Key Points

• Berkshire Hathaway commits another $330 million in investment to Bending Spoons
• This Italian company acquired and transformed it into a well-known internet brand.
• This investment will increase Berkshire's planned shareholding to 4%.

AOL once defined the early internet. Evernote was once one of the most well-known note-taking apps in the world, and Vimeo and WeTransfer also attracted millions of users before facing more intense competition.

Today, these four brands all belong to Bending Spoons – a technology company headquartered in Milan that has made the acquisition of mature digital businesses its core strategy.

On October 14, Berkshire Hathaway agreed to invest an additional $330 million in the company, on top of the $600 million it promised to invest when the company went public in Bending Spoons in July.

This transaction will increase Berkshire's stake to approximately 4%, and it also demonstrates its strong endorsement of a business model that revolves around acquiring and transforming existing software companies.

Bending Spoons How to Transform Established Internet Brands into New Businesses

Bending Spoons was established in 2013, initially developing applications for consumers, but later it became increasingly focused on acquiring mature digital companies.

Its portfolio currently includes Evernote, WeTransfer, AOL, Vimeo, Eventbrite, Airtable, Brightcove, and Tractive.

Unlike venture capital that seeks the next breakthrough startup, Bending Spoons focuses more on companies that already have products, paying customers, and well-known brands.

After completing the acquisition, the company typically reorganizes its team, upgrades its technology, redesigns its products, and adjusts its pricing or marketing strategies in order to improve profitability.

This approach is similar to a modern version of distressed corporate restructuring investment, however, the goal of Bending Spoons is to continue operating these acquired businesses rather than liquidating their assets.

This strategy is not without controversy. Large-scale reorganizations and layoffs after the acquisition have drawn criticism from employees and users, especially when there are changes to subscription prices or product features.

However, Bending Spoons believes that its operating platform can improve those enterprises that might otherwise have difficulty maintaining their competitiveness.

Why did Berkshire invest nearly $1 billion?

Berkshire Hathaway's latest investment involves 10 million newly issued Bending Spoons shares, with an issue price of $33 per share.

Adding to the previous $600 million in IPO investment, the new commitment brings Berkshire's total disclosed investment amount to $930 million.

This acquisition took place at a time when Berkshire is going through a major transition.

Greg Abel has now taken on the role of CEO of this corporate group, while Warren Buffett recently stepped down from the position of chairman after overseeing investment strategies for several decades.

Berkshire Hathaway is also expanding its exposure to the technology sector, which includes a significant investment in Alphabet, making Google's parent company one of its largest stock holdings.

Buffett has previously explained why he believes that Alphabet is an attractive long-term business, and emphasized its competitive advantages over short-term market forecasts in earlier statements.

Bending Spoons offers a different investment logic: it does not rely on a single dominant technology product, but rather attempts to acquire multiple companies and improve their operational performance.

Can acquiring a mature company outperform building a new company from scratch?

Bending Spoons reports that revenue in the second quarter was approximately $704 million, a year-on-year increase of 126%, and the acquisition has driven its rapid expansion.

The company also plans to continue acquiring businesses with the support of new capital injections from Berkshire and other financing arrangements.

In July of IPO, it also attracted attention beyond traditional stock exchanges, and subsequently, its tokenized form of shares was launched on the Mantle blockchain.

However, this strategy also comes with significant risks. Established brands may continue to lose customers, reorganization could weaken products, and financing acquisitions through borrowing will increase financial burdens.

The core issue is whether Bending Spoons can continuously create value from each acquisition that exceeds the costs of acquisition and transformation.

This also makes the company an unusual example of the long-term compound interest principle, which is precisely what has helped Berkshire grow into one of the largest corporate groups in the world.

Berkshire's investment does not guarantee the success of this strategy. However, its commitment of nearly $1 billion indicates that when someone believes that a mature internet business can be operated in different ways, its value can become quite substantial.