Kevin: You're back with Kevin Garber on the "It's a Monkey" podcast. Beautiful day here in Sydney, Australia. I have a very special guest live on the line. He has been called "the most underrated Silicon Valley star." He has managed to build a company...I can hear him laughing in the background. [laughs] He's managed to build a company that's raised over $250 million. The company is four years old. It has more than 45 million users, over 200 employees. Its valuation is between $1 billion and $2 billion. He has fascinating things to say, fascinating insight into the start-up industry, into entrepreneurship. I'm lucky enough to have him at the end of the line in Silicon Valley. from Evernote, thanks very much for joining us on "It's a Monkey" podcast. Phil Libin: Thank you. It's a real pleasure to be here. Kevin: Phil, have you ever been to Australia? Phil: No. It's one of the great injustices in my life. One of the things that I'm most ashamed of is that I've never been to Australia. There's really no good reason. I need to come and I need to do it relatively quickly. Kevin: It's only one flight away from the Bay Area. Phil: It is. And it's a short flight. It's only 20 hours or something. It's easy to do. It's crazy, with all the traveling I do. I've been just about everywhere and that I haven't been to Australia it's unsettling to me. I need to make it down there very soon. Kevin: I saw your comments about the European start-up industry that it's got a couple of elements being smart, creative people, hardworking people, but the early stage ecosystem is still not quite there. I think Australia is in a very similar position to that. Phil: Yeah. What we'll do is we'll probably go over there and start doing some Hackathons and doing some outreach to the local developers, local designers. We really just want the most creative and energetic people to do stuff with Evernote. We'll come to Australia and do that. Kevin: I look forward to it. Phil: I think I should just make news on this podcast and just go out and say that I will commit to being in Australia at some point in 2013. I think it's going to be a New Year's resolution that I make. I'm not let another year go by without going to Australia. You can check in with me in a year and see if I've lied about this. Kevin: We'll definitely hold you to that. But please try and come in summer because in summer it sounds like it's a mixture between the Bay Area and Hawaii, not that I've been to Hawaii. Phil: That sounds good. That sounds like a plan. Summer is now, right, over there? Kevin: Summer is now. Phil: OK. Kevin: It goes from about December until about February, March. It's probably the best time of the year head to at least Sydney. It's the best time for Sydney. Phil: Neat. I'll make it out sometime in 2013. I'm really looking forward to it. Kevin: Terrific. Phil, you've called Evernote the global human memory extension or the cognitive prosthesis. What I like about that description is that you're not talking about tech, you're not talking about features, you're not talking about bells and whistles, you're actually focusing on the value and the impact it actually has on people's lives. I feel that that sometimes gets lost in particularly the echo chamber of the tech industry. Phil: Yeah. I never really saw us as a technology company. I'm a nerd. I'm a computer programmer. Many of the early people at Evernote were. But we never really saw this as making something that differentiated itself based on the technology. We really just wanted to make a product that we could use for the rest of our lives. We want Evernote to be a lifetime product. Kevin: You guys have the claim to fame of being the oldest app in the Apple Store as well as for the iPad. The first apps released. Phil: Yeah. We were in the first cohort, we were there on day one. There's only a few apps that were there on day one that are still around. That was our strategy early on. We basically said we're going to kill ourselves to get on all of the major new platforms on the day that they're released so that we can piggyback on all of the massive marketing money that the vendors and manufacturers and platform companies are going to spend promoting all their new stuff. You know, we didn't have any money back then. We didn't have any advertising or marketing budget, so we thought all right, let's just kill ourselves to get on there on day one, and hopefully that'll mean a whole lot of publicity and promotion. And it worked really well, so I'm glad we did that. Kevin: So you guys are really famous for having presence on nearly every single platform; how do you organize the development teams internally, as a matter of interest? Are they split by platform? Is there an R&D team that sort of wraps around all the teams? Phil: Well, "organize" is probably too generous a word for it. I think we definitely have a barely managed creative chaos here. And it is multiple teams, so we have a few principles that we we try to adhere to. But the most important one is really that we don't, like we know that we don't know how to do any of this perfectly. So everything is an experimentation, we're not dogmatic about stuff, we don't have any particular methodology that we say is the right way to do things. We try to be as flexible as possible in our approach and measure the success of things and adapt. So there's a few things that seem to be working out pretty well, and that's having small teams. So we kind of think that the ideal number of people working on a product team is the same as the ideal number of people you want to have over at your house for dinner. Kevin: Right. Phil: It's like six people, maybe six to eight people. Like if you have if you have eight people sitting around the dinner table, you could still have one conversation. But sometimes you have more, like once you have 10 people sitting around a dinner table, it's not really one conversation anymore. There's just too many people, so like somebody's off on the side having a little side conversation, that kind of stuff. And product development really is, it's like a six-month dinner party. It's an extended, spirited, energetic conversation among a small group of people who are working together on something. So we have maybe 19, 20 teams, each one is five to maybe eight people, and they build all the products. And they compete with each other for good ideas, for bragging rights they kind of leapfrog each other in terms of functionality. The other thing that we've figured out works pretty well for us is we never strive for consistency. I kind of think that consistency's not a goal, the goal should be excellence. Because I think if you strive for consistency, what you wind up getting is you wind up getting everything being consistently mediocre, like everything kind of becomes consistent because it's all sort of sucky, especially if you're building cross-platform, you know. So we don't use any lowest common denominator technology, we don't care about code reuse if any of you...to the extent that some of your listeners are developers or manager developers code reuse is like this big Holy Grail. We just, we couldn't care less about it. We don't try to optimize reuse of any kind. We really just try to strive for every single app being the best it could possibly be, and then motivating the teams that way. And when the iPhone team comes up with something that's better than the Android team, then the Android team is motivated to leapfrog over that and come up with something even better in the next release. Kevin: So the majority of your 200 or so employees, are they developers, engineers? Phil: Yeah. Well, I think we're up to about 280, I think, maybe closer to 300. Kevin: Right. Phil: And I think something like 60 or 70 percent are product, so they're developers, designers, QAs people making the product in some way. Really, like almost everyone does. There's relatively few people that don't do anything that's like...There's me, there's a couple of other of the higher management, so the dead weight is isolated. You know, I'm grandfathered in. There's a few other people, but for the most part, everyone's actually building products. Kevin: Do you still code at all? Do you cut code? Phil: I do a little bit. They don't let me into the source control system very much, so they don't let me write production code, but I do write. They let me play around with the reporting system and the stats, because they figure what's the worst I can do? I do wind up writing a bunch of the reports. I write a lot of SQL queries and spend a lot of time with pivot tables and analytics, and I produced most of the analytics that we put out over the past few years in the early days. Now, we do have teams of people that are actual professionals at analytics that are doing a lot of that stuff. I still write a bunch of SQL from time to time, if you consider that code, which I do because it's [inaudible 00: [19:29] 19:53] . It's the last thing that they'll let me actually program. Kevin: Tell us about Evernote for Business. You guys have launched something earlier this month, and I guess it's based very much on the fact that your stats are showing at 60 percent, over 60 percent of your users actually use Evernote at work. Most of those people are actually doing it on their own back, and they actually bought it themselves and bringing it into work. Phil: Yeah. We just did a survey a few weeks ago. It was two-thirds, 66 percent use Evernote at work for both work stuff and personal stuff. The vast majority of those, I think 85 percent of them, are bringing it in themselves. It's not something that's sanctioned by the company. It's something that they bring in because they like it. We just thought, well, that's how everyone at Evernote uses it. We all have Evernote accounts, and we all use it. It's not really officially mandated, but we use it to run the whole company. We just wanted to make that a better experience. Like everything else, we're really just building for ourselves. We said now that we are close to a 300-person company, we still want to use Evernote to run everything. How do we make a great experience for us? We set out to do that. We talked to a bunch of users, a bunch of companies, and I think we came up with some things, a very good start for Evernote Business. The main idea is it's Evernote. It's just Evernote that plays well at work. It make your experience of using technology at the office as good as it is outside the office. Kevin: I first heard you talk, I think it was on Jason Calacanis' regular show. Good old Jason, he's done great things for the start-up industry. I just love his energy. Phil: Yeah, absolutely. Kevin: His podcast, I just want to start another company after listening to him. What strikes me about most of the talks I've listened to, you sound incredibly relaxed for someone who is running a business that's having high impact and raising money and staff, and all those things that's part of an entrepreneurial roller coaster. Are you a relaxed person or do you just sound relaxed? Phil: I think maybe you've just mistaken exhaustion for relaxation. I think maybe you're just picking up on extreme levels of sleep deprivation and maybe that's coming across as being mellow. Yeah, it's definitely a very, very intense process being at Evernote. Everyone works really hard, the stakes are incredibly high. It turns out it's far more stressful to be at this stage of the company now that we've had a little bit of success. This is actually far more stressful than when we were tiny and about to fail at any given day. So there's quite a lot of pressure here. I think I probably respond to that in my best Spock-like manner and try to de-emotionalize everything and be relatively even keeled just because there is so much stuff going on. I see the job of the CEO to be a "drama sponge." I need to soak up all the drama, I need to soak up all the risk and you try to shield the rest of the team from as much of it as possible, to just let brilliant people focus on being productive and not stress out. So I just try to soak up all of that up. I wouldn't be doing a very good job of that if I was always running around with my hair on fire. Kevin: Do you have any strategy for down time, just getting a little bit of inside into yourself? How do you decompress and get the "yang to the ying," so to speak? Phil: I made a big breakthrough myself when I realized that I was just going to stop trying to adverse not work. This is not generally necessarily good advice for everyone else but I'm the type of person that I would hate it. Whenever I would go on vacation or whatever people would always tell me, "Oh, you got to relax. You just got to turn off. You got to decompress. You can't work so hard." What I realized was like, "Bullshit. No, I don't." It's actually more stressful for me to be trying to please other people's...live up to other people's expectations of down time. I'm actually never more relaxed than when I'm being productive and I'm getting something done. Being away from work is deeply stressful to me because I don't know what's going on when I'm not there. I think I suffered quite a bit. I think probably a lot of people do where you're forced to unplug. Then a couple of years ago I just realized, "Screw that. I don't have to do this. I don't have to ever be off. If I want to go on vacation and still be on email six hours a day no one's going to tell me not to." That actually helps quite a bit. Now I'm not operating under any delusions that I need to have anything other than productive time at work. That's pretty much what I do. I'm always on, I'm always doing something. But I love doing it. It's my life's work. Why would I ever want time away from it? Kevin: You've spoken a lot about how you're vision is to have a 100-year company, and look at the long term, and any technology company, you noted, really is not a short term play. But then you also talk about that in a few years you would like to list. How do you plan on consolidating those two tensions, because the short term, the stock market is incredibly fickle and incredibly myopic, and yet you still want to have your hundred-year company vision. Are they going to be sympathetic to that? Phil: I hope so. That's definitely one of the big risks and unknowns. I do think that I want to be a public company at some point, and I really think about that almost in moral terms. I think it's morally correct for us to be a public company at some point, because we're asking the whole world to trust us with their memories. We're asking people to build up this fundamental level of trust in Evernote, and I think it's only fair. Kevin: So you want that accountability just wrapped around you as much as possible, as tight as possible. Phil: Yeah, and frankly, if we ask everyone in the world to trust us with their memory, I want everyone in the world who feels like it to have the opportunity to be an owner of the company. I think it's morally correct to be a public company, and I want to do the right thing. I just don't want to do it right now. I want to put off the day of going public for a reasonable amount of time, because we're just having so much fun right now. This is the most fun time in a company. This is the time where we can really innovate. We can really take risks. We can fail a few times. You can't really do that when you're small. When you're just a tiny startup, you can't afford to take risks. Other than the one massive risk that you're taking by being a startup, you can't really do anything else. Then when you're a big public company, you get punished pretty severely for failure. So I think the Goldilocks moment for us is right now. Big enough to have resources to take some risks, do some crazy things, to fail a few times, and not get crushed by public markets. I'd like to do this for a few years, really be very innovative, be very friendly towards risk-taking. Once we've figured out a few more things, in three or four years, maybe we'll go public at that point. Kevin: What type of crazy risks are you thinking of? Is it the type of companies that you'll acquire? Is it just pushing the envelope in terms of the product? Phil: Yeah, everything we do. Evernote Business, the fact that we've said, "Hey, now we're going to sell business software, but we're going to do it with the same exact point of view as we've always done it with the consumer software. We are building business software, but we stand completely and 100 percent on the side of the end users. We are taking a public position about how companies ought to use it. We have a point of view about what the right way is to run a company. That point of view is directly reflected by our software. It's not going to be a good fit for companies that have a fundamentally different point of view about how much you should trust your employees or how to motivate people. I think if we were a large public company, once we started selling something, I think there'd be this tremendous pressure to sell as much of it as possible regardless of whether or not it comports to our general philosophy of how the world ought to be structured. Right now we don't. Right now we can still afford to make something and we can try to make it really great and say, "Hey, if 50 percent of the companies in the world don't want to buy it because it's just not a good fit," then that's fine with us. We don't have any pressure to accommodate that. There's international stuff. We opened up offices in several countries this year. We're going to do more next year. That's always a big risk. That's always a big unknown. I don't think we do anything that's reckless. We very carefully consider everything but we are willing to do things where we expect that...Roughly the quarter or roughly 25 percent of things that we do we expect to fail, and we expect to fail pretty spectacularly. Because if we're not failing in a quarter of things we're doing then we're probably not being ambitious enough. Once you're a big public company can you really afford to have big public flame-outs in the quarter of the things you do? You probably can't. Kevin: Dick Costolo, the current CEO of Twitter made some interesting comments about the tension between focus and taking risks. As a CEO just trying to get that balance right to taking these two approaches, whereas Amazon, in a way, just took risks. But other companies have chosen to focus deep and hard on their specific product. Phil: Yeah. Dick and Jeff, they're both genius, visionary people. They've done pretty amazing things. Obviously, Jeff Bezos and Amazon has been willing to...he's been willing to walk in the desert. As a public company he's willing to go and tell investors we're going to do this thing and it's not going to bring us any money for years and we're just going to do it. He just barrels through it and he does amazing things and the result that no one would have expected. Things totally not obviously in line with the core strengths originally. All of the cloud services that they've invented, where did that come from? What does that have to do with selling books? Yet they do it. They do it and they changed the world. That's a really inspiring thing. I think Amazon's performance, Apple's performance, a few of these companies really are the exceptions to what I'm talking about, the exceptions to when I say that big public companies are little to take risk there's obviously great ones that aren't afraid at all, they take big risks all the time. But it's one thing to say that Tim Cook and Steve Jobs and Jeff Bezos can do it but it's very much another thing to say that I can. Kevin: Well, I think others would disagree. You seem to be doing terrific things with your company. You're API, not as many people that I thought of are actually aware that you guys have a very open API and people are developing around it. Phil: Yeah. It's something that we're going to be much more vocal about in the next year. We haven't got 20,000 third-party developers, it's a pretty good community. But we're not fundamentally social. I think in general we aren't a viral company. We don't do things that spread virally, we don't there's not a lot of hype around what we do, so everything at Evernote is about very steady, measured growth, which gets some pretty big numbers like 20,000 API developers I think is pretty good. But we are going to be making a big deal about it this year. I think one of the unique things about our platform...well, really about our business model. I mean, this is the thing about the Evernote business model which I think is really kind of magical, which is it's no conflict, no tricks. We have a direct business model, which means that we only have to please one party, which is our customers, our users. We don't have to please advertisers, we don't have to please partners, we don't drive affiliate traffic, we don't do data mining, we're not a big data company. We don't have to monetize data in any way, we don't have to monetize eyeballs, all we have to do is make a product that people like so much that they pay money for it when they don't have to. And what that does is it really lets us focus, because we have no conflict of interest. We just focus on making the best possible user experience of the Evernote service. And I think one way that that's reflected in the developer community is I think we have no conflict. We have no conflict of interest with our developers. You know, somebody writes an app an app that uses the Evernote API, that uses Evernote accounts, that takes people's eyeballs away from Evernote apps, that's fine with us. Like we have no conflict, we're not losing any money, which isn't true for some of the some of the bigger companies with successful public APIs. As great as they are, they have a fundamental conflict of interest. You know, Twitter, if somebody makes a Twitter app that takes away a large number of people from Twitter's official apps, their ability to monetize is decreased. Kevin: What do you think about the whole...you know, Michael Arrington wrote a piece recently that the promise of Web 2.0 and open APIs and mashups is failing, everything seems to be contracting inwards, and the user is now losing out? Phil: No, what's failing are advertising-supported business models, because the big lie of advertising is that 'oh, no, no, it's going to be so well-directed and so good that it's going to be a positive experience people are going to seek out,' and that's just not the case. That's why whenever you have advertising business models, even though there's plenty of companies that make a lot of money on it, there's fundamentally a conflict of interest, and it's fundamentally there's a finite pie. It's like whoever has the eyeballs is going to be making the money. And so in that sense, there's a conflict between the platforms, the developers, the advertisers, the users, that they don't all want the same thing, and we don't have that. So when we actually look at our revenue per user, which all comes from premium subscriptions or a freemium model, our most profitable users are ones that use our third-party API apps. So even though they're using apps that take their attention away from official Evernote apps, they're still using Evernote, and we make more money from them, because they're more engaged, they're more active, they're more likely to get value out of the premium subscription. So I think we have this we have this model, which is very simple, and it lets us completely avoid conflicts of interest. You know, the downside of it is that it's slower to grow, because there are no tricks in it, there's no little viral or social hooks. But the upside is there's also no conflict. So it's just a model that I prefer. Kevin: Phil, I really appreciate your time. I know you push for time and you do need to head soon. I'll just end on one of your comments when someone asked you what your main competition to Evernote is. You said, "The main alternative to Evernote is leading a miserable, unproductive life and being sad all the time." [laughter] Phil: Yes. That was me before I started using it. I stand by that statement. Kevin: Phil, I really appreciate your time. I look forward to showing you around Sydney sometime. Thanks for joining us on the podcast. It was really great to talk to you. Phil: Yeah. Thank you. I'm going to take you up on that offer. When I decide when I'm going to be in Australia I'm going to need people take me to all the best eating and drinking spots. I'll look you up. Kevin: It will be an absolute pleasure. Thanks and have a good day. Phil: Take care. Bye. Kevin: Bye.