Yesterday, Phil Libin (CEO of Evernote) came down to RocketSpace (co-working facility in SF) to talk with Jason Calacanis from TWiST.  The talk was quite informal, and touched on a number of topics before jumping to Q&A.   These are my piecemeal notes from the talk (still not taken with Evernote yet, but I hope to do so one day!)

Company Growth

Starting out in June 2008, Evernote wasn’t doing so well because Phil “wasn’t the best at fundraising.” The VC pitch at the time was, “we have software to write stuff down to remember things, and we’re giving it away for free, give me $10 mil.” Oh yea, and our competition is all note-taking devices out there that ship for free with every operating system. They were finally about to close a deal with some European investors, but on the day of the deal, Lehman Brothers collapsed and the VCs had to pull out – they simply had no money in the bank. Phil remembers clearly that there was “3 weeks of money left, so you have to be an adult and lay everyone off. And being an adult sucks.” (Agreed, I’m going to keep chasing my dream of working in the productivity industry for as long as I can.) Then, at the last minute, Evernote got an email from Sweden half million at that night – the investor was a passionate user. The rest, as they say, is history.

Actually, it’s not all done yet because the company is only 5 years into its 100 year journey. But here’s the update. They have ~285 employees now, which is almost triple the size from last year. There are about 20,000 developers working on Evernote Trunk. This works really well because unlike the situation at other companies, there are no conflicts of interest between Evernote, the developer community, and the end users.

Finally, the funding: Evernote has raised over $250 million from VC at this point, not because they need the money, but just so have a buffer for when the need arises. This is important to (a) pay off investors who want to cash out early (b) allow developers to focus on great product even during tough economic times and (c) it’s better to have the money than not have it. Ultimately, it’s worth a little bit of delusion for that kind of security.

Product Direction

In relation to the D3 Productivity Framework, Evernote has always been great when it comes to collecting ideas, but lacking in organization and retrieval capabilities.

It turns out that Evernote is great at capturing ideas because (1) being available on all platforms and (2) being compatible for all data types has been part of the core philosophy from the beginning. This means that Evernote works well with iOS, Android, Windows and MacOSX today. It worked well with Blackberry, Symbian, and Palm in the past. And it will work well with Windows 8 and whatever else comes out in the future. In fact, Evernote has made extreme efforts to always be ready as one of the first apps whenever a new platform launches. They made cardboard cut-outs of the iPad before any devices were released, just so they could start prototyping as early as possible! The goal has been native for every platform, and will always be. This allows teams compete with each other to come up with different options, which leads to versions leapfrogging each other to be the best. Going native means a lack of consistency in the short-term, but a faster route to consistency in the long-term when all the apps reach a level of general excellence.

In the next stage, Evernote will continue to get better at recall (and has already done so quite a bit in Evernote 5). There are now smart searches, location-based tags, simpler navigation and shortcuts to the most used notebooks. But it gets better. The area where Evernote has consistently been lacking in the past is the ability to organize your thoughts and ideas. This is not because they aren’t trying, but because this is a hard problem to solve. The goal though is to move beyond just “remembering things” to where Evernote can actually make your brain smarter as you think better through cognitive prosthesis. Currently, it can already present you options for connections through related notes, but in the future there will be more automatic support for making serendipitous relations.

Evernote realizes that software historically has been made based on technical limits, rather than on how our brain actually works. Therefore, a tangential goal is to take the burden off of email, which is currently being abused beyond its original intentions. Email is just communication through delayed memos, which is never how our brain worked before. Rather, tools like Skitch are much better suited for communication because you can just grunt and point. Ultimately, Evernote and Phil are making all the right calls, and there isn’t much standing in their way.

Competition

On the topic of things in the way, Evernote doesn’t believe is has any real traditional competition.  It’s not really Microsoft OneNote or Word.  And it certainly isn’t Google Drive or Dropbox.  In fact, Evernote employees use Google Drive and Dropbox when needed.  To Phil, Google Drive is useful for real-time collaboration and Dropbox is useful for structured file-sharing, both of which are outside the realm of Evernote.  On this area of competition, I would have to disagree because I do think Evernote has competitors.  On the analog side, millions of people still use physical notebooks and legal pads to take notes.  On the digital side, there are companies like DevonThink and SpringPad.  Do I think Evernote will win out in the marketplace?  Sure, but that doesn’t mean there’s no competition, just that Evernote will beat the competition.

Business Strategy

Finally, there were a couple threads discussing general business strategy.   Starting with user feedback, Phil noted that incorporating user feedback is good to have if you can tone down the rhetoric since there is usually a nugget of truth in there. Criticism is bad at telling you what new features to built, but great at telling you when you messed up. The key is to strike a balance between the two sides to figure out which comments have merit. An example of following this advice is with Skitch, where three months of work was paused to update the product based on feedback.

Next, on the topic of the Freemium Model, Phil believes that Free users should have the same expectations as Paid users. Even though the prevailing notion is that “If you got it for free, you get what you paid for”, Freemium should not just be a gimmick in Phil’s eyes. His argument is both groups should have decent quality software since both types of users have made the investment of time, energy, and attention. The proof of this can be seen in the cohort analysis of users. When you look at any particular segment of users, the performance over time has been quite consistent with 0.33% converting immediately, 5-6% converting in a year, 10-15% in two years, and 25%+ in three years. As a business analyst though, I would love to see the segmentation based on other metrics as well such as amount of data stored, demographics, feature usage, etc.

On the topic of user testing, Phil advises that this is not the same as beta testing (and I want to add, not the same as A/B testing either). All three are forms of gathering user data (without having to directly mine information), but they all serve different purposes. Beta testing is a way for power users to give direct feedback and can give detailed insights (Retention). User testing is good for understanding new user experiences (Usability). In the end, neither will tell you what you should build, but it will be good at telling you what you should not build.

There were a number of other jokes thrown in as well, making the entire conversation a pleasure to watch.   Personally, it would have nice to know more about Evernote’s intentions to add note organization capabilities (and whether they need a PM to lead the project), but of course Q&A ran out of time.  Overall, just a great interview with a great CEO and host.