20VC: Bending Spoons: The Most Untold Success Story in Startups: Lessons Scaling to 500M Downloads, $360M in Reported 2023 Sales and a $2.55BN Valuation... Bootstrapped with Luca Ferrari, Co-Founder and CEO @ Bending Spoons

26:19Basically, if it's an equation, you have more variables, and you control them less. And so your ability to then force the future the direction you wanted to go is lower. When you make a mistake there, you generally didn't have an opportunity to fix it. Whereas in other cases, maybe you thought something, you could achieve something, and you thought it would be easier. It turns out to be harder, but you can't go the extra mile. I'll locate a few more resources somehow you get there. But if the rate that we sure acquiring users isn't where it needs to be often there isn't much you can do I mean you can spend more in advertising that you're gonna lose money otherwise you would be spending it already Right, so the problem is you can find ways of acquiring users efficiently and that happens to be the end of it Do you find scale network effects and what I mean by that is given the portfolio of products there's cross -promotion referrals the ability to increase ones No, not a factor.

27:15Maybe it's because we have failed to leverage it, but no value coming from that. In the one that worked out really well, what were the lessons from that? We spoke about the challenge of predicting user acquisition. In the one that went to the upside, what was the lesson from that? Yeah, there are some small tactical lessons. The bigger lesson is acknowledging the incredibly high level of unpredictability of some of this and bake in appropriate safeguards, particularly a sufficiently large margin of safety so that when you are wrong, as long as you're not massively wrong, it doesn't destroy you.

27:49Maybe you won't be happy with that investment, but it doesn't destroy you entirely. And you can move on to live to fight another day, as they say. How do you build margins of safety? Is that in diversification of product lines? Is that in pricing? Well, that helps. Yeah, probably want to do it both on the individual, let's say, capital allocations, for example, an acquisition, but the same concept would work if you allocate capital in R &D marketing, because that is still cash. It's no less real than if you buy a company. So, you probably want to bake in a good margin of safety as you do that.

28:19And then naturally, if you have a broader portfolio of initiatives, whether it's multiple products like we do or multiple R &D projects, then your further protected statistics are on your But risk assessment and mitigation is a surely complex topic. I think we could talk a lot of hours. What do you know about risk and risk mitigation today that you wish you'd known 10 years ago? Assume you're not as smart as you think you are. The issue here is that most people who end up making significant capital allocation calls. Generally those people, they wouldn't be there if they hadn't been somewhat successful by most measures.

28:58Sometimes academically and then professionally, but at least professionally, right? Otherwise, it's unlikely to imagine that someone will be managing $50 billion or, you know, ask a scale -up or billions. If that's a case, it's very easy to think too highly of yourself. And that is very dangerous. The moment you think you're very smart, the likelihood that you make very dumb mistakes, skyrockets in my opinion. Now you need to retain a little bit of self -confidence, otherwise you won't make any moves, but I think a healthy level of the second guessing yourself assuming your biased in favor of your ideas that you're lazy and don't want to look into a certain risk factor because you know it's going to take you 50 hours of grinding through benchmarks and analyzing data that you should assume that's a case and adjust your aim accordingly.

29:45Lika when did you take too much risk on an asset? Too much that you shouldn't have taken. Oh I mean it's difficult in hindsight you know it's like if you play a hand of poker It's quite dangerous to assess why are you played it well based on the results. So I'm thinking based on what I knew at the time and what I could have possibly known. One that's obvious to me, we did buy this app, I'd rather not mention it by name, but a pretty significant product. We made the mistake I mentioned earlier. We were quite bullish that our projections of user acquisition rates were conservative, And I think we were a little bit lazy in really studying the underlying factors driving user acquisition Historically, we just looked at it in aggregate and a bit naively had we done our homework more Thoroughly, I think we've just plotted that some of the underlying factors were waning and dropping quickly and that Consequently the rate of user acquisition was likely to to shrink faster than we had anticipated because we had actually projected it to decline but not nearly fast enough.

30:47That's certainly a case where I feel I'm not very proud of the way we handle ourselves. I think we did a mediocre job there. Did it change how you do it? Yeah, definitely. Every year or so we try to spend an hour reminiscing that particular situation. A repeated retrospective. We have dissected our mistakes. Adnauzum, so it's not that we're gonna learn anything new, but I think it's healthy to remind yourself just how lazy and dumb you were at some point. So you don't assume you've become hardworking and smart all of a sudden. I did love your humility. Can I ask you on the flip side? Is there a time when you didn't take enough risk?

31:20And you're like, come on Luca, you should have done more that. We could have been more aggressive. I think it's probably one of my greatest shortcomings as an entrepreneur and manager. I feel I'm too concerned, scared even of disappointing others, colleagues, investors. And as such, I believe we've waited a little bit too long to raise capital. We've waited a little bit too long to push on the accelerator to implement our strategy, the fastest speed we were capable of. I feel our level of caution has been generally speaking excessive. I think had we been more aggressive, we would have made more mistakes, but overall, I believe we would have created more value for our shareholders, our colleagues.

32:00You can't really A, B test life, and so maybe it's not the case who knows, but that's my read in hindsight. Right. Likki, what other people think? Do you care? Unfortunately, yes, that's the second. It's part of the, I was just mentioning I'm too concerned about disappointing otters. I don't think I want otters to think highly of me. I don't think I'm egocentric in that way, but it really bothers me if they hate me or think poorly of me. So it's more like the downside that I or the negative end of distraction that really annoys me or frustrates me. I don't necessarily seek to be on the other end of the spectrum and be praised, but I hate when they really don't like me.

32:38That's a major handicap in my role. If many of the best CEOs they don't give a shit to a fault even. I think it's a superpower to have. I've tried to be more resilient, emotionally in that regard over time. I've gotten more fatalities to gain. You grow a thicker skin. When you get criticized a lot, then at some point you either die or give up or grow a thicker skin. So I've been able to grow a thicker skin, but that's an issue for sure for me. I was walking in the park with a friend of mine. He's a founder of a 20 billion dollar business, and I was moaning about something and he was like, how are you shut up?

33:10Your job is to get punched in the face 50 times a year and just get up every time. That's life as an entrepreneur, like get on with it. My question to you is, what do you tell yourself when you do get punched? When you do get that hit down? What is that voice in your head say? I think I'm very self -critical to a point where maybe it's unhealthy. I wouldn't recommend that necessarily to others. I don't think it's part of my character to give up. Now, at least in the situations I've been so far because there's always something harder and maybe there's a point where you break down, but I think I can claim to have gone through the truly difficult things in life that some people have to go through.

33:47My challenges have been business -related, which I find are frankly, look -story problems to have. I've been in a situation where I was complaining to particularly to other people in similar roles, but in hindsight, I think it's irritating that people like you and I complain about these sort of things because we really are privileged. I mean, come on, we were born and raised in somewhat affluent countries and clearly had a chance to try our hands at things that are certainly not terrible. I mean, it's a privilege to be able to do what, at least what I do, I think you probably feel the same way about what you do.

34:19So maybe we should just probably just take a step back and have a laugh, you know, the real problems in life are not these ones. Absolutely not. The life of a venture capitalist is brutal, Eka. We are positively Suppressed as a class of people. No, I completely I completely agree with you my grandfather I found out like seven pounds an hour shoveling gravel on a golf course at 82 and I was like, you know what a little bit of Perspective is important. I want to touch on and there's worse than death I mean, that's a thing. That's not even as good as better as it gets you know, so I do want to touch on the people around you because so many people told me about the talent density that you build.

35:00And you mentioned before to me about talent and motivation density. It's quite a specific use of words actually. It's not like, oh, we have great people. What did you mean by talent and motivation density? Yeah, I think so. We built a framework internally to describe exactly these sort of things, but a short of it is that three important components are talent, which is how good you can be, then there is experience which is cumulative exposure to relevant experiences which will help you based on your talent, unlock your potential and then there's motivation which is kind of a multiplier factor going from zero let's say to one where based on how much you care to be great in that particular context you'll do better or worse within the range determined by your talent and experience.

35:44It's a trade -off when you hire people you can say I want to hire for experience talent motivation you can but you're gonna do worse at any one of these than if you focus on just one or two. In our case we chose to focus on talent and motivation almost entirely disregarding experience. Experience we can provide talent we can't motivation we can try to create the conditions for it but you don't change what what someone wants and cares about and and this is the way in the long term we have the best team we can. Let's just unpack this like talent. What does that mean and how do you test for it? Is it raw skills and how do you test for them?

36:17We try to test people as much as possible practically and measurably. We have come to be wary of interviews at least. The more traditional structured interview where the interviewer will just ask a bunch of questions and tell you how they feel about the candidate. We discovered that is not a good predictor. And so we try to have practical tests or at least have to simulate or require the underlying abilities that the actual job will require. And we try to go more toward general problem solving abilities than as I said before acquired knowledge. So we're fine to have someone who doesn't know the things as yet as long as they show us that they have the work ethic, the ability to learn, the right teamwork and mentality to then be great at our company.

37:02So that's talent. Motivation, happy test motivation. You need to try to understand what triggers the person in a good way. What are the factors which one present drive the person to really give their best. With recruiting, like, the goal is not to be perfect, it's just to be less bad. And so it's not that we are great and all of a sudden can predict what gets people to be as motivated as possible. We just aim to be a little bit better than most companies and a little bit better than we were yesterday. And I think we have improved substantially, but it's still wildly inaccurate our prediction, but better, that's worth something.

37:39What have been the biggest mistakes you've made in talent identification and hiring? Too many to count, but I would say broadly speaking, the biggest one was to assign too much weight to experience. In that trade -off I mentioned earlier, ultimately, if you assign a lot of value to experience, you get someone who's more valuable immediately or early on, but then because you've had to trade talent and motivation potential off for more experience, you'll have a lower level of contribution in the long run. And we saw that quite clearly that I think we did that a little bit too much. In terms of density, how important is it for you that people are together?

38:16That there's a physical co -location. We have seen that working together physically tends to correlate with higher -perform levels of performance. It's really hard to tell whether that's because people are in the same place on site or it's a consequence of the fact that people who are intrinsically more motivated about working at the company or doing what they do. They also want to be with others because if you really care, you typically tend to want to be where the action isn't so it's simply that it's self -selected, that sample. But we have incredibly high performers who work remotely all the time too.

38:48It's just on average slightly less probable. Our decision has been to fully support remote work. Some of our best performers are working, almost entirely remotely or completely remotely, but we do pay a price for that. It's not clear cut. When a company decides to only do on -site, I don't feel like I can say it's a stupid move. I could see how that could ultimately prove to be the right move. For us, it's kind of a toss of a coin. We're not sure, so we just keep all options open and again, we're very happy with our remote colleagues. They are great and again, some of them are some of the best colleagues we have.

39:19Do you pay remote different to normal? Standardized pricing is a hard thing to get in terms of remote talent, depending on where they are at different prices. Currently, we have the same salaries, regardless of where you are. Being in Italy and in Europe, I suffer from this assumption too, but a lot of our American friends and counterparts say, ah, you lack the ambition, the young people don't live to work. They work to live. Do you agree with that assumption on Europe? I know it's a general statement, but do you think it's fair? I don't think anybody should live to work. I don't know that you should even try to make a distinction between life and work.

39:55You know, life includes work, includes play, includes love, includes exploration, includes sorrow, happiness. So I think they're just on two different dimensions and it's just logical to compare them, but having said that, I don't have a lot of certainties in life, but this is one of the strongest opinions I have. And that's that if you want to have a chance to be the best or one of the very best at what you do, not only do you need to be very talented, whatever talent means for relevant to that particular pursuit you have, but also So you need to work your ass off for a very long time. In a competitive world, this seems pretty straightforward to me and I've seen it proven out with a truck rack or the almost 100 % in the people I've seen being great at what they do.

40:37It is very rare that they haven't tried very hard to be great for a very long time. So that's my general appreciation for hard work and I think it should be imposed on anybody and I think it's either morally good or morally bad to want to try hard to be great. I think it's really arbitrary, whatever you want to do with your life. Forgive me if this is too dark. You feel like you're quite hard on yourself. People say the same to me. Do you ever give yourself a bit of a break? Maybe I am, maybe I'm not. I think as I said before, I feel very privileged. I don't want to sound like I pity myself or being hard on myself.

41:08It's okay. I'm as lucky as it gets. I have a big dream. I've been very fortunate to find and be found by amazing people. I love working and living with. I get to pursue my dream. It'll be part of a team, with a big ambition, love my job. And yes, it's a sacrifice, including the hard truth of not being great at many things and trying to be better. I think I wouldn't want any other way to be honest. Final one for you before you do a quick five, but many mutual friends said I had to ask about your co -founder relationship, saying that it's a very unique pairing. Would it been some of your biggest lessons or would it take to have a great relationship with your co -founders in the way that you do?

41:47If you were Italian, I would tell you that it takes a lot of cool, you know what it means? No. So that translates to ass like the body part and it means a lot of luck. A lot of luck. But the truth is I got lucky. I had been friends, particularly with one of them for the longest time before we even started the first startup. We went through again from the entrepreneurial perspective quite a bit of hardship together failed startup in which we had pulled our hearts and souls for multiple years and the relationship didn't fracture but actually got stronger in those lowest moments. And that is the best proof that you have something to build upon.

42:26How did you choose your investors? Is there another form of partner? Capital partner? How did you choose your investors? Oh, I mean, it was easy. Nobody else would give us money, so we... No, sorry. I'm sorry. I'm sorry. I mean, there have been different moments in which we welcomed you investors, and the answer would change a bit before the sake of brevity, I will say, we have some advisors we trust. One, for example, is called Allen & Company, an equity M &A financing advisor from the US excellent. You know, they know a lot of investors, they've seen them in different situations, particularly the shitty ones where you really see what sort of principles they abide by.

43:01Because it's easy to be lovely when you've been generating great returns, but it's a lot harder to be professional and fair when I think aren't going that well. So they provided us with a short list of firms they thought highly of. And then we had a few relationships, so we added a few names that list. And then we went through a process of they studying us us studying them and talking to people who had them as investors for a long time and had difficult moments with them on board and ultimately it was a mutual selection. Is there anything you do differently about the fundraising processes having been through them?

43:33Different things on negotiation, on price, on length, anything you do differently? Yeah, I think you want to create a certain level of competition if you can. I'm very happy with investors we have. We could have obtained better terms early on and we could have closed faster, have to create a little bit more competition because often what they tell you and they might actually mean it, the initial enthusiasm. You always hear this is awesome, we definitely gonna invest, we're gonna cover the whole round, you don't need to talk to anybody else, this would be amazing and then once due de -illegion starts, there's always a tendency to then commit a little less capital, try to walk back on a few of the key terms and if you don't have any competitive tension, it's hard to avoid that from happening.

44:13But if you have a reasonable amount of competitive pressure, then and you keep it up all the way to the end big mistake Is to just base your selection on the early feedback and then wave goodbye to all those you don't plan to take on board and proceed only with the one or two that you plan to take on board You shouldn't do that. Just keep a broader spectrum of parties involved up to the very end when you're signing Well, see immovable time fee. You mentioned terms that are important. Is that one that's like, hey, no mass. Not gonna budge on that one Well, I'll exchange each time, but I would say one that stayed the same throughout our rounds was liquidation preferences All our shareholders myself our institutional investors are colleagues who got equity through their working at the company Nobody has any liquidation preferences over all on equal terms economically The reason why we fought very hard to avoid that is we didn't want our colleagues who despite our efforts to educate them financially actually, of course, are not as financially savvy as an investor.

45:13And unlike an investor, which has maybe dozens or even hundreds of investments, many of them better metaphorically speaking that their house on the company, we really didn't want to be in a situation where had things gone poorly, then everybody would be left empty -ended, bought water to investors. But that was something we really pushed against. Well done. That's a good thing to be able to push against. That's not an easy one with the scale of cash erased. I do want to move into a quick file, so I say a short statement, you give me your immediate thoughts. Does that sound okay? Yeah, let's do that.

45:44What if you changed your mind on in the last 12 months? I used to think that I should try to read as many books as possible. Quantity, I wouldn't say, is irrelevant, but not so important. What's really valuable is to select and well and try to read each and analyze each in depth really ponder it. You learn a lot more, or it's a lot more useful that way. What three books would you most recommend someone listening? Our Mathematical Universe by Max Tecmark. I'd say the selfish gene by Richard Dawkins. And then maybe to go fiction versus no fiction, I would say a gentleman in Moscow by Amor Tiles, a bullet that's up, you pronounce it.

46:21Wonderful, wonderful novel. Maybe the best novel I've ever read, one of the best. I was gonna suggest Venture Deals by Brad Feld and so you have a lot more diversity than me Luke. because they don't like. Ah, some people tell me I need to get out of Vansha. I probably agree with them. What does a day look like for you? Do you have a routine? I'm just intrigued. You look like a fit date. I mean, I don't think I'm anything incredibly surprising. I work out around 7, 7, 30, walk my dogs, go to the gym, I can run, maybe lift weights, I try to mix stuff a little bit. Then I have breakfast and read the same time.

46:54That's my health and our meditation. To me reading and eating a light breakfast is really recharging. And then I have my workday. I tried out a lot of time to do individual work. I think it'd be surprised by how few meetings and external meetings particularly. What we're doing here is quite rare for me. I maybe do two of these three per year max. So most of the time I spend doing individual work. We promote individual work a lot of the company at all levels. We want all of our managers to be incredibly hands on. Do you know I have direct reports that report to you, Litha? Yeah, I do. I do once every two weeks.

47:24Maybe it takes about five hours a week. And then I have other meetings, but I would say I probably have no more than 20 hours of meeting a week and I squeezing maybe 40, 50 hours of individual work each week and then I try tend to be done around maybe 8 .39 in the evening. I spend an hour my fiance with my dogs again you know there's just chatting watching a part of a movie eating dinner then walk the dogs again read a book full of sleep pretty simple. Tell me if you could choose one person as a bold member who would it be? can be anyone. Sidharata, the fictional character from the book by Hermann Hess.

48:01I think it'd be great as a poor member. Most say Bill Gurley, so you know, good. That was me. That was me too. What's the biggest piece of BS advice that you hear most often? The opinion I hear most often that I think is really poorly informed and poorly thought out is that artificial intelligence will create more jobs than it will eliminate. We will see, I might be very wrong, I'm quite confident that it will prove to be otherwise. Distortion or jobs? Yeah, if I were an excess of job creation in the medium long term. I don't know if it's a few years or a few decades, but I'm quite convinced of that.

48:38An ultimate one was the kindest thing anyone's done for. Two friends from middle school or classmates. I told you it was almost pathologically shy at the time. They went out of their way to pull me out of my shell and teach me how to socialize with others. For two kids of 10 years of age, to do that showed a level of, I think, selflessness and maturity that I still remember today with incredible gratitude. And it changed my life for real. And you gave them 10 % of bending spoons to thank them in gratitude. I did not, but maybe I should. Well, you know, it's a $230 million gift. I'd help you socialize more if that was on the cards.

49:20Final one for you, Leica. The most ambitious that you can be for bending spoons 10 years out. What is bending spoons then if everything goes right? I do think and hope we we can continue doing roughly what we do we like what we do We think has potential and we're fun doing it. I think we can do it at a much bigger scale We can do it a lot better and I hope that we have Developed a level of competence and accumulated enough resources that we can Increasingly find ways of making a positive difference. I think it's quite difficult in business Everybody talks about it, but it's very few businesses that you can really say in order to make a very positive difference.

49:57I don't think we make a very positive difference, nor do 99 % of the businesses as far as I can tell, but I would like to be in a position to make that difference without a doubt. I love to see things like the Gates Foundation. It's very inspiring to me. Being able to tackle polio and almost eradicated. That is incredibly inspiring to me. So being in a position to do something like that. Maybe it doesn't have to be charity, can be many ways, maybe it's charity, maybe not, but have that level of resources and credibility and access to tackle some of those problems at that level. That will be a dream control.

50:27You mentioned that you do, you know, two or three of these a year. Thank you so much for agreeing to do this with me. I've long been in the admire of the model that you have. I've wanted to do it for a long time. So thank you so much for the time, Staleyka. Thank you, Harry. My pleasure and congrats on all you do. I just so loved doing that, Shoe. I think it is such an untold story of success. as we said there are 500 million downloads over 350 million in sales and barely anyone knows this company, it is an incredible story of success which we should celebrate more if you want to see the full interview you can watch it of course on YouTube by searching for 20vc but before we leave you today, there's no shortage of helpful AI tools out there, but using the mean switching back and forth between yet another digital tool, what was supposed to simplify your workflow just made it way more complicated.

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