This is part of my operating manual series, which opens up the playbook of private equity and company building luminaries. Check out past ones with Mark Leonard, Andrew Wilkinson, Robert F. Smith, ESW Capital, and many more.
What is Bending Spoons?
Bending Spoons is an Italian technology company founded in 2013 that specializes in acquiring and revitalizing software businesses. They often get compared to Constellation Software (their operating manual here).
Described as "private equity hipsters" and “a new kind of private equity firm for the app store generation” the company focuses on purchasing distressed businesses with steady cash flow and transforming them into profitable ventures.
Bending Spoons has become one of Europe’s most valuable tech startups, with investors valuing the company at $2.6 billion in 2024.
They are doing around $700M in annual revenue across 100 digital products with around 450 engineers. They have invested about $1 billion in companies through 2024.
How did Bending Spoons get started?
The company was founded by Luca Ferrari (CEO), 39 years old in 2024, and his co-founders while they were living in Copenhagen.
Their first project was a scrapbooking app called Evertale (unrelated to Evernote) they founded in 2010. Evertale aimed to create a self-writing diary using AI.
While they were struggling to get off the ground the co-founders agreed to try to get jobs and share the salaries with the others who would continue working on the startup.
Luca got the best paying job at McKinsey and worked part-time at the start-up while using the salary to subsidize the startup by paying his co-founders food and rent.
They eventually raised some money and Luca was able to join full-time again. Then the company failed a few years later. Their venture investors sold back their shares for $1 to the co-founders and left the company with the remaining $40,000 in venture capital funding.
The teams' learning from this failure was that they were arrogant in thinking that they knew what the market wanted. So instead they shifted to looking for companies that already had prodcuct-market-fit and with untapped potential.
In 2013, they used this remaining capital to start Bending Spoons. The name is inspired by a scene from The Matrix where a boy bends a spoon with his mind.
They moved the company back to Italy and began by investing $10,000 in their first acquisition—a simple iOS app for keyboard personalization.
They improved the app, doubled their investment, and continued this cycle of acquiring, enhancing apps, and reinvesting the profits to acquire more apps. They have not sold a significant asset to date.
What are some deals Bending Spoons has done / businesses purchased?
Bending Spoons has made several significant acquisitions:
Evernote (2022): The note-taking app is their most famous acquisition to date. They agreed to buy the company In November 2022 and the acquisition concluded in January 2023. In July 2023, Evernote laid off all existing staff who were in the US at the time and announced plans to relocate to Europe to be closer to Bending Spoons’ headquarters. They reportadly had $100 million in ARR at the time of acquisition with 250 million users.
Hopin (2024) - In April 2024, the company announced it would acquire Hopin, owner of the popular live-streaming studio StreamYard.
WeTransfer (2024): Purchased the Dutch file-sharing service, which had previously been considering an IPO, valuing it at €716 million. A month later, they laid off 75% of the company’s workforce.
Meetup (2024) - They acquired Meetup, a social media platform for organizing in-person and virtual activities. WeWork Inc. previously owned the events-listing platform.
Mosaic Group (2024): - In January 2024, it acquired the assets of New York City-based mobile app developer Mosaic Group from IAC Inc.; subsequently, Mosaic’s entire workforce of 330 staff members was laid off, as they were not part of the acquisition.
Remini (2021): Acquired this AI photo editing app, which later became a top-ranking app in the App Store.
Attempted Vimeo Acquisition (2024): Sought to acquire Vimeo Inc., but the deal did not materialize.
FiLMiC (2002) - In September 2022, Bending Spoons acquired FiLMiC and converted its video-recording app, FiLMiC Pro, to a subscription revenue model. In December 2023, the original FiLMiC team was laid off, and the development of FiLMiC Pro continued in-house by Bending Spoons.
Issuu (2024) - They acquired the digital publishing platform Issuu.
What does Bending Spoons do after a sale?
“like private equity had a baby with Google” - Luca Ferrar, Founder & CEO
They implement a classic software investment strategy by acquiring an underperforming software business and combining aggressive financial strategies with technological innovation.
This is similar to my playbooks on Constellation Software, Vista Equity, Tiny, Verne (us), and ESW Capital in the software space.
Learning Phase
After acquiring a company, Bending Spoons enters a comprehensive learning phase that lasts several weeks to a couple of months.
During this period, team members at all levels immerse themselves in the new company’s operations, talking to staff, reviewing code, reading documents, and conducting analyses. They aim to understand every aspect of the business, including technology, product, monetization, and organizational structure.
Once they have gathered sufficient information, they develop a clear vision for the company’s future across all areas. They then work to bridge the gap between the current state and this vision as swiftly as possible.
This often involves significant changes such as technological overhauls, organizational restructuring, and often reducing staff substantially to create a leaner, more efficient operation focused on long-term success.
Cut Costs
Many of the companies that Bending Spoons acquires are based in Silicon Valley, which has labor costs that are significantly higher than in Italy, where Bending Spoons is based.
By getting rid of the expensive US employees and moving the team to Italy they are able to reduce expenses and take advantage of their shared services.
For example:
Evernote: Dismissed over half the staff and eventually shut down its offices in California, moving operations to Europe.
Meetup: They sent an email shortly after the acquisition indicating that most employees would lose their jobs.
WeTransfer: Let go of three-quarters of the staff almost immediately.
Emplyoees typically receive 16 weeks of salary, one year of health insurance, and a pro-rated performance bonus, along with assistance for those working on visas.
Price Increases
They substantially raise subscription prices to maximize revenue from dedicated users. Many customers churn, but the profits increase substantially.
For instance:
Evernote: Increased the fee for the personal plan by 63%, from $80 to $130 per year.
StreamYard (Hopin): Increased prices by 80%, from $25 to $45 / month.
Product Improvements
A team of young coders and data scientists in Italy works on adding new features and improving the product. For instance:
Evernote: With Evernote, Bending Spoons identified that the backend needed a complete rewrite. They moved from a monolithic architecture running on manually provisioned virtual machines to a microservices architecture with managed databases, significantly improving performance and scalability. Then they released 75 product improvements within a year.
Remini: Rewrote every line of the app’s code, leading it to top the App Store rankings.
Focus on Profitability
They shift the business model to prioritize immediate profits from the existing user base over pursuing future growth.
Some users appreciate the enhanced features and revitalization of stagnant apps like Evernote. Others get mad about the price increases and layoffs. The reality is that they’ve grown revenue on basically all acquisitions and customer retention stays near all-time highs.
How does Bending Spoons operate?
Bending Spoons focuses on radical simplicity, autonomy, and efficiency.
They organize their company into business units dedicated to specific products, each with its own management and resources like software engineers, data analysts, and designers. These units have a high degree of autonomy to set objectives and determine how best to achieve them.
Some interesting Bending Spoons operating principles::
No On-Call Rotations:
Bending Spoons aims to build systems so reliable that they eliminate the need for on-call rotations. This is unusual in the tech industry, where on-call duties are standard to promptly address system issues.
For most of their products, they have no on-call schemes at all. Engineers are encouraged to think through all corner cases to ensure robustness, knowing there is no fallback like an on-call team.
Non-Prescriptive Processes:
While they provide guidelines and shared services through their platform teams, they don’t impose strict processes. Teams choose the tools and methods that best suit their needs.
Fixed Salaries with No Bonuses:
They operate with 100% fixed salaries and do not offer performance bonuses.
After researching and discussing internally, they concluded that bonuses did not significantly drive performance and decided to simplify compensation by eliminating them.
Hire For Raw Talent:
Bending Spoons prefers to hire inexperienced but highly talented and motivated individuals, focusing on potential rather than experience.
They often hire recent graduates or junior engineers and invest heavily in their training and development, believing that talent outweighs experience in the long term.
Extremely Low Employee Turnover:
They boast an unwanted churn rate of about 1% per year, significantly lower than the industry average.
Out of 450 employees, only a handful leave each year.
No Traditional Titles or Hierarchical Levels:
The company does not use job titles like “Senior Software Engineer” or “Staff Engineer.” Everyone is referred to simply by their role.
Internally, all engineers are called “Software Engineer,” regardless of experience. Managers are referred to as “Leads.” Employees can choose their own external titles within reason.
“Controversial Principles” Document:
They provide job candidates with a document outlining company values that might be seen as controversial.
This document includes principles like uncompromising excellence and explains their expectations regarding performance and culture, ensuring transparency from the outset.
Shared Services:
They have a central platform team that builds tools and services used across all their products.
The platform team provides services like authentication, security, monetization, and data tracking that individual product teams can leverage.
Diverse Technology Stack:
They are not prescriptive about the technologies used and choose tools based on the best fit for the project.
While Python is their most popular language, they’ve used Rust for high-performance needs, such as their marketing attribution tool, and employ Swift, Kotlin, TypeScript, and others where appropriate.
Based in Italy:
Despite being a global company with employees worldwide, they are headquartered in Milan and are considered one of the most sought-after tech employers in Italy.
Italian developers recognize Bending Spoons as a premier place to work in the local tech scene.
Bending Spoons is known to pay "salaries on par with those in London. “It’s a little Goldman Sachs here in Italy"" which enables them to get the best talent (at still much lower prices than what similar talent would cost in the US). This is similar to hiring talent in Latin America through my company Jules.
What does Bending Spoons look for in businesses to buy?
Bending Spoons targets:
Distressed Businesses: Underperforming or stagnating companies with the potential for a turnaround. Also known as venture orphans.
Steady Cash Flow: Businesses with a consistent revenue stream from subscriptions, despite current challenges. They like subscription software with recurring revenue for this reason.
Loyal User Base: Products with dedicated users who rely on the service are less likely to churn despite price increases.
Untapped Potential: Businesses where operational efficiencies can be implemented, costs can be reduced, and revenues can be increased through price hikes and product improvements.
They model out cash flows to determine what they can pay since they buy and hold companies instead of flipping them. They have been the highest bidder on every deal they’ve won.
How Has Bending Spoons Been Financed, and Who Are Its Investors?
Bending Spoons has been primarily self-financed. The company has been profitable every year since its founding, relying on its own cash flows to fund operations and acquisitions.
Early on, they faced challenges raising capital in Italy due to a lack of venture capital interest and unfavorable terms. As a result, they did not rely on external equity financing. Instead, they used a combination of profits, loans from local banks, and small Italian investors to finance their growth and acquisitions.
In recent years, to scale up they have raised hundreds of millions of dollars from international investors, including:
Celebrities like Ryan Reynolds, Andre Agassi, Eric Schmidt (Former Google CEO) and Abel Tesfaye (The Weeknd) are among the notable names who have invested.
While celebrity investors bring attention to the company, Ferrari admits their impact on operations is minimal. The primary significance lies in visibility and validation.
Celebrity involvement raises the company’s profile, potentially aiding in future fundraising, recruiting, and endorsing the company’s strategy and potential.
What Are Bending Spoons’ Future Plans or Goals?
Bending Spoons aims to continue its aggressive acquisition strategy, with CEO Luca Ferrari indicating the company could spend up to $2 billion on acquisitions and even more soon.
Investors anticipate an initial public offering (IPO) in the next few years, given the company’s rapid growth and increased valuation to $2.6 billion in 2024.
The focus remains on acquiring more distressed, subscription-based software businesses and turning them into profitable ventures.
For more, check out our podcast on Mark Leonard (Constellation Software) and Robert F. Smith (Vista Equity).
If you are interested in buying, growing, and selling small companies, check out my course & community on it at IndiePE.com.
If you know of anything I should add, please reach out @ColinKeeley or Colin@ColinKeeley.com. I’ll continue updating as I learn more.