🥛 SaaS-pocalypse = opportunity? 🥄

GM. This is Milk Road Stocks, the newsletter that hits harder than your dad's opinion on index funds.

Today we’re going full “bald kid from the first act of The Matrix” and talking about Bending Spoons.

First, a quick detour to private markets.

On Sept 23, Milk Road's Martin sits down with Alumni Ventures to talk about blockchain and private markets. Save your free seat here.

THE ANSWER TO THE SAAS-POCALYPSE? 🥄

Every new frontier model eats away at another software company's business.

Which is why "SaaS is dead" has been one of the more common calls in the market this year.

Vincent covered a company on Friday's Milk Road Stock pod that treats all of those ‘failing’ companies as buying opportunities.

The company is called Bending Spoons. They're based in Milan, and they listed on the Nasdaq on July 1st at $29 a share.

Odds are you've used something they own - AOL, Evernote, Vimeo, WeTransfer, Eventbrite, Airtable, Miro...

The trick is what they buy. They go after software companies that broke expectations rather than businesses that actually broke, meaning they’re looking for:

Established names, with a big paying customer base, where growth has stalled since the post-Covid SaaS hype cooled off.

When they find a company that fits that mold, they buy them up, and:

Cut the cost base: At Evernote they took headcount down by more than 80% and kept running the same product.
Rebuild the product: Adding new features and creating a more stable experience (all the stuff the old owner stopped funding).
Re-price it: They're specialists at pricing tiers, and they A/B test their way through them.

It's worked out well so far, with revenue going from $387M in 2023 to $1.31B last year, and Q2 of this year landing at $704M 👇

Source: BendingSpoons

Vincent's angle is that all of this is an AI adoption story, which is not how most investors are looking at it.

The CEO, Luca Ferrari, describes the business as 75% tech company and 25% private equity.

They've built more than 50 internal tools over the years, and every employee (they call them Spooners) has an AI agent with access to everything that person does.

There's also a routing layer that picks which model handles each request based on cost and quality, and M0xt pointed out that 90% of their token usage already goes to open-source models.

What limits this business is people. It takes 40-60 Spooners to transform an acquired company, and there are only about 700 of them.

So making each one more effective is what lets them buy more.

And they're brutally picky about who gets in - of the 800,000 applications last year, only 286 turned into hires.

All told, revenue per Spooner has gone from $1.1M in 2023 to roughly $4M today.

Source: BendingSpoons

Every deal also feeds that platform more customer data, which makes the next transformation cheaper to pull off. (More companies bought → smarter tools → faster turnarounds → more companies bought.)

Which brings us to what it's worth.

At ~$39 a share, Bending Spoons is a ~$25B company. Vincent's base case is that if they keep deploying capital at this year's pace and hold adjusted operating margins in the mid-40s to mid-50s (Q2 came in at 54%), you're looking at a $160 stock by 2030.

If it underwhelms, he sees ~$100.

But Bending Spoons doesn’t come without baggage:

They're carrying debt at 2.4 times yearly earnings as of the end of Q2. And the IPO lock-up expires in late December, which frees up roughly 5.5x the shares currently tradable - though the founding team holds about 49% and talks about the company in 20-year terms.

Either way, the stock peaked near $55 in August and has drifted back to about where it opened.