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I don't understand this model. Such significant layoffs would indicate that there is no real appetite for expansion or growth. Their goal might be be to acquir
by nness 8mo ago
I don't understand this model. Such significant layoffs would indicate that there is no real appetite for expansion or growth.
Their goal might be be to acquire, dramatically cut costs, and then run the product for as long as they can at a profit before breaking it down and selling it off (or hope for a buyout by a bigger player.) But that wouldn't make sense — customers of a depreciating SaaS product surely churn after a 1-3 years, so they wouldn't make enough of a return from their existing customers to justify the investment...
- mlnj 8mo agoWhat I understand from listening to the management from various podcasts, it was a mix of shipping the most minimum impactful features with the leanest product team needed and then jacking up the price every year for the people that can't move away from these products.
- didacusc 8mo agoThey did the same thing with Komoot and other apps. I don't understand where the money comes from and how they are planning to keep this portfolio growing.
- tetris11 8mo agoIt's a vampire economy. No one has any new ideas
- danelski 8mo ago(For Komoot) Did they, though? I am aware of the layoffs, but after that they slightly redesigned the app, collected the poll for next year's requested features, the lifetime maps option is still there to buy etc. If not for HN, I wouldn't have noticed any change in the direction that it's going in.
- bombcar 8mo agoI suspect that the VAST majority of users want their saas tools to do today what they did yesterday, and so stopping active development of new features is actually a positive - no sudden Liquid Ass is going to appear in a program in maintenance mode.
- agentcoops 8mo agoIt seems to all be debt financed, i.e. just a private equity model slightly specialized for tech. The "innovation" is that Bending Spoons has an in-house engineering team it seems they try to keep constant yet scale out to all the acquisitions. I hadn't looked into them much before, but https://www.colinkeeley.com/blog/bending-spoons-operating-manual https://www.colinkeeley.com/blog/bending-spoons-operating-ma... is an interesting report -- though not focused on the finance side.
- direwolf20 8mo ago[dead]
- gtowey 8mo ago> Their goal might be be to acquire, dramatically cut costs, and then run the product for as long as they can at a profit before breaking it down and selling it off In the 80's people who did this were known as "corperate raiders". Nowadays it's just called business.
- thatguy0900 8mo agoI've heard vulture capitalist used to refer to that too
- t1234s 8mo ago"corporate raiders" are a definitely real thing.
- everfrustrated 8mo agoThat usually means stripping the company for parts. Bending Spoons is just trying to run the company sustainably.
- munk-a 8mo agoVimeo employed somewhere north of a thousand people a year ago with 28% being in the engineering team (according to random google results - this isn't an area I have personal knowledge of). If they dropped from around 300 people to 15 that sounds like gutting - not trimming.
- deleted 8mo ago[deleted]
- everfrustrated 8mo agoThey will be hiring up but not the same people. Bending Spoons tends to replace high silicon valley wages with high Italy wages which is a considerable saving.
- 8mo ago
- sublinear 8mo agoThe long tail of revenue is not only a substantial sum, but decays more steadily than growth. This is a low risk investment that still turns a profit. It's also not their only investment or even necessarily their own money. Individual holding companies don't tell you much about the larger pool of money they come from.
- observationist 8mo agoLook at the companies they're acquiring - it's 100% about getting user data and tertiary monetization, and they're making bank. They couldn't care less about what the companies they buy supposedly do.
- afavour 8mo agoI imagine a lot of companies have contracts with Vimeo and switching costs are real. They'll likely stick with Vimeo if they manage to maintain their offering to the level it exists at today. In the long term I think it guarantees death but they will be able to extract plenty of money before that happens.
- lumost 8mo agoAre these hostile takeovers? buying a competitor out through a PE deal could be cheap relative to competing with them.
- WJW 8mo agoNo, they just come in and offer a lot of money to the current owners. Bending spoons are ruthless businesspeople but AFAIK they do offer a reasonable price for the businesses they acquire. (I used to work for WeTransfer and some time after I left it got acquired at about the price it was once considering IPO-ing at. This was apparently such a good offer that it took very little deliberation to agree to the deal.)
- lumost 8mo agobut where does the money come from? it seems like a good way to avoid regulatory scrutiny if your acquisition goal is to simply exit a competitor from the market.
- hedgehog 8mo agoBasically a loan.
- rcxdude 8mo agoThe money comes from investors. Private Equity basically works by taking money from investors to buy companies and turn a profit with them, paying back the investors when they do so (it's a very illiquid and risky investment, so the advertised returns tend to be higher, but it does seem like a lot of firms are struggling to actually make it work).
- lumost 8mo agoAye - it’s a simple business model, which seemed to work well in an era of low interest rates. However some of these tech buyouts seem quite myopic, making it almost appear like the goal was to shutdown the company.
- AznHisoka 8mo agoThis is just my personal opinion, but if they didnt change the price of Evernote and never made any changes, I probably would remain a customer for a very very long time. There is a high switching cost for me to use any app to move all my docs, and notes. I dont know if the same can be said for Vimeo, though
- egypturnash 8mo agoI would still be a happy Evernote customer if they hadn't rewritten all the apps from scratch.
- stefan_ 8mo agoIts just private equity for software
- jjice 8mo agoYeah this is what I think Bending Spoons does, mostly based on the Evernote situation. Product has paying users and it's in a "complete" state. Cut costs to optimize profit for a bit and hope not everyone leaves. In the case of Evernote, it's probably really hard to get 10 year users off of it at this point, so they can double subscriptions and they're locked in. My assumption is that there's a serious amount of people that go "eh" and just deal with the cost increase and stagnated features.
- toomuchtodo 8mo agoThis is correct. You're buying a cashflow. Bending Spoons has optimized their model for very specific types of cashflow enterprises to aggregate into their portfolio.
- rickydroll 8mo agoI use Harvest to track hours and expenses and to invoice my customers. Bending Spoons apparently bought them a while ago and just eliminated the shell company around Harvest. Based on my experience with Evernote, I don't trust Bending Spoons, and I'm wondering if I should look for a different time-tracking and invoicing system.
- toomuchtodo 8mo agoYes.
- dwedge 8mo agoI've been in the same boat as you and replaced it last year but still pay for harvest (grandfathered pricing) until I can be sure I don't need it. I'm almost up to renewal and haven't used it at all since trying app.solidtime.io I'll be honest it's not as good as harvest. The mac app is a bit buggy, it's not as easy to add manual time, and you need to pay for pdf export. But having said that I've found the free version to cover 90% of my use of the paid version of harvest
- burningChrome 8mo ago
- usrusr 8mo agoWhat's hard to understand? They switch the companies from growth (no matter the cost) to revenue extraction (even if it will eventually fade) Minimum viable cost of keeping the lights on. And sometimes they even compromise a little, "let's spend a tiny bit more and see how much growth we can get from that"
- Recursing 8mo agoMy best guess is that a part of it is replacing US (or in this case Israeli) devs with much cheaper Italian/European ones, earning ~a quarter of their US counterparts and working longer hours, as Bending Spoons has an extremely competitive hiring process, and is probably the highest paying tech company in Italy
- Beretta_Vexee 8mo agoThey are also very good at pooling their infrastructure and software stack. This accounts for a significant portion of the costs.
- ragall 8mo agoActually they're paying very competitive salaries. For example: https://jobs.bendingspoons.com/positions/67c6dc18c70c531d6db8bc3e https://jobs.bendingspoons.com/positions/67c6dc18c70c531d6db....
- throwaway2037 8mo ago> Typically, we offer individuals at the start of their career an annual salary of £85,797 in London and €66,065 elsewhere in Europe. That would be excellent pay for a junior engineer in Italy.
- IshKebab 8mo agoI can't see any salaries there but presumably they're going to be competitive for Europe, which is roughly half the competitive salary in America. There are plenty of competent devs outside America. I can't see any reason why you'd want to pay American salaries if you're a global company.
- Fnoord 8mo agoIt is called bait and switch. And the company name referring to bending spoons (Uri Geller) gives away the way they see themselves.
- pc86 8mo agoBait and switch is something completely different. If you started buying Evernote 10 or 15 years ago, and use it a lot, then Evernote gets acquired and the terms change, that's shitty but is not remotely a "bait and switch."
- dingnuts 8mo agoYou bought a relationship with a service company that locked you in and sold you out. That's absolutely a bait and switch, just one of service instead of goods, because it's a SaaS company. This is the real reason I'm tired of subscriptions. I don't even care about the "pay in perpetuity" problem in some cases, I just don't want the entity I chose to do business with to completely change. That's absolutely a bait and switch.
- huhtenberg 8mo agoAccording to Wikipedia, the name is a reference to that scene from The Matrix.
- nradov 8mo agoVimeo isn't really SaaS though.
- dbbk 8mo agoOf course it is?
- Beretta_Vexee 8mo agoFor example, they bought the German hiking and cycling app Komoot. It's a mature app in terms of functionality, with a stable user base. There's little chance of hypergrowth with this type of app. It's also complicated to switch apps because transferring routes, collections, photos, etc. to another service is difficult. They laid off 90% of the teams. They migrated the app to their infrastructure to pool costs. Since then, there has been no further development of the service. They are cost killers of the internet.
- alistairSH 8mo agoIt's also complicated to switch apps because transferring routes, collections, photos, etc. to another service is difficult. Not really, sync everything through Strava, and then drop whichever service you don't want. Basically any bike ride I've done in the past decade is on 3+ services because they all sync.
- mendelmaleh 8mo agoI think by routes he means the trails database, not user activity
- Beretta_Vexee 8mo agoOh I can do it but I am not really representative of the average user. Plus I have a lot of points of interest, note, picture, that I could request via gdpr but not easy to reuse and couldn't be imported into Strava. Strava isn't better than Komoot on this regard.
- stabbles 8mo ago> Since then, there has been no further development of the service. That's not true, the website and app both got a major redesign after acquisition.
- Beretta_Vexee 8mo agoIt is mainly cosmetic and probably due to sharing resources (web template) with their other products. There are no new features.
- bachmeier 8mo agoOne of the advantages of their business model is that it's low risk. Find a business you can get cheap enough, shut off all investment related to growth or product improvement, and use the product's moat to get as much cash as possible from current customers. Business doesn't have to be about expanding into new markets or growing revenue. If I had to guess, there's not much of a market for the companies they're acquiring because everyone else is looking for growth.
- reactordev 8mo agoThe growth comes from increasing subscription value, not from adding users. They bet that the platform is sticky enough for the users that they’ll slowly boil the frog until there’s no more equity left.
- ratelimitsteve 8mo agoyou're absolutely right, they're not positioned for expansion or growth. you're very close to seeing the private capital dark pattern that's become a huge part of our economics lately. let me illustrate for you how they make money by decoupling the company's success from the investors' success 1) borrow a bunch of money to buy the company - this is called a leveraged buyout 2) once you're in control, have the company assume the debt you took on in order to buy it. you as the buyer are now free and clear, and the company is now responsible for paying back the money you borrowed to buy it. the end result of this transaction is that the company now owns stock that is less desirable because the company is more leveraged 3) make huge cuts everywhere and use the money "saved" by divesting from your own future to pay yourself as a consultant The company is now in the extremely fragile position of not being able to spend to respond to the market because all of their income is going to servicing debt and paying the members of the private capital group. the "investors" aren't actually invested at all because even if the stock they hold becomes worthless they didn't pay anything for it in the first place, the company did. the thing limps along for as long as it can keep bringing in some small amount of income for the "investors" to skim off the top of, then it inevitably dies like anything riddled with parasites will, the company declares bankruptcy and they sell the copper out of the walls in order to pay back the loan used to take the company private in the first place
- bradleybuda 8mo agoHN: VC is a cancer, businesses don't need to grow forever at all costs, products can be finished, what we need is sustainable small companies Also HN: No, not like that
- cheschire 8mo agoIt’s almost as if HN were a community of voices instead of just one…
- DonHopkins 8mo agoYes, we're are all individuals! Yes, we're all different! https://www.youtube.com/watch?v=QereR0CViMY https://www.youtube.com/watch?v=QereR0CViMY (I'm not.)
- ryoshoe 8mo agoThe Goomba Fallacy strikes once again
- cheschire 8mo agoThanks for sharing the name of the phenomenon! I was not aware of it before.
- Imustaskforhelp 8mo agoThis fallacy's pretty cool and first time I Heard of it! Do you know other fallacies like this which are less known but as interesting (that you or others might know of) probably?
- ecshafer 8mo agoThe Bending Spoons business model is right out of the private equity playbook. Buy a business with good revenue, cut cost to turn this into a consistent revenue stream, generate annual returns. This is not like making a small 20 person self funded company.
- dotBen 8mo ago
- Closi 8mo agoWhat if there isn't a feasible path for expansion and growth? Vimeo already has contracting revenue, it's either in the maturity or decline phase. Some customers will churn, some will stay, Bending Spoons are the masters of this model so will have made an assumption on how revenue will change across the next 5-10 years+, but I would assume that they aren't forecasting extreme growth, and instead are calculating that net profit can be changed from c$30m to c$139m within existing revenue, so if they can keep revenue at/near current levels without growth, they can end up with a much more profitable business. Bear in mind that same revenue doesn't necessarily mean the same number of customers - it can also mean raising prices and having less customers. Bending Spoons might estimate that if they double prices, half their customers might leave - this would still be BRILLIANT for profit, as while revenue would stay the same, some costs would half, and thus profit might jump from c$140m to c$250m based on some napkin math!
- CodeWriter23 8mo ago> customers of a depreciating SaaS product surely churn after a 1-3 years, so they wouldn't make enough of a return You might think that. Then there's Earthlink and AOL still collecting $5 or $6/mo per mailbox as their cash cow.
- everfrustrated 8mo agoThey recently bought AOL too!
- CodeWriter23 8mo agoI was unaware, thanks for the update.
- j45 8mo agoSometimes solutions end up solving problems that don't need constant featuritis. Maybe they're deciding to maximize locked in revenue and margin. Laying off so many people doesn't seem signal the greatest confidence to the market, maybe they'll explain it as some kind of efficiency alignment. After all, Twitter is still operating on some level after 75% layoffs?
- nine_k 8mo agoSo it's sort of a "white-dwarf maker" company. Pick a company with a steady cashflow, eject all the fluff that made it a big star, and collect the remaining energy / cash until the core cools down. The end state is a cold slab of iron, and nothing new is going to happen to the acquired business ever since, but the plentiful (if dwindling) cashflow will be collected without any obstacles.
- epolanski 8mo agoIt's called butt cigar investing or corporate raiding. They acquire startups and companies without a huge growth potential but modest cash flow and little profits. They cut the operating expenses to the minimum and jack up the prices to sky rocket profits till their mathematical models will tell them they will profit on the investment. Rinse and repeat.
- joelthelion 8mo agoHave there been any serious legal efforts to make this less profitable? It's very clearly detrimental to society.
- ImPostingOnHN 8mo agoPrivate equity (what's being described here) has more political influence than "society" because money.
- johnnyanmac 8mo agoSociety has more money and way more votes than PE. I'm going to quote A Bugs Life (1998) of all things here: > Hopper: You let one ant stand up to us, then they all might stand up! Those puny little ants outnumber us a hundred to one and if they ever figure that out there goes our way of life! It's not about food, it's about keeping those ants in line. In our case, it's more like a million to one
- ImPostingOnHN 8mo agoI suspect that the free cash flow of those who seek fewer regulations of this sort on thing exceeds the free cash flow of those who seek more. People that are being squeezed by PE have less money to wield as political influence partially because they are being squeezed by PE. The ones doing the squeezing are ok with that. The people who are uninvolved, who fit into neither box, don't care enough or don't have enough money they're able & willing to part with. They also don't have fancy accountants or corporate accounts to expense it to. This is the local optimum.
- mynameisjody 8mo agoYou're assuming all or most paying customers are paying attention. That is sometimes not the case. For example folks/businesses who forgot they signed up. Alternatively it could be that the cost to switch is too painful.
- huhtenberg 8mo ago> appetite for expansion or growth This requires reinvesting profits into the company. It sounds like they choose not to do that, but instead switched to cashing in. If the profits are stable and supported by a fraction of the workforce, then why keep the rest around? Clearly a shitty thing to do, but business-wise it makes sense.
- jlarocco 8mo ago> I don't understand this model. Such significant layoffs would indicate that there is no real appetite for expansion or growth. To play devil's advocate, maybe there's a point where a product or service needs to stop evolving and just be. I have a Vimeo account that's been on auto-resubscribe for years. I couldn't tell you a single feature they've added in the last 5 years, but they host my videos, collect stats, and let me send links to my friends, and that's really all I want.
- muzani 8mo agoStartups focus on building assets, not revenue or profit. Companies like Bending Spoons focus on buying these assets and turn them into $$$$$$$$, not sustainability or growth.