Private Equity Hipsters Are Coming For Your Favorite Apps

Several other entrepreneurs have gone through similar experiences since. Bending Spoons is like a new kind of private equity firm for the app store generation. Since buying Evernote last year, Bending Spoons has snapped up five other companies. That includes Dutch file-sharing service WeTransfer, which had shelved plans for an initial public offering that would’ve valued the company at €716 million ($800 million) just a couple of years before its sale, and the assets of Meetup, a bankrupt events-listing business that briefly belonged to WeWork Inc.

Bending Spoons has been around for a little more than a decade, and for most of its life, the bulk of its financing came from Italian investors and loans from local banks. But in recent years it’s raised hundreds of millions of dollars from international tycoons and celebrities, including Ryan Reynolds, Andre Agassi and Abel Tesfaye, aka the Weeknd. Investors valued the company at $2.6 billion this year, making it one of Europe’s most valuable technology startups.

Early this year, Bending Spoons went after Vimeo Inc., a publicly traded online video site worth $690 million at the time, but a deal never materialized. Bending Spoons Chief Executive Officer Luca Ferrari has told backers his company could spend as much as $2 billion to acquire targets right now and even more in the near future.

As an acquirer, Bending Spoons has a type: distressed businesses with a steady cash flow that sell subscription software. Then it brings in twentysomething coders and data scientists in Italy who add features and sometimes push the limits of what subscribers will pay. To set these apps on a new path, the company often fires the employees it inherited.

That’s pretty much what happened with Evernote. Bending Spoons dismissed more than half the staff and hiked prices, raising the fee for Evernote’s personal plan by 63%, to $130 a year. Ferrari has described his business as “like private equity had a baby with Google.”

Corporate efficiency wasn’t exactly en vogue in the tech industry when Bending Spoons was founded, in 2013. But after the Covid-19 pandemic and Elon Musk’s brutal takeover of Twitter, firing became fashionable in Silicon Valley. In Evernote’s case, the strategy appears to be working. Ferrari says it became profitable earlier this year.

“I’ve been pretty pleasantly surprised,” Libin says. He’s observed that acquaintances are using the service more regularly. “At least anecdotally,” he says, “it feels like they’re reviving it.”

Evernote has helped lift annual sales for Bending Spoons past $700 million, up from $162 million in 2022. Bending Spoons touts 200 million monthly active users for its apps. Ferrari is coy about IPO plans, but investors say they expect one in the next few years.

He’s at least achieved some name recognition. Bob Mylod, a board member, says when he first started working with the Italian startup, he’d call American bankers with a pat intro: “I want to tell you about this company you’ve never heard of.” Now, he says, all the banks know it.

The Bending Spoons headquarters is a sleek, three-story complex with a view of Italy’s tallest skyscraper. Blond wood curves around shared office spaces named for planets—a nod to the company’s galaxy-level ambition. It’s meant to feel like a slice of Silicon Valley in a still-gentrifying neighborhood, across the street from a place called Exotica Disco Lap.

Ferrari is tall, trim and slightly uncomfortable—he doesn’t appear to enjoy attention and has given few interviews beyond ones with the occasional tech podcaster or Italian YouTuber. He carefully guards his time and rarely uses his company’s apps. “I’m very offline,” he says. “I’m a reader. I listen to audiobooks.”

His last job was as a consultant with McKinsey & Co., a role he took to subsidize the startup dreams he shared with his co-founders while living in Copenhagen. Their first effort didn’t take—a scrapbooking app called Evertale (no relation to Evernote, apparently)—so they used some leftover cash to kick-start Bending Spoons in 2013. They had a name—inspired by a scene in The Matrix when a monkish boy teaches Neo how to bend a metal spoon with his mind—but only a vague business plan. They made their first app, a feature for changing fonts on a smartphone keyboard, and charged $1 or $2 for extra typefaces. Then they paid a developer around $10,000 for another keyboard app, and a playbook quickly emerged: Make money from apps, then use that money to buy more apps.

Investors compare Bending Spoons to Constellation Software Inc., which sells to an assortment of businesses including car dealerships and spas, and Barry Diller’s IAC Inc. (Bending Spoons spent about $160 million to acquire the assets of Mosaic Group from IAC in February.) Ferrari prefers to draw a different comparison. “I don’t think Warren Buffett and Charlie Munger, when they were doing primarily insurance and some consumer brands, thought, ‘This is all we’re ever going to do,’” he says. “Not saying we will achieve equal success. We’ll see. We’ll try.”

Where Ferrari draws a sharp contrast from the typical private equity firm, and even from Berkshire Hathaway Inc.: “When we acquire these companies, we do so to own them forever. We’ve never sold one,” he says. “When you own something forever, there is a very big incentive to think long term.”

Despite its stature among European startups, Bending Spoons is somewhat isolated. “They are not in the startup circus,” says Paola Bonomo, a tech investor in Milan. Rather than networking at local tech events, Ferrari has brought on celebrity investors, hoping marquee names will help with recruiting. (The impact has been, he admits, “probably negligible.”) Filling jobs hasn’t been a problem, though. The company, which calls its employees “Spooners,” is known for paying salaries on par with those in London. “It’s a little Goldman Sachs here in Italy,” Bonomo says.

The Evernote deal was the highest-profile test of Bending Spoons’ model. Evernote’s legacy stretched back three decades to a Russian computer scientist, Stepan Pachikov, who developed advanced note-taking software for computers. Libin helped turn it into a thriving business in 2007 with a zippy catchphrase: “Remember Everything.” The arrival of the iPhone and its App Store soon after was a boon to Evernote, helping the company secure a $1 billion valuation. But Evernote lost its focus, and subscribers began to lose patience. Libin was out in 2015, and successive CEOs failed to reignite growth.

The Evernote purchase caught the attention of Baillie Gifford, a powerful investment firm that doesn’t often buy stock in private companies but was weighing a stake in Bending Spoons. The debt associated with that deal and Evernote’s yearslong slide gave Baillie Gifford pause. Bending Spoons, hoping to secure the support of investors such as Baillie Gifford, immediately went to work.

In February, a month after the deal closed, Bending Spoons had already begun laying off Evernote staff, says Alexander Pashintsev, a former vice president who’d been with Evernote since its inception. (He says his severance package was “top notch.”) By the summer, Bending Spoons instituted mass layoffs, shut its offices and moved operations to Europe from California.

A lesson Bending Spoons learned from that experience was that it should fire people even more quickly. Weeks after buying Meetup, Ferrari sent an email saying most of the employees were losing their jobs. He dismissed three-quarters of the WeTransfer staff almost immediately. “We’re very transparent, for better or worse,” Ferrari says. He also used the Evernote deal as an incentive to remake his own team. When the purchase was finalized, the Bending Spoons board consisted of only Ferrari, his Italian co-founders and two of the company’s executives. He added Mylod, a former chief financial officer at Booking Holdings Inc., and several other seasoned outside directors.

When Bending Spoons came in, Evernote had been focused on adding collaborative editing features and artificial-intelligence-enabled search while midway through a massive technical overhaul, Pashintsev says. Bending Spoons released many of these features in the first year after the deal. The new team proceeded with the technical overhaul, leaving Pashintsev “really stunned” with how well it was executed.

Really stunned, too, were many Evernote customers, who weren’t expecting such steep price hikes. The company’s personal plan costs $130 a year, almost twice the price of a Microsoft 365 subscription. Reddit is full of former Evernote fans complaining about the new owners and offering suggestions for alternative apps.

Evaluating Bending Spoons’ success is difficult, because it keeps buying companies and doesn’t publicly disclose financial details. Acquisitions, including WeTransfer and Mosaic Group, account for most of Bending Spoons’ sales growth this year. (Ferrari says the company has increased revenue for “nearly all” the businesses it has acquired.) A success story, by at least one measure, is Remini, an AI photo editor. Bending Spoons bought the service in 2021 and says it rewrote every line of the app’s code. Remini spent much of 2023 near the top of App Store rankings, and in China it outranked Douyin, the local version of TikTok. But in part because of the high cost of Remini’s subscription, customers typically only stick with it for two to three months, says a former employee who asked not to be identified discussing private information.

Still, Baillie Gifford was so satisfied with Evernote’s performance under Bending Spoons that it did the investment and put in additional money this year. “None of their customers are obliged to stay unless the product they offer is a good product,” says Peter Singlehurst, head of the firm’s private companies team.

Evernote had always been designed as a permanent online storage system, and many use it as such. “It’s difficult for people to leave,” Pashintsev says. He wasn’t shocked or upset by the Bending Spoons pricing strategy. It reminds him of an old Russian adage: “If you want your cow to give you more milk and eat less, you feed it less and milk it more.” He adds, “They’re doing it with high-quality milking.”

Libin is also fine paying more. His deeper worry, he says, was about an owner who’d mine his personal data in the app for advertising or other unsavory purposes. “If they can make money by making a product that’s good enough for people to want to pay for,” he says, “I think that’s virtuous.”

Ferrari grows animated when asked about disgruntled customers. “All the satisfied users,” he says, leaning forward in his chair, “they have zero motivation to go and shout their satisfaction online.” He says his company has made 75 product improvements to Evernote this year, and customer retention is now the highest in its history. And Bending Spoons says all its apps “enjoy best-in-class retention” rates, though it declines to share any figures.

Federico Simionato, sitting across from Ferrari, was appointed Evernote’s head of product after the acquisition. He offers a more measured take on the pricing controversy. “We all use software products, and it’s not like we jump with joy when somebody increases prices,” he says. But his team surveyed customers and determined they found it “super reasonable” to pay more. “If the question is ‘Are you guys trying to be Steve Jobs for Evernote?’ No, that’s not the case,” Simionato says. “It’s more like, ‘OK, Evernote is like this today. How can we make it 10% better?’” The company, of course, doesn’t advertise the 63% price increase. —With Daniele Lepido and Katie Roof