Anish Acharya
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a16z · How Bending Spoons Built a $20 Billion Compounder | Luca Ferrari
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When Is Optimization a Better Bet Than Invention?
Luca Ferrari says optimization is the better bet when the strategy can compound small gains, because radical invention's usual outcome is losing everything. Anish Acharya asks how Bending Spoons chooses when it buys a company such as Miro or Evernote. The mindsets are different, and a company that goes all in on one at the expense of the other is leaving results behind. Apple has leaned toward big inventions without ignoring operations, and Tim Cook made those operations efficient. You still pick a camp.
Radical invention can raise the peak faster. A new iPhone can change a company close to overnight, and Google is still mostly search about 30 years later, around 80 percent of the business,
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How Does Bending Spoons Improve the Companies It Buys?
Luca Ferrari says Bending Spoons buys technology companies where it sees a chance to make them much more successful, then puts them on one platform with the same foundational technology and the same core team. The aim is to make each business more cash generative on a 10-year view. If that works, the extra earnings are levered up to buy larger companies, and the loop repeats.
The better-known deals he names are Airtable, AOL, Vimeo, Eventbrite, Komoot, and WeTransfer. The count is more than 50 acquisitions, and maybe 60. Anish Acharya quotes Mark Andreessen's line that there is no such thing as equities, only a bond that throws off cash or an option that may never pay. Luca calls that a bit
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Why Does Bending Spoons Optimize Free Cash Flow?
Luca Ferrari says Bending Spoons kept optimizing the rate at which free cash flow compounds, passing up choices that would please investors and produce a better valuation in the moment.
More than once, the company knew a different move would raise the valuation immediately: buy a certain type of asset, or manage an asset in a different way. The team was very confident, and in his view history so far has proven the choice right, because staying with free-cash-flow compounding would make the cash flows much higher in the long run than the other path. A multiple is only one factor in a multiplication. If the other factor is 10 times bigger, the overall result is bigger even when the multiple i