Evernote: Company of the Year
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Let's not forget they've taken nearly $100M of investment at a nearly billion dollar valuation. Perhaps this is my east coast conservatism, but in the average case I just can't see how this works out well for the investors.
To get a respectable exit of perhaps $4B in a few years they would have to get their revenue up to something closer to $200M/year assuming you gave them a generous valuation on 20x revenue and completely neglect profitability. Given that Evernote primarily makes money from paid users they will need to dramatically improve conversion, or somehow figure how to get 10x more users. 200 million users strikes me as unlikely, and doubling conversion while also getting 100 million users does too. It's not to say it can't happen, but I just don't see it for a paid consumer service.
Not only are they currently growing quickly, their rate of growth is increasing.
They grew from ~2M at the start of 2010 to ~6M at the start of 2011 to ~20M at the end of 2011[1]. Growth in paid customer looks to be similar.
In September they stated they are getting 40,000 new users a day[2].
200 million users strikes me as unlikely, and doubling conversion while also getting 100 million users does too. It's not to say it can't happen, but I just don't see it for a paid consumer service.
Why do you think this? The market of "everyone who has a smartphone and needs to remember things" seems pretty large to me.
[1] http://blog.evernote.com/2011/01/04/evernote-2010-a-year-in-...
[2] http://www.reuters.com/article/2011/09/09/us-evernote-idUSTR...
I don't know much about their business, but I'm guessing they are sacrificing a lot of revenue/profit for growth.
They could probably double their conversion by slowly dialing down the awesomeness of the free version in favor of the paid version. Could they do advertising/leadgen to their massive free audience? I'm skeptical, but it's a big/untapped asset. Is the data asset interesting? You never know.
They are clearly onto something-- I saw a comment here was someone said, "it's as important to me as email."
Even in just digital goods, there are general software companies (Microsoft, Intuit, McAfee), gaming companies (Zynga, EA, Valve), online dating companies (Match, Eharmony), geneology (Ancestry), health (Weight Watchers Online) that make 1+ orders of magnitude more money than Evernote.
Most of them also have freemium models. What's special here?
The fact that this is a fashionable valuation tells me everything I need to know about the market.
So a good way of projecting future performance here is looking at how many free users they have, and what the conversion rate has been in the past (as well as average time to convert). If they've recently picked up a lot of new free users, we should expect a significant bump in paid accounts in about a year (or whatever their average time to convert is). The freemium businesses just have a significantly different business model, and looking at the current paid accounts is often a poor indicator of future profitability. I don't know that their valuation is justified (personally, I think most valuations are high right now), but the fact that they're only "barely" profitable now probably isn't a good indicator of future profitability.
Almost as if it's more psychologically than fundamentally based.
It is the expectation of future profits by investors.
When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company.
It's fairly common for small, young companies to grow by multiple-hundred percent per year.
More than most people.
> It is the expectation of future profits by investors.
No, that is one component.
> When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company.
Not without more information.
> It's fairly common for small, young companies to grow by multiple-hundred percent per year.
Considering the failure rate of young companies, you have a strange definition of the word "common".
Even taking failures into account, multiple-hundred percent per year is still probably pretty common. If a company doubles its revenue in a year that's a 100% increase, and that's not exactly uncommon.
Strangely, investors attempt to pick the winners, not invest in random small companies.
They look at metrics like growth rate, earnings, and cost of customer acquisition to decide what to invest in.
GOOG floated at 100x earnings, and that was really, really good value.
20x revenue seems more-than-reasonable for a high-growth company with a contained cost structure and a clear path to profitability.
Perhaps. It will be interesting if that is still the prevailing wisdom after Europe melts down.
Google's P/E ratio is ~21 at the moment, and their share price is ~$620.
They floated at a P/E ratio of ~100, and a share price of $85. Their share price would have to drop to below $85 for it not to be good value as an investment, and they would have to drop revenue to around 1/10 the current level for them to be earning less.
Even if I accept the likelyhood that there will be some kind of recession in Europe are you really saying that Google will drop revenues by 10 times? (I'd point out that during the 2008 financial crisis it reduced their revenue by a couple of percent).
That seems quite unlikely.
Can you expand on what you are trying to say?
How exactly is this business model profitable for them?
If Evernote had found a way to make money by paying customers, I would think they would indeed be very deserving of the title, "Company of the year."
The fact that they've got the database open for nevernote[1] is also freakin' incredible, as it means I'm synced across android/windows/Linux seamlessly.
http://nevernote.sourceforge.net/ (now called nixnotes maybe?)
There's an excellent iOS app called TurboScan. It's fantastic. Take a picture of your receipts and it'll convert the image to low file size, but high-quality, PDFs. You can then send those PDFs to your Evernote email and have them stored neatly in a notebook.
It's a fantastic solution for portable document scanning. And with the iPhone 4s camera being so improved over its predecessors, it makes great PDFs of receipts.
I doubt they will ever offer a 'host it yourself' plan, but if only they would implement encrypted notes, it would solve this problem. Data blobs that are only decrypted on the client side, with searching possible only on the metadata (note title, tag, etc) and not the encrypted contents.
They do allow this for text--you can select text and encrypt it--but not for documents.
My workflow with Evernote is that every single piece of paper and mail (along with tons of web pages, etc) goes into it. ScanSnap is awesome, an administrative assistant feeding your paper mail through the ScanSnap even more awesome.
It is unfortunate that there isn't a real facility to keep thos most sensitive of documents safe, though. IMO this is the most significant failure of the service.
For flights, I store all my itinerary information, and also make a note of the parking location in a special note. Never forget that way.
I have a note for all my emergency contact information. I have a notebook for date ideas for my wife and I.
Every other list maker I've ever tried has suffered from either local storage - it won't be with me after I flash my phone or if I take the idevice to the store instead of the android or if I'm at my computer and left my phone downstairs - or else poor searching. Evernote makes all my info show up everywhere I am and be very well searchable, so it's become my go-to 'jot something down' system. I particularly love that they did a great job on search.
But, as a list maker, why can't I make lists in user defined order? This is one of the most fundamental things a list maker should be able to do. It's so painful it's almost a deal breaker. There is no more natural way to sort things into priority order. I need to be able to switch to different notebooks (and tags, potentially) and immediately see what's most important, but the only way to do that now is clumsy hacks and workarounds. I can't throw stuff in and iterate over it until it's a hunk of polished gold. Instead, I have to come up with a "system" to manage it all. It's frustrating. Dragging things into order is the most low-tech way of prioritizing work. I read recently that low-tech solutions appeal to geeks, so maybe that's why it appeals to me. The fact that you can't drag stuff into order forces you to over-engineer your approach to task management.
For now, I make lists inside notes, but then I lose much of the power that makes evernote useful in the first place.
Again, you could do this in simplenote /notational velocity. You're using a sledgehammer to do really simple tasks.
Details: I bought a Fujitsu ScanSnap sheet fed scanner (loads paper in a hopper like a fax machine) off of Ebay for $100. It has decent Evernote integration, such that I can drop in a sheet of paper, push a button, and have it scan both sides of the sheet of paper directly to Evernote.
I tried Springpad some time after quitting Evernote and found it to be more fluid and easier to use. So, has there been significant changes to Evernote? Or, is it largely the same and likely just a preference issue for me?
What's interesting is that many people forget that Evernote is also a powerful cloud plattform with a solid API. The ability to save all your notes in a standardized way in the Cloud and then install individual apps for filtering, processing, or managing them has huge potential.
I think we've only seen the beginning of where they'll go. In comparison to Dropbox mostly because Evernote as a whole is a bit more difficult to grasp.
"Evernote didn't need it because the company became profitable early in 2011"