How Evernote got a million users with a $0 growth engine

The following is an edited excerpt from Startup Growth Engines: Case Studies of How Today’s Most Successful Startups Unlock Extraordinary Growth by Sean Ellis and Morgan Brown. The excerpt was provided by the authors. You can buy a copy of their book here.

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 over $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 multiplatform 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.”

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, [Evernote co-founder] 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 3:00 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.”

Early traction

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?

Excellent timing

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.”

Great product

Impressive user experience