Why did Phil Libin decide to build Evernote for himself and his team?

After two previous startups that were either consulting-based or focused on products the team wasn't passionate about, Libin decided to build Evernote based on a shared desire for a better productivity tool that they themselves would love to use.

What was the biggest mistake Phil Libin made when starting Evernote?

The biggest structural mistake was being 'too clever' with the legal and stock division when merging two teams, which made the company difficult to fund for about 18 months.

How did Evernote survive the 2008 financial crisis?

Evernote was on the verge of shutting down with only weeks of cash left when a random email from a user in Sweden offered a $500,000 investment, which provided just enough runway to clean up their structure and gain traction for future funding.

What is the difference between an 'exit strategy' and a 'liquidity strategy' for a startup?

An exit strategy focuses on selling the company, which can be bittersweet. A liquidity strategy, on the other hand, is about ensuring investors can realize gains, especially if the company is intended to be a long-term 'life's work' rather than a quick flip.

Is founding a company supposed to be easy?

No, according to Phil Libin, founding and running a company gets harder over time, though it also becomes more important, rewarding, and fun. It's not a path for those optimizing for ease.

Why is building a product that you love important for a startup today?

Building something you love ensures you are your own target audience and can be an honest judge of its quality. In today's meritocratic tech world, if you build something great that you love, there's a high probability a billion other people will too, enabling success through app stores and social media.

Key Moments

Phil Libin at Startup School 2013

Y Combinator

Science & Technology4 min read29 min video

Oct 26, 2013|27,302 views|250|3

YC Y Combinator Phil Libin Evernote CoreStreet

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Key Moments

TL;DR

Phil Libin shares startup lessons: build a great team, focus on products you love, and be epic.

Key Insights

Cultivate a core group of brilliant, high-energy, lifelong friends who can become co-founders.

The primary goal of a startup should be to build a product you are passionate about, not to be a consultant or chase market demand.

Don't be overly clever with legal structures and stock division; simplicity and adherence to standard practices minimize early-stage risks.

Building a company is inherently difficult, but it becomes more rewarding and fun when focused on an 'epic' mission and a product you love.

In today's tech landscape, building for yourself is crucial; if you love it, chances are a billion others will too, and they can find it.

The most fun and least stressed times are often when the company is close to failure, as priorities are simplified to survival and fundraising.

THE FOUNDATION: ASSEMBLING A STELLAR TEAM

Phil Libin emphasizes that the most critical element for startup success is cultivating a core group of exceptionally talented, energetic, and loyal individuals who function as lifelong friends and potential co-founders. He illustrates this with his own experience, where the same team members have transitioned through multiple successful startups, including Evernote. Libin stresses the importance of proactively identifying and nurturing these relationships, suggesting that one should ideally only form friendships with people they could envision starting a company with. This foundational team is more valuable than any other asset in the early stages of a venture.

THE SHIFT FROM CONSULTING TO PRODUCT BUILDING

Reflecting on his first startup, Engine Five, a consulting firm, Libin highlights a crucial lesson learned: the illusion of control and reward when working purely as a consultant. Despite working incredibly long hours and generating revenue, the lack of product ownership meant they weren't building lasting value. This experience led to a fundamental shift in his approach for subsequent ventures, including Cor Street and ultimately Evernote. The conviction was firm: focus on building a product, not just providing services for others.

BUILDING WHAT YOU LOVE: THE EVERNOTE ETHOS

The genesis of Evernote was rooted in a desire to build something for themselves that they were genuinely passionate about. Tired of board members and investors dictating market needs, Libin and his team decided to create a product they loved and would use themselves. This principle guided their search for an 'epic' mission, leading them to address the subpar experience of productivity tools at the time. The goal was to define what it meant to be effective and productive in the modern knowledge worker era, creating a 'second brain' for users.

NAVIGATING STRUCTURAL CHALLENGES AND FUNDING CRISES

Libin recounts the unconventional and 'too clever' structural setup of Evernote's early days, which inadvertently created significant hurdles in raising capital for nearly 18 months. This experience hammered home the lesson that innovation should be reserved for the core idea, not the legal and financial structuring, which should be as straightforward as possible. Furthermore, he details the near-collapse of Evernote in the 2008 financial crisis when a major funding round fell through, only to be saved by a small investment from a random user, underscoring the power of product adoption and a lifeline from an unexpected source.

THE CONSTANT STRUGGLE: DIFFICULTY AND REWARD

Contrary to the expectation that success brings ease, Libin asserts that running a company only gets harder over time. The initial phase, fraught with existential threats and constant fundraising needs, is paradoxically described as more fun and less stressful due to simplified priorities. Once a company achieves stability and scale, the complexity and responsibility increase. This is not a path for those seeking an easy ride; the rewards, though immense, stem from overcoming continuous challenges and building something meaningful with an exceptional team.

THE EPIC MISSION: A RECIPE FOR LONG-TERM SUCCESS

Libin strongly advocates for pursuing an 'epic' mission—something truly significant that the team can dedicate their lives to. He believes that in today's interconnected world, building a product that you and your team passionately love is the most effective strategy. If the creators are passionate, it's highly probable that millions of others will share that enthusiasm. This shared passion, amplified by modern technology and distribution channels, creates a meritocracy where great products can find their audience and achieve success, making it the only viable strategy for building a company worth keeping.

Mentioned in This Episode

●Products

●Software & Apps

●Companies

●Organizations

●People Referenced

Startup Founding Principles

Practical takeaways from this episode

Do This

Cultivate a core group of brilliant, high-energy co-founders early on.

Build a product that you and your team are genuinely passionate about and love to use.

Focus innovation on your core idea, not on complex legal or financial structures.

Be clear about your company's purpose and its 'epic' potential for long-term commitment.

Build for yourself first; if it's great, there's likely a large audience that will agree.

Ensure you can be an honest critic and judge of your own product.

Have a liquidity strategy, especially if raising money, but don't focus on an 'exit strategy' if it's your life's work.

Avoid This

Don't start a company with people you can't imagine co-founding with.

Avoid being a consultant if your goal is to build lasting value.

Do not get overly clever or innovative with company structure, legalities, or stock division.

Don't build a product solely based on perceived market demand if you lack passion for it.

Don't assume the best product always wins or that you are not the target audience.

Avoid framing your initial pitch as 'give me money for this free product' without demonstrating value or a scalable model.

Don't expect building a company to be easy; it gets harder but more rewarding.

Common Questions

The most crucial lesson Phil Libin learned was the paramount importance of having great co-founders and cultivating a core team of brilliant, high-energy individuals who are committed for the long term.

Topics

Mindset & Self-Improvement Technology & Innovation Business & Entrepreneurship Crisis Management Company Culture Product Development Startup Strategy Venture Capital Founder Lessons Entrepreneurial Mindset

Mentioned in this video

Companies

Twitter

The platform through which Doo Capital, a Japanese investor, initially reached out to Evernote.

Doo Capital

A Japanese telecom company and one of Evernote's early professional investors, who invested after a humorous misunderstanding in language.

Engine Five

Phil Libin's first startup, which was a consulting company focused on e-commerce, formed with college roommates.

Y Combinator

Mentioned as a resource for startups, advising to follow standard practices rather than being overly clever with structure.

Corasource

Phil Libin's second startup, an MIT spin-off focused on cryptography and security for banks and government, which was eventually sold.

Vignette

A large company in Austin, Texas, that acquired Phil Libin's first startup, Engine Five.

Morgan & Company

The first Silicon Valley firm to invest significantly in Evernote after the company gained traction.

Lehman Brothers

The collapse of this company on the day Evernote's funding was supposed to close significantly impacted their investment prospects.

People

Phil Libin

The speaker and founder of Evernote, sharing his experiences and lessons learned from building multiple startups.

Dave Angberg

CTO of Evernote and co-founder, involved in a humorous incident where he accidentally spoke Korean to Japanese investors.

Stepan Pikov

The founder of a group in Sunnyvale that was working on the concept of a 'second memory', which merged with Phil Libin's team to form Evernote.

Products

Apple Newton

An early portable device with handwriting recognition that the team behind the original Evernote concept worked on.

Software & Apps

Evernote

A productivity software company founded by Phil Libin and his team, focusing on creating a 'second brain' for knowledge workers.

Skype

The communication platform used for an impromptu investment call with a Swedish investor during a financial crisis.

Organizations

MIT

Mentioned as the origin of the second startup, Corasource, and the source of a brilliant cryptographer.

Sequoia Capital

A venture capital firm that invested in Evernote multiple times.

Media

Always Sunny in Philadelphia

A TV show episode mentioned as a humorous parallel to the way a company acquisition was handled.

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