding so that was a one reason the other reason was we just had this idea that and I still have it the world is a better place if knowledge opportunity wealth is better distributed I think it's totally fine that you have one or two different ways of doing it. You have one or two hops or those are off the charts you know Silicon Valley I you'll never going to have a uniform distribution and that's okay but I think if you have a just a gigantic gap and a growing gap I don't think that's a stable world the world will ultimately anybody wins and we want to improve it you could build a company of global caliber and absolutely kind of key cast company in technology which was our passion from we grew in an unlikely place like he tell you but it could have been port you got it. I don't know if you have a big fan of a big fan of a I'm not a libertarian I said that I want to be clear I'm actually a fan of an extremely generous supportive world of the world.

33:52I'm not a libertarian I said that I want to be clear I actually a fan of an extremely generous supportive world first date a society that helps people I just don't think that a good way to do it is by imposing massive encambresism companies I would say I would say I want to have a big fan of a big fan of a very good way to do it. companies, I would say, you know, have us pay lots of taxes and help people, but don't make getting a permit for building something impossible, getting, you know, being able to fire a team member because you can hire some higher performance in POS. So I make it easy to deploy, to launch projects and allocate resources efficiently and then use taxes to provide a generous safety net for those who are left behind. I'm actually in favor with wealth taxes and more taxes for rich people. I just think we're doing it the wrong way, but Europe is good, but it could be a lot better if I think changed in this regard.

34:57I was going to ask you what you think the gap is between US entrepreneurship and European entrepreneurship and there is a gigantic gap and there is a gigantic gap in productivity and GDP and overall wealth creation. I assume you believe it is a result of overly bud and some regulation in Europe or is there anything else? No, there's more. That would be a reductive. I think that's a very big reason. One of the main reasons I'd say another big reason is culture. I think Europe has historically, and this changes by country. Europe is quite, people who have traveled Europe and spend a lot of time in Europe. It's quite a heterogeneous country. Like the people can be quite different, but I think on average, compared to my understanding of the US, which I think I know, visually well at this point, there is a greater tendency to fear and criticize failure. People can be stigmatized for failing and when they succeed, they are often criticized for being too ambitious and maybe there is a sort of the default is to be suspicious.

36:00Maybe someone helped them too much or they got lucky, which obviously doesn't breed. You have successful entrepreneurs, but it doesn't help. Then another factor is the market is especially historically being more fragmented. Whereas the US has done a fantastic job at basically unifying the market. So winners got bigger, faster and in a global world, that's a huge advantage. None of these things is huge in and of itself. They're old marginal frictions. But the way, in my opinion, the economy works is that when I certain location in these cases, even 20% more appealing resources start trickling from the less appealing location to the other location, whether it's human resources, capital resources, and over time that builds an advantage in the more appealing location that can be massive. And I think the US today, in my estimation, if I take the 1000 of the best broadways from Italian universities every year, Arlyche, let's actually take the top 100.

37:02Let's really go at the top of the best of the best or really the people who tend to have breakthrough, breakthroughs in R&D or launch successful companies. My estimation is that probably a good three out of four end up in the US. And early, often even before graduating, and that's difficult to capture in the statistics, but down the line, five or 10 years, that compounds to a major disadvantage to Italy or Europe. And that's going on for decades at this point. So how do you deal with that issue? If the talent in Italy and in Europe is being sucked out of Europe and they're all going sent over to the US and they're working at AI companies in Silicon Valley and San Francisco, I mean, how do you deal with that? Is that a problem for your business? Not so much for us because we, I mean, we're, first of all, we attract, we bring people back quite up. There are a lot of people who are originally European and they like the US, but maybe their family, their dear ones are in Europe and they've been looking forward to coming back and they haven't had that many opportunities. So they see bandage, it's a great opportunity not to be able to come

38:06back and yet not give up that level of ambition, high compensation, fast career growth and whatnot. Also, we happen to be, generally, we hire people who are graduating or when their students, who would have gone abroad and they stay and they have a fantastic career. And we'll be opening offices in the States next year. So it's not really a vantage from this problem per se, but it's a massive problem for society here in Europe, I think. Out to Solvite, frankly, I don't know. I don't have a silver bullet, I think, you need fundamental reform, certainly massive intervention on regulation, but frankly, if you did that, it wouldn't solve it overnight. It's something that would have to build up over a long period of time. I don't know that you can reverse the compounding that's going on for decades to be honest, not in any reasonable timeframe. It is quite a quite worrisome, in my view. Even, frankly, in many ways, even for the US themselves, because again, a world where people in the US are 10 times richer than everybody else, I don't know that's a stable world.

39:08A world where people can travel safely and be generally happy and go, I think we need a level, you can have a country that's dominant and substantially better off, but if the gap becomes, and it's not today's situation, but with AI potentially accelerating the divide, if the divide becomes just massive, it's a difficult earth to inhabit, I think, for all, really, even the ultra-rich and ultra-successful, in my view at least. We'll be right back. Support for the show comes from Engine. The company's winning right now aren't cutting travel, they're booking smarter. Here's the reality. The average business travel estimates 45 minutes booking a single trip on a legacy platform, with engine, that booking time drops to as little as two and a half minutes, and its AI-powered personalization gets faster the more you use it. Multiply that across your team every trip every year. That's not a perk, that's a competitive advantage. Last year, engine customers saved more than $300 million on travel,

40:11and with the engine X card get up to 10% back on any hotel booking. 33,000 businesses have joined, now it's your turn. Get $500 in your business signs up and start traveling at engine.com slash founders. Engine X visa commercial cards are issued by Fifth Third Bank and a member FDIC, earn up to 10% back and points on eligible engine travel purchases. Actual rewards are vary by purchase category and make change points of no cash value and are redeemable for rewards through our program. See full rewards terms for details. Go to engine.com slash X slash rewards dash terms. We're back with Luca Ferrari. You were able to not let this affect your business, and I think this is one of the big questions for founders of the big problems to solve is how do I recruit talented people to my business, and especially it's difficult if you're starting from scratch. What did you learn about how to build an excellent brand that world-class students and engineers

41:22want to come to and want to come to work for, because to me, I think that when you're building a business, the people are almost everything and you need to convince them that they're going to succeed and that they're going to win. How did you do that? A lot of people in my experience tell you that they believe people are important, but then they don't walk the talk. They actually don't put in the time or effort into that as those words would warrant. At Bennichol Street, we try to remind ourselves that the jobs we offer are more important product. More important, any customer facing product we have. We try to make those jobs as great as possible, then word-o-mouth will help you a lot. You hire two people. They are absolutely happy and satisfied and they will tell their other friends from university. It's actually fantastic. You're joy and we have hired so many people that way. We can discuss how we've tried to make jobs here amazing. It's actually not that difficult if you stop. For a second, remember that you're in a founder, CEO, you're in an

42:27unusual position and in an awful vantage point, actually trying to stand in the shoes of team members. It's not that difficult to find what the type of person you want to hire would appreciate, whether it's of course good pay, but then autonomy, trust, respect. A lot of times management teams are a little bit arrogant in expecting that people should love it to work with them simply because they want it to be that way. You try to work hard to make it a great product and then you need to put in an effort to promote that product. When we were 50 people at Bennichol, we already have something like three or four people doing recruiting alone. I can master investment just going to recruiting events, posting job ads, calling people, emailing people. At the beginning, you need to persuade people. I spent so much time persuading people to join us and there a good founder needs to provide a vision that's credible and the energy and passion that would convince the those who are, you know, invincible. So you punch above your weight, basically your

43:33higher slightly better people than you should be able to. And then if you do that right, hopefully a virtue cycle is is ignited where you offer better and better jobs. You can pay more and more as the company becomes more successful. And the truck record speaks for itself at the beginning. It's more like you have to believe me, but now, you know, go, you know, read on glass door or go talk to 50 people work here. You can establish the truth pretty easy. So that's, you know, a lot of effort. And then, you know, you want to to select well among anyone applies. And we believe that's a question of science. And we have tried to make it that. We were data scientists and researchers put in a lot of effort to detect signals and sound on application that predict performance. And we keep iterating and improving. Not unlike, I think a quantitative trader would, with algorithms trying to find signals in the market to tell them which stock is like to go up and would start to go down. We tried to do the same thing with people. And find the people who are will be amazing if provided with enough opportunity and coaching.

44:39What does that look like? That, that, that sort of more scientific approach to hiring. We need to first establish an objective function. What you want to optimize for, we found that in our case, at this stage, that's a performance as rated by once colleagues after 12 months on the job. The more people you hire, the more the deeper you can go into the funnel, while still retaining statistical significance. We are currently hiring several hundred people a year so we can go fairly deep one year. It's just, it tends to be pretty good. And then we, so that's the rear objective function. And then what to do is you need to identify as many signals as you can in someone's profile, even beyond the pure application. And then you just, you rigorously track them and see what, you know, how, what combinations of signals best predict that outcome at the objective, objective function level. And that's a, that's not a difficult problem. That's pretty well established in statistics or the problem is of course, capturing that

45:45outcome at one year and you know, way that's reliable, always in the same way, pre-structured. And those signals, the signals are really the key. Some are pretty obvious, for example, GPA. It's not perfect predictor. It's only a mild predictor, but it's, someone has done really well in university. They're more likely than not to do well, at least at any point. Most people will believe that helps. If someone has gone to a more competitive, selective university, that's a, it's a predictor too, a weak one, surprisingly. People think, oh, someone to MIT, they must be a genius. Actually, it's much less predictive than you would think, but it's, it is predictive a little bit. Some other are quite amusing and yet quite predictive. For example, we found that if someone was politically active during, when they were a teenager, but stopped being politically active when they were like in their 20s, as a very good predictor of drive of agency entrepreneurship, which you, at least we definitely wanted Benniss Fons,

46:48it would have never occurred to me. We spotted it through, it would AI basically. But then you can rationalize it by saying if someone is 16 and, and, and they're not content enough with being a good student, they're looking for ways to change the world around them. That's a good sign of, again, productivity agency, a healthy level of dissatisfaction. If they're still doing it, whether 24, it's great, but it's probably more of a life mission and their job is probably, you know, takes a backseat to it. And so they're likely to do super well relative to people prioritized their job. So hundreds of signals like that, we keep finding nuance. Many we generate through tests. We have people go through practical tests, but we tried to, we look at, you know, what people write in their emails, what tone they use, how do they interact with people who are not in a position of power? We found that how people email our, let's say, our support agents who help them just with the logistics of their application and clearly are not the person deciding whether they get hired is a very good predictor of whether they are a collaborative

47:54humble team member as opposed to because they're always nice to people late in the final when they know that the offer depends on that interview. But those who are assholes in life, they will show up as assholes more often than not, when people who are not perceived to be in a position of power. So hundreds of those, none is very predictive, but when you put them all together, we were pretty predictive at this point. It sounds quite similar to the strategy that Ray Dahlio used at Bridgewater for many years, where there was a lot of, he wanted to track everything. He wanted to track every meeting, every interaction, sort of put everyone on a social graph, which I think in a lot of ways probably worked, but also he got a lot of criticism for it and a lot of people did not like it because it feels like it felt like to a lot of the work is in that culture that they were being surveilled and that every interaction was a test. And it sounds like, in a lot of ways, with the level of tracking that you find that you are employing, that you might

48:55run into potentially similar issues. I guess how do you think about that issue? And do you think about it? Do you think of it as a potential issue? I didn't work at Bridgewater. I've read a few things about it, so I'm just a little familiar with it. What I just striped only applies before you get hired. On the job, we actually don't do any, there's a just a review at the end of the year, which is based on input from your colleagues. We don't do any tracking of working hours of anything really. So precisely for what you mentioned, we are staunch believers in the fact that most people react really well to being trusted. And so we try to hire people who believe or believe are amazing or can be amazing, give enough time. And then we give them uncoftably high levels of trust and freedom. To the point that sometimes we've been criticized by the opposite because sometimes we have had these situations where we acquired a business and then we we establish as a general manager, someone who's like 27 years old and sometimes a part team

50:00member tell us, are you crazy like, you know, this person, how can you trust she can do the job? And historically she has, by the way. But I think if we were to monitor and surveil people, that would that would really destroy that trust that's such a motivating factor for people to come to work and do their best. I guess it makes sense. It's like you're extremely discerning before they're hired and that extremely trusting once they're hired, which I think is makes a lot of sense is probably the right strategy. Over time, you assess people's outcomes over a range of scenarios. You don't need to surveil how they're, if someone is consistently delivering, delivering quickly, high quality work. I don't care to know really how you got it done. If you use the air, didn't use the air, did you work late or you didn't like ultimately we want to work with people who are effective. And so we can just measure how we contribute to projects over time. And I don't think surveilling people would add in very much if anything to be honest. But pre-higher, you don't have pre-higher, you don't have any information to look at in every

51:04niche and cranny to be able to figure out what are extending and offer make sense. One of the big themes with your business is sort of using AI and using modern computer science and infusing it into these businesses. What does that look like? What does it look like to take a company like Eventbrite and then give it whatever the AI bending spoons magic actually is? What are you attaching onto these businesses? So I think we try to use AI broadly speaking for two things. One is there are some times features you can build for customers that are only possible today. Thanks to AI that were maybe not possible in the past. You mentioned Eventbrite I think. We haven't done it yet. It's very early, but I think one of the ways I could help make Eventbrite better is by greatly enhancing the recommender systems when you go to Eventbrite. There's roughly 80 million people who go there monthly to find interesting events near them. What you show them as our recommendation makes a huge difference on whether they are satisfied and

52:08whether organizers sell tickets. It's really like a win-win. That's a difficult problem, especially because you don't have the data that metadase. You have very limited data clearly because the people all go there for the events. AI, we believe, could be quite helpful in making that better and even marginal improvements in that recommender system can be quite valuable for both parties of the marketplace and the other big ways. That's completely bespoke to the product obviously. Then there is something much more to say, general purpose that applies to almost any business stats using AI and technology more generally, cutting edge technology to be operationally much more effective and efficient. Again, I told you we have dozens of proprietary technologies. Most of these are based in the AI, especially these days where, if you don't use AI, you're probably giving a lot of volume at the table. Some are really AI-centric. For instance, we've got something alternative spooner, old ALT spooner. Each one of us, spooners, by the way, are basically the members of this core team highly selected recruiting process and people will move around their businesses

53:11fully. We are working now to extend this technology, by the way, to all team members. It takes a little bit more work. You have this personal assistant that lives in Slack. We use Slack for communication and automatically, as exactly the same level of access you do across all of our toolkit. You just talk to this agent and you ask it to do pretty much anything. For example, you could say, I actually saw this live as I was in a channel on Slack where we post feedback on ever-note ideas to improve the product. I was just writing about a bug I found. I saw our general manager for ever-note. She wrote that she had experienced the bug and asked her alternative spooner to, first of all, investigate it by going to this tool to build to collect and categorize customer support tickets and check whether that bug was prevalent. Among customers, she was a coordinator case and then go into the code-base, identify the root codes, code a fix, and then message the technical lead for that project, Marco, so that it could review

54:15the pool request and it would basically prove it so that that fix would go and benefit all customers. She did that in less than five minutes and the agent went off and did it. The bug was six-day after because Marco apparently didn't have time to review it the same day, but probably took 30 minutes of a person's time to do something that would have taken optimistically 10 hours, even just two years ago. We would probably never have solved that bug because it would never probably have reached a level of priority that we would go after it with the cost. So this is just one example and interestingly, that technology, you don't even get to choose the model that's used, that's being used. So there is a gateway that the harness is built in-house of open source components and then the gateway is also built in-house. So then when a task comes in, we have an algorithm that will determine the best model or combination of models to implement the task, trying to optimize for quality and cost. So we have of course access to the APIs for the

55:22frontier models, but also we have self-hosted over 15 or something different open-weight models and combinations thereof. And for 99% of the tasks, we actually go open-weight, spend almost nothing. We're currently, like I said, close to $4 billion in run rate revenue. As far as I can tell, one of the most aggressive users of AI of any company writing 94% of our code with AI, almost all of our data analysis, almost all of our design. And on a run rate annualized basis, we're spending $15, $15 million in all AI-related spend because it's almost all done with super efficient open-weight stuff and the frontier models are used only for supervision, which is super cheap. It's like, if you have a senior engineer just overseeing 10 junior engineers, taking a look, but not doing the work themselves, that's way cheaper. And then for some super critical task, those are quite rare. So when you bring this to an acquired team, it can make a massive difference in the efficiency with which things get done. And it's not just you kept costs, but also

56:23just launch more features. You can run more experiments in monetization. And it's all a virtuous cycle of compounding over time, which is quite powerful, especially if you can deploy it across new acquisitions because then you can invest more in building these tools because you're amortized across a growing base of revenue. It is a really good endorsement of how AI can make businesses more efficient. Also an endorsement of the value of the open source models, which is that they're cheaper and you're not losing that much. So long as you're strategic about when and how to use them, which I think is going to be a huge shift in the AI landscape over the next few years. But also it is kind of an endorsement of the AI will take your job story because you're using AI, it's making the business more efficient. And you're also reducing headcount pretty dramatically in a lot of cases. And it seems like AI is doing a lot of the business work that humans would have been doing in a yes less efficient system. But I think if I were worried about AI taking my job,

57:30I would point to bending spoons as an example. Are you concerned about that? What do you think about this issue? Yeah, very much so. I agree. We watch her saying. I also think that I don't believe the answer is telling companies, well, try to be worse than you could be because we like I think ultimately that's not a lasting solution. But I think, society, this could be a big problem. Up until a few months ago, I was quite pessimistic about this. I really thought I couldn't see a way for people to be employed even in 10 years, at least the bulk of the population. I guess I've gotten a little bit more positive about it as I read an article by an economist, forget his name now, but we made a, and so I'm playing a people who, everybody of her, say, don't worry, AI will create more jobs. Their claim was ultimately I cannot do everything humans can better than you must can. And I think that's a dumb argument. I think it's true today, but our brains are ultimately molecules and electromagnetic signals. Look, we're going to get there,

58:34maybe next year, maybe in 20 years. It's a difficult but definitely not instrumentable, technological problem. And the upside for whoever sold it is so massive that someone is going to solve it. Maybe it's not LLMs. Maybe we need some breakthroughs, architecturally that we, you know, but we'll gather. So I think that's a dumb argument. But this economy is made an argument that I think is brilliant. And it's like the concept of comparative advantage or opportunity cost or what you will, you are probably, you know, you are anyone at companies, probably much better at a range of tasks than some colleagues for doing those very tasks, but your time is limited. And so it's ultimately more efficient for you to focus on certain things, other things, you're better at or they're more value-adding and other people will do the other things. And AI ultimately, although the capacity it can have can be ordered from magnitude greater than that of a human, ultimately it's limited by something, whether it's energy or chips or, you know, it's never going to be infinite. And so there will be things that AI cannot do because it would be

59:37stupid to use those limited resources for AI to do those things. And you must very likely be the next best, best option. And in a world where the economy has grown massively because of productivity gains through AI, maybe we get paid so much more for those things simply because there's so much more money to go around that. Whoever is enjoying part of that, share of the AI pie, so to say, is willing to pay a non-nanny, 100 times more than their pain in her today. And I think nurses are paid a lot more today than they were paid 100 years ago for very similar reasons. So I've got more optimistic, but there's this scenario which could be almost, you know, having on her in some ways and maybe having on her, it's maybe we don't even need to work because we found a way to distribute that wealth and we can all pursue our hobbies and whatever. But this is a same I haven't on her, I quite like it, but I also got pretty worried that if the point AI is so powerful and there's this limiting factor or say energy,

1:00:40it's a slippery slope where if we lose control of AI, then why are we feeding humans? Because that's taking away energy that could be fed to giving AI that extra 0.1% to do even more. Like if we're pushing AI to that limit, what prevents those who control it or AI itself from turning this into a massive dystopia, a bit like the paper clip typical dystopso. I got more optimistic, but also this scenario I think opens up even more concerns on some truly extraordinary bad scenarios. A lot worse than people are unemployed kind of scenarios. So I'm I'm excited about AI because I'm ultimately a technologist and I think it's fascinating, but I'm also extremely scared about some of the implications it could bring to society. It seems so much rests on the transition period. How do we transition into that future and what decisions do we need to make? And it seems like we do need to make some pretty important decisions. We all out of time, I want to just wrap up with final question for you. You have found yourself

1:01:46in an extremely successful position. You are working in AI, you're also working in investment, you've seen a lot of things. As I found what advice would you give to anyone who's listening to this podcast who's interested in being entrepreneurial, maybe thinking about living in a more AI-enabled world and how to succeed in that world, what advice would you give? Try to look for ways to be valuable, create value where a few people are looking. I think if you're building the you know, harness number 28 simply because someone like a VC who's not being able to finance the bigger brands as well as giving you five million dollars, I think you're probably with your time. So try to find a place that's a little bit concealed, unseen, unsexy. And by all means ask yourself a question, what AI could do to make it better or more successful, but don't look where everybody's looking because especially if you're looking for me to give you the answer, you're probably not Elon Musk.

1:02:52And so you have no chance of winning. I think where everybody else is already pouring billions and trying hard. That's one thing. But then go for it. I guess there's I've heard very few people, it's a bit like having children. Almost everybody chooses to have children does not regret it. Sometimes people who choose not to later regret it, with entrepreneurs who are similar, I've rarely found them entrepreneurs later like, I wish I'd never tried. Even if they fail, they almost all cherish the experience. So give it a shot. Don't be stubborn. If you fail time again at some point, get a job. But give it a shot. Luca Ferrari is the co-founder and CEO of Bending Spoon's Luca. We really appreciate it. Thank you for joining us and to our audience. Thank you for tuning in live. We will see you next time. Thank you for having me. This episode was produced by Alison Weiss and engineered by Benjamin Spencer. Our research associates are Dan Shalan and Christian O'Donohue and our senior producer is Claire Miller.

1:03:55Thank you for listening to the Prof. G Markets founder series. We'll see you next month with another founder's story. Support for the show comes from an engine. Here's the reality. The average business traveler spends 45 minutes booking a single trip on a legacy platform. But the company's winning right now aren't cutting travel. They're booking smarter. With engine, that booking time drops to as little as two and a half minutes. And it's AI-powered personalization gets faster the more you use it. Multiply that across your team every trip every year. That's not a perk. That's a competitive advantage. 37,000 businesses have joined engine. Now it's your turn. Get $500 from your business signs up and start traveling at engine.com slash founders.