Phil Libin has spent the past 15 years leading two Internet companies from startup to commercial success and helping three others through rapid growth. Now, as CEO of Evernote Corp., the software and services company that he helped launch in 2007, he says the environment is more favorable than ever for entrepreneurs — as long as they have a fantastic idea. Libin explains that Evernote’s collection of apps makes it easy for users to store and organize everything of importance in their daily lives — a business that has attracted more than 30 million users. Renowned entrepreneur, author and speaker Guy Kawasaki (above, at right), co-founder of Garage Technology Ventures and former chief evangelist at Apple Inc., recently sat down with Libin (left) to extract advice for other budding entrepreneurs.
KAWASAKI: What would you say about the environment for entrepreneurs and startup companies in the U.S. today?
LIBIN: If you’re an entrepreneur for the right reasons — and really there’s only one right reason, which is to change the world a little bit — now is the best time in history to be an entrepreneur. The warning I always got 10 or 15 years ago was that the best product doesn’t always win. If you don’t have the best logistics, channels, marketing and relationships, no one will know about you, and you will fail. That’s just not true anymore, because we live in as much of a meritocracy as the world has ever seen. What’s unique about the time we’re living in now is that if you make something that you love, another billion people can love it as well. And if you have a great product, everyone in the world will know about it the next day. As long as you can make something great, you have a good shot at success.
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How do you know if that “something” is something great?
At my first company, we made e-commerce software for retailers. But we weren’t in the retail business, so how could we know if our product was great? We’d have to ask people, do market research. My second company made security products for banks and governments. Again, we were neither. At Evernote we make a product for us, for people like us. We know our product is great because we use it. If you’re setting up your first company, the only way you will ever know if what you’re selling is fantastically good is if you make it for yourself.
What should startup leaders keep in mind as they begin to build their team?
When you are a five-person startup, those five people don’t have jobs — they have a mission. When your staff grows to 10 people, you think: Nine of us are on a mission, but for one, this is just a job. And that’s okay; you have to get comfortable with that. When you get to 1,000 people, you’re lucky if you have 10 percent who share your quest. As a founder, you must cultivate the small percentage of people who share your quest and take care not to alienate the people for whom it is just a job.
Even as you grow to tens of thousands of employees, you never want anyone to do a task and feel like the boss is wasting his or her time. As soon as that happens, you’ve crossed the line into a big bureaucracy.
NYSE recently launched the NYSE Big StartUp initiative in an effort to support entrepreneurs. How do you think it can best help the startup community?
Entrepreneurs need all the help they can get. I’ve been thinking a lot about exit strategies, liquidity and IPOs, which the NYSE program can help entrepreneurs think through. At Evernote we decided that there is no exit strategy, because Evernote is our life’s work. An IPO doesn’t have to be an exit. Ultimately, going to IPO is the morally correct thing for us to do. If we’re building a company that asks the whole world to trust us with their memories, the right thing to do is to give everyone the chance to be an owner. For us, an IPO is not an end goal. Rather, it’s an inevitable step in our 100-year plan.
What was your first step in building Evernote?
In 2007 two teams came together to form Evernote. A group of people was already working on the problem of making a memory extension. It had a product and technology and ideas. I had a similar idea and team. Then the two startups decided to combine forces rather than compete. Evernote was created in this unusual way: two startups with similar visions but different personalities and backgrounds. Immediately we had a conflict of ideas, but that’s what made us strong: Only the best ideas survive.
Click below to watch a video of this interview — the first in the NYSE Big StartUp’s “Unlocking Potential” series. To view Guy Kawasaki’s interview with Box Inc. founder Aaron Levie, click here. Find additional interviews at nysebigstartup.com.
Video produced by Silber Studios
Describe that conflict.
We came at the problem from different angles. Do we build for power users? For new users? For businesses? For consumers? What’s the right design aesthetic? The first year or so, we struggled with these ideas. Then we decided to build just for us — we were computer nerds, programmers, designers, geeks! — and not worry about anyone else. But then the business expanded as we started hiring designers, editors, writers, artists and so forth. As the company grew, so did our ambition and the scope of what the product should be.
Evernote is the best example of the “freemium” model, converting people from free to paid. How do you get such high conversion rates?
The longer you use Evernote, the more likely you are to pay. In your first month, only 0.3 percent pay. But as consumers keep using it, Evernote becomes more valuable and they start wanting to pay. After a year of using Evernote, 5 percent to 6 percent pay. After two years, it’s 12 percent. Of our longest users, at four years now, more than 25 percent pay. We don’t push people to convert. What we’ve found is that people love to buy and hate being sold to. You love to buy things you’re in love with. And so we don’t want to sell you anything forcefully. We just want you to fall in love with the product.
“Freemium” really works if the point of greatest perceived value is always in the future. We cheat in the sense that if Evernote is your life your life gets more valuable to you as time goes on. It’s because of the subject matter: you. So the longer you use it, the more likely you are to start paying.
What does mobile mean to Evernote?
It’s been a huge driver for our business. Most people find us on mobile first. Discovery is best on the app stores. In fact, 75 percent of users’ first experience with us is on a mobile device. Then most of them within a couple of months also use us on their desktops. Our apps are more visible because they are popular and therefore easy to find in the app stores. Without the platform companies like Apple Inc. and Google Inc. that reinvented this meritocracy, there could not have been an Evernote. We would have been a niche player with only 20,000 users instead of 30 million, 100 million and eventually a billion users.
Learn more about the NYSE Big StartUp initiative at nysebigstartup.com.