Written by: Morgan Brown
Evernote – The $0 Growth Engine
Evernote has never been sexy, almost ran out of money, and doesn’t benefit from the network effects that drive many of today’s successful companies. Yet Evernote’s 75 million users and $1+ billion valuation prove they’ve figured out their own unique growth engine. So what is it? And how did they get those first 100,000 users?
Evernote CEO Phil Libin doesn’t think of Evernote as just a multi-platform post-it note storage app. Rather, he describes the company as your “intellectual brain” and “[it’s] really about how you experience your life. The experience of your memories, what they mean to you, what can you use them for to make yourself more productive and happier. We really focus more on making a beautiful user experience.” 
WIth a valuation at more than $1 billion, and more than 75 million users, it seems that Libin and the rest of the Evernote team are on to something.  But this hasn’t always been the case.
Early Funding Woes
According to Libin, the company had no professional venture investment until 2009, though some funding was coming in from passionate users worldwide. In 2007 and 2008, he explains, “everyone was pitching websites and social, and we were the opposite of both of those and we suffered because of it.” Libin continues, “we never had [more than] a few weeks of money in the bank, we were putting a lot of money in ourselves. I put money in, Stepan [Pachikov] put money in, we were getting a lot of friends and family for funds.” 
In fact, Libin says that during the financial crisis of 2008, an Evernote investor backed out at the last minute, leaving the company with only three weeks worth of cash to stay afloat. 
“We panicked,” he says. “I spent a week frantically calling everyone that I knew.” Yet because they’d entered “exclusivity” in those original financing talks, they could not proceed with discussions with other investors. 
This forced Libin to make the tough call to shut Evernote’s doors. He says, “I remember sitting there at 3 a.m. thinking … This is what it feels like — making adult decisions. This sucks.” 
But like a scene from a movie, an Evernote user from Sweden contacted Libin, claiming the product had changed his life, making him happier and more organized. Libin says he thought to himself, “That’s nice. This makes me feel better. Maybe if you can make a difference to one random guy in Sweden, that’s enough.” But it wasn’t enough for the user, who was so passionate about Evernote that he wanted to make an investment. Within about a week’s time, he had wired the company half a million dollars—enough to keep them afloat long enough to prove themselves and secure the funds they needed, in the form of investments from DoCoMo Capital and Sequoia Capital. 
Things finally started to look up for the company in 2009, when they had accumulated the data to show that they were onto something. Libin says that, “almost overnight we went from having to constantly beg for money to having multiple term sheets.” 
It took Evernote 446 days to gain their first million users, but the next million took around half that time—222 days to be exact. That number was almost halved again with their next million, which took 133 days, then 108, then 83, and then just 52 days to go from 5 to 6 million users. Over 19,000 new people sign up for Evernote every day. 
So how did they get their first million? How did Evernote crack the code to successful and scalable growth with a product that didn’t benefit from network effects and other growth factors that many recent success stories have?
Evernote launched right as mobile apps as we know them today were beginning to take off. In part, their early traction had a lot to do with this timing. Libin admits, “We definitely were very lucky with the timing, absolutely.” He continues, “We were very fortunate that the app stores were launching right as we were getting ready. If we were 6 months behind in our development, we would had missed all of it.” 
Not all of their timing was perfect. In fact, Libin describes October 2008 as “the worst time in the history of the universe to raise money.” As Libin points out, “The logic works the other way as well … In the long term you have to deal with both the good luck and bad luck that’s dealt to you and what you make of it is ultimately what determines the success of the company. 
These AppStores were brand new distribution channels, giving companies like Evernote instant reach to millions of users who were eager to add new, valuable apps to their smartphones. While AppStores today are overly crowded and gamed by paid downloads, in 2008 there was less competition, less gaming, and subsequently more visibility that allowed apps to break out organically through these channels.
And Libin and team didn’t rely on just one AppStore launch, each new store, each new platform was a priority to the Evernote team:
“What we did, is we really killed ourselves in the first couple of years to always be in all of the app store launches on day one. Whenever a new device or platform would come out, we would work days and nights for months before that to make sure Evernote was there and supporting the new device or operating system in the app store on the first day. So that it could be one of the showcase apps for all of these devices as they launch.” 
This approach continues today, with Evernote being one of the launch apps in the Google Glass appstore.
At the risk of sounding like a broken record (see: Square and Uber), more important than timing is the fact that Evernote is a great product. After all, it was the product itself, not clever marketing or an awesome affiliate program, that kept the company afloat during the unlucky period of 2008. Evernote made one guy’s life so much better that he wanted to invest half a million dollars in the company. If not for that, we might not be talking about them today.
But what is it that makes Evernote great? It’s impossible to include an exhaustive list of Evernote’s killer features, but there are a few that users frequently cite, including:
Remember Anything and Everything is at the heart of the Evernote experience. There are no size limitations, no file constraints, no complex rules to remember. Evernote can hold everything you’ve ever wanted to remember, and then make it easy to retrieve at a moment’s notice. This “second brain” as Libin calls it allows users in an age of information overload to manage all the data and info in their lives in a way not possible before.
Impressive User Experience has also been one of the company’s core philosophies from the start. In fact, rather than relying on a one-size-fits-all mobile site or app, they built native apps for every single platform. Libin explains:
“Our intuition right from the beginning was that people are going to want the best possible experience on their devices. So much of the growth of the mobile industry … is generated by rapid improvement in the quality of the hardware and in the devices from generation to generation. … Evernote has to work better on your brand new phone than it did on your crappy old phone. If it doesn’t give you a better experience then what was the point? The only way to do that is to write all the clients natively. To go down the bare essence of what the device can do and say, how do we make the best possible experience on this great new device? If you take the lowest common denominator approach using cross platform stuff, you by definition create something that’s average. You get an experience that’s the same on your shiny new phone as it was on last year’s phone. If it’s the same experience, you’ve removed the motivation for the manufacturers and publishers to promote you. You’ve removed the excitement of people who get their new device.” 
Optical Character Recognition, or OCR, which refers to Evernote’s ability to search text within images. From business cards to receipts and takeout menus, this feature in particular makes a lot of people’s lives simpler and more streamlined. (Check out the Evernote blog for a full breakdown on how they pull it off.)
Syncing Across Multiple Platforms is another feature that users love, consistently citing the ability to access information from multiple devices as one of the main benefits to using Evernote, and as of 2010, the majority of Evernote users were already accessing the service via multiple platforms, most commonly a desktop computer in addition to a mobile device. 
Word of Mouth from Satisfied Customers
Not only did they inspire a handful of passionate users to invest in the company, it’s these killer features that resulted in word of mouth from tons of satisfied Evernote customers. Libin claims that growth has been a pretty smooth, exponentially growing upward slope from the very beginning. He explains:
“I dug up the original model we used when we closed our first Silicon Valley round with Morgan Capital in 2009. I found the original plan, we built this model for them that shows how we’re going to grow, both users and revenue. It was from 2009 and that plan went to the end of 2011. The end of 2011 back then was unimaginably far in the future for us. I just found it, I wanted to compare how we did against what we projected and we were within 5% on both users and revenue, that’s kind of amazing.” 
Evernote’s model is really word of mouth, as Libin is quick to point out, “We don’t pay money for users.” They don’t spend money on user acquisition, and they don’t do any SEO or SEM. They don’t do incentivized downloads or any acquisition spend of any kind. 
Closed Beta Generated Buzz
When Libin and team were ready to reveal Evernote to the world, they launched with a closed beta and gave away 100 invites on Techcrunch. Techcrunch covered them, and as Libin explains, that was the spark that started the Evernote growth engine:
“We launched closed beta on TechCrunch, we were lucky enough that TechCrunch wrote about us right as we were starting the closed beta and we gave away 100 invites, that was the first spark. We had a couple thousand people within the first few days just because of that really early spark and it just grew from there.”
Though Libin insists that the purpose of closed beta was user testing, it nevertheless helped to generate buzz around the product. He explains, “We never thought of the closed beta as a marketing exercise. We were frankly terrified that everything would crash all the time.”  Yet the fact that people had to sign up and send out invitations to actually use the service generated buzz around Evernote. Libin claims on the Evernote Blog that their goal was to get around 10,000 beta users to test out the app. He explains:
“We were blown away by the response and watched with equal parts of glee and horror as the closed beta users count passed 10,000, then 25,000, then 50,000… By the end of the four months, over 125,000 people had participated in the closed-beta.” 
Luckily, the servers didn’t crash, and the Evernote team worked out the scaling issues as they grew. By the time Evernote came out of closed beta in 2008, they already had over 125,000 users.
Then, when the iPhone App Store launch in July of 2008, Evernote was practically forced to launch. As we’ve already discussed, one of Evernote’s key growth factors was its impeccable timing, and the company felt it was critical that Evernote be in the App Store from day one. This is why, as Libin explains, they “worked 20 hour days 7 days a week for a few months before [the App Store launched] to make sure that we could have something that was genuinely available and out of beta.” 
The final and critical piece to the puzzle of Evernote’s early growth engine is the Freemium model, in which users sign up for a basic free service, then upgrade to a paid version to unlock features and storage space. Though the merits of Freemium services have been debated (with compelling cases made for and against), there’s no arguing that it’s been instrumental in helping Evernote become the billion dollar company it is today. But how?
Put simply, the Freemium model got people in the door, but the features we’ve already talked about kept them around, and eventually inspired a lot of them to convert to paid. This is because Evernote increases in value the longer you use it.
Unlike a game or novelty app that’s initially fun and quickly becomes boring (in which case it isn’t worth it to upgrade to the paid version), the longer you use Evernote, the more invested you are in the product. As Libin explains, Evernote is “your intellectual brain, it’s a service that lets you remember everything important that happens to you and use that information in a way to make yourself happier and more productive.” 
So it follows that the more of your life you have bound up in Evernote, the more vested you are and the better user you are. Evernote’s conversion rates increase with the age of the user. That’s why, when everyone is tripped up over the percentage of paid users in a freemium model, that metric is largely ignored by the company. As Libin explains:
“The overall rate we frankly don’t pay attention to, but it’s probably somewhere around 4 or 5 percent range. What we pay a lot of attention to is what percentage convert in the first month, in the first year, in the first two years. … Of the first few months worth of users, people who have been with us for about 4 years, around 25% of them are paying us right now, that ratio declines as you get new users.” 
To give these numbers some perspective, as of 2010 when Libin shared some of Evernote’s revenue stats, their cost per user was around 9 cents per active user per month, and they made around 25 cents per user per month . This is likely why he asserts, “We don’t care if you pay, we just want you to stay around and keep using it and get all your friends to use it.” Because Evernote’s numbers show that the longer you use the product, they more likely you are to fall in love with it, and sooner or later you’ll be happy to pay for it.”
Today’s Growth Engine
Many of the factors above, in particular Evernote’s killer features, word of mouth from passionate users, and the freemium model, continue to drive the company’s growth engine. Over time, some additional elements have also become increasingly apparent as keys to Evernote’s sustained growth.
Beauty and Simplicity as Core Features
Perhaps the most significant of these elements is the inherent simplicity of the product, which makes Evernote applicable across a practically limitless number of use cases. Evernote is like a blank canvas, and it’s totally customizable based on what you need it to do, which is kind of the point. It’s an app for people who have thoughts and ideas they need to remember and organize, which is pretty much every person in the world. Libin explains how Evernote’s philosophy of simplicity has evolved:
“The fundamental thing that I wish I’d of known, is I underestimated the importance of simplicity and design. The first couple of years I really didn’t feel that, I didn’t have a good enough appreciation that the most important thing for consumer facing software was that it was beautiful, simple, people immediately and intuitively understood how to use it. It really wasn’t about making it more powerful, it was about making it more natural. I think I’ve only internalized that in the past couple of years and it’ll take another lifetime to really master it.” 
Though this is definitely harder to pull off than a feature-packed, bells-and-whistles product, Evernote’s core philosophy of simplicity is how the product lends itself to so many diverse applications. One area in which this is evident is in the informal Evernote acolytes, who constantly share their tips and strategies for getting the most out of of the product.
Supercharging Word of Mouth
As we’ve already discussed, word of mouth is a key growth factor for Evernote. While the valuable product, freemium business model and simplicity are key factors driving word of mouth, Evernote has introduced new programs to accelerate sharing and drive the performance of this channel.
In implementing the Evernote Ambassador program in October of 2011, Evernote began to leverage the inherent user tendencies toward both customization based on use case and word of mouth referrals. The program, which the company says—“shines a spotlight on our passionate users, allowing them to highlight their individual areas of expertise and the ways Evernote helps them achieve their goals as a way to help others achieve theirs.”
The program is comprised of users who run the gamut—from experts in healthy living, blogging, education, small business, organization, photography, mobile living, design, travel, home cooking, and more. Ambassadors are hand-picked by the company to represent distinct ways of engaging with Evernote, and their job is to share their passion with others like them, showing how Evernote can make their personal and professional lives better. In December of last year, Evernote took the Ambassador program global, adding 26 new Ambassadors from around the world.
Ambassadors attend meetups, help new users get acquainted with the product, and are enthusiastic promoters. They’re often doling out stickers and premium trial coupons to help turn more of their network into Evernote users. In exchange the ambassadors are associated with a brand they love and recognized as an expert among their peers.
Users interested in becoming an Ambassador can request to be considered by the company. Based on the pages and pages of requests from users on the Evernote forum, Ambassador spots are in high demand.
The Evernote Referral Program, launched in September of this year, is yet another way the company leverages word-of-mouth referrals and rewards customers for their loyalty. New users who sign up from a referral get a free month of premium, while referrers get points they can redeem toward perks, such as up to 12 months of Evernote Premium, a 1GB boost in monthly upload limit, a VIP ticket to the Evernote Conference in San Francisco, or a visit to Evernote headquarters for lunch with the team. Evernote Premium members can also earn points by redeeming gifts cards and promotions from Evernote partners, like Moleskine. While there’s nothing revolutionary about the program, it is another way to drive the natural referral and word of mouth channels to maximize their effectiveness
Clever Promotions and Marketing
Another way that Evernote leverages the product simplicity as a growth strategy is through broad promotional efforts like last year’s Evernote Holiday Pledge, in which users signed up to receive email tips and guidance for getting more out of Evernote during the Holidays from Ambassadors and the Evernote team.
What Evernote offers users is a simplified, sane holiday season, yet, as we’ve already discussed, the more of your life that’s bound up in the app, the more valuable it is to you. Once you get into the swing of things through planning Thanksgiving dinner and organizing and purchasing holiday wishlists, you’re much more likely to use Evernote when you want to plan that family vacation in February, which is the whole point.
Yet another low-cost but popular promotion used by the company is the “I’m not being rude, I’m taking notes in Evernote” sticker pack. These stickers, which go on the back of laptops and mobile devices, were effective for several reasons. First they solved a real problem (user concern over seeming rude), but they did it in a fun and affordable way (sticker packs sold for $5 in the Evernote Market). They also served as additional marketing for the company.
Acquisitions and Product Extensions
As Libin has pointed out again and again, in the age of the internet, good products sell themselves. So Evernote’s growth strategy, at its most basic level, is making their product (and now products) as simple, beautiful, and useful as possible, and then letting the other stuff work itself out. In addition to the original Evernote app, the company now offers several new product extensions to make Evernote more useful to users, including:
Skitch — a popular screen capture and annotation app, which Evernote acquired in late 2011
Penultimate — a handwriting app for iPad
Evernote Hello — a contact management service
Evernote Food — an app for keeping track of meals and recipes
Evernote Clearly — a distraction-free reading and writing app
Evernote Peek — a study aid that works in conjunction with a specially designed iPad cover, which functions similar to the traditional flash card system of learning
These are in addition to a handful of physical products, designed in to work in conjunction with Evernote and Evernote extensions, including:
Evernote Moleskine smart notebook, which comes with a subscription to Evernote premium, and is designed so that any page can be photographed and uploaded to Evernote.
Two high-end, super-functional backpacks and a laptop sleeve designed by Côte&Ciel
The Adonit Jot Script stylus for Evernote, which seamlessly integrates with Penultimate.
A ScanSnap Evernote Edition scanner, which scans documents directly to designated Evernote folders.
Livescribe Pen integration, turning notes into digital documents with OCR in Evernote
Plus t-shirts, socks, a wallet, and more.
What the above apps and physical products share in common is a core focus on simplicity, beauty, and ease of use. By and large, they are equally applicable for teachers, freelance designers, professional and home chefs, and pretty much anyone else who engages with information and wants to keep track of it. Both Evernote’s near universal applicability and its increasing value over time will continue to work together to fuel the company’s growth.
The Hundred Year Company
Much has been written about Libin’s desire to build a “hundred year company.” He says that his previous business ventures were about building something for someone else, but Evernote was totally different. He explains:
“Because Evernote got very popular in Japan, we started doing a lot of work over there. … Some of our partner companies were these Japanese companies that are more than a 100 years old and they’re still innovating and we felt really inspired by that. Let’s try to combine the best of both worlds. Let’s build a company that has the long term planning and thinking of some of these great Japanese companies, combined with the best of the Silicon Valley startup mentality. We don’t just want to build a 100 year company, we want to build a 100 year startup.” 
In part, this has meant launching new products with the same core principles of simplicity, usability, and beauty.
The Remaining Pieces of Evernote’s Growth Engine
We hope that this analysis will serve as encouragement as well as guidance for startups struggling to find initial traction and prove their worth. Evernote indicates that with an awesome product, an inspiring vision, and passionate users, you can give your product away and still turn a profit. The key is creating something that becomes more valuable as users engage with it.
What are we forgetting? Is there something else that was instrumental in Evernote’s growth, either in the early days or today? Share your thoughts and insight in the comments, and help us make this the definitive piece on Evernote’s growth engine.
Some Key Takeaways on the Freemium Model
There has been much debate about the benefits and drawbacks of freemium. Freemium models don’t work for everyone. If you’re not sure whether the Freemium model would work for your product, Rapportive recommends asking yourself the following:
Do you, like Evernote, rely on word-of-mouth marketing?
Free users can refer their friends and coworkers just as easily as paid ones. Especially if you aren’t targeting a very niche market and, like Evernote, you have a product that’s applicable to a wide variety of use cases.
Can people start using your product gradually, or does it require immediate behavior change?
With Evernote, for example, users can add information little by little. Whether they accumulate their first ten notes in a day, a week, or a month is of little consequence because their engagement with the product will build over time, and eventually it will become an everyday product.
However, when users have to switch from one product to another and learn a whole new skill set in the process, requiring them to pay up front might actually make them more likely to use the product than if they’d gotten it for free (based on the sunk costs fallacy). 
This case study is one of ten in Growth Engines: Case Studies of How Today's Most Successful Startups Unlock Extraordinary Growth. Get the ebook on Amazon right now for just $2.99.