Tech's trust imperative

It’s Silicon Valley lore that one night during the 2008 financial crisis, Phil Libin, CEO of Redwood City, California-based Evernote, discovered that his company had barely enough cash to last two weeks. But at 3 a.m., as Libin resigned himself to breaking the news of impending bankruptcy to his employees, a mail arrived from an Evernote user in Sweden, thanking the productivity suite for changing his life by helping him get more organised. He was so impressed, he offered to invest in the company. Two weeks later, the user—who goes by just that moniker in the story—wired half-a-million dollars to Libin with minimum fuss, effectively saving what is now one of the world’s hottest startups. Six years on, Ken Gullicksen, COO, and Troy Malone, general manager-Asia Pacific, were in India, Evernote’s third-fastest growing market. Among other things, they spoke to Fortune India about trust—the ephemeral asset that gave Evernote a second chance, a global user base of over 100 million, and a billion-dollar valuation. Edited excerpts:

How is Evernote different from all the other apps out there?
Gullicksen: We want you to think of Evernote as a company that makes you smarter and more productive. A big part of that is the core Evernote app, though we also sell physical products like notebooks and scanners in some countries. The app itself is not just a storage locker for your data or another note-taking tool, but a workspace where you get things done—whether it’s an article you have to write for your magazine, or a paper that you want to submit in school.

Malone: In the era of knowledge working, there are countless ways in which information enters our lives: web links, photos, e-mails. Evernote helps you organise all that and do something productive with it. Our CEO Phil Libin calls Evernote a 100-year startup; we fully expect our users to stay with us for the rest of their lives. That’s the vision and that’s the opportunity. If you look at popular productivity suites, Microsoft Office is 26 years old. There’s a lot of demand for [a new kind of] space where you can spend your day—whether it’s on your mobile phone or laptop or whatever else—having meaningful conversations about the information in your life with your colleagues, your wife, your friends.

How do you make money? Give us a sense of your markets.
Malone: We have three service levels—free, premium, and business. We don’t release our conversion rates, but we desire to keep it at a level where the free product is good enough for people to use for a long, long time. We also sell physical goods through our e-commerce store; we have sold over $10 million (Rs 61 crore) worth since we launched the store eight months ago. We don’t release revenues from the app, but globally, 2.5 million to 3 million new Evernote accounts are created every month. About 75% of our market is outside the U.S. and Canada; the average age group of our users is between 19 years and 45 years. Most come through word of mouth.

Where does India stand?
Gullicksen: India is our third-largest growth market globally, behind only the U.S. and China. India’s ascent is fairly recent—it has got here in the past few months. We have more than 25 lakh users in India right now and are adding about 150,000-plus each month. That’s an average 5,000 to 6,000 new users a day. The conversion from free to paid subscriptions in India is lower than more mature markets, but this is principally because you can only pay for Evernote in India with an international credit card. We do plan to introduce more comfortable payment methods in India soon.

While apps like Evernote claim to simplify life, their very existence depends on life necessarily getting more complex...
Gullicksen: It is a fact of modern life that things are getting more and more complex. We are aware of this, so we try not to add more complications to our users’ lives. Most products that have come in this space over the past few decades demanded a lot of you to make them work for you. Evernote on the other hand has a very unstructured approach. You just put everything in there, and then it’s the software’s job to take over from there. If you are someone who really likes organising things [manually], we give you the tools to do that, but we don’t force it on you.

You talked about people staying hooked to Evernote for their whole lives. Is there a limit to which a company can stretch this aura of indispensability before users start sensing arrogance? Think of Facebook forcing users to download its messenger as a separate app, and the backlash from users.
Gullicksen: A company’s job first and foremost is to fulfil a need. Whenever you begin to get away from that, you get into trouble.

Thinking in monopolistic terms, in terms of owning the user—that’s a crazy idea! What we do in this respect is actually counterintuitive. We make it extremely easy for our users to export all their information out of Evernote with one click. It’s not our job to control your information. It’s our job to earn your trust, so that you wouldn’t want to take your information elsewhere.
Malone: Evernote becomes you as you enter your thoughts, ideas, research, conversations in it. It is intensely personal, so we thought about data privacy and security very deeply right at the start. We
don’t have an incentive to drive page views. We don’t do big data on our users to serve ads or juice out every user. We do small data on each user that helps them become more productive. Our business model revolves around that, and we love it.

In June, you suffered a pretty serious attack, which blocked users from their accounts. How do you regain trust after such scares?
Malone: We restored access quickly, thanks to network-level technologies that are used to mitigate such attacks. No accounts were compromised and no data was lost. Over and above our security systems, Phil has personally penned Evernote’s three fundamental laws of data protection: Your data is yours. Your data is protected. Your data is portable.

Coming back to India, has the growth here kept pace with your expectations?
Gullicksen: Particularly in the past two years, the evolution has been extremely rapid. For us, the biggest enabler has been the explosion in smartphones and the general air of business optimism.
Malone: A distinct nuance in the India growth story is the way the quality of local smartphone brands has improved, not just the adoption. Micromax, one of our key partners here, is a great example. The quality of experience with Evernote and the app’s penetration have also risen because of that. We spoke to business students at Amity a few years ago, and only one guy said he had heard of Evernote. We were back there last night, and this time a good 25% to 30% of the hands went up. In two years, that’s an amazing transformation.

Do you see Indians as natural users of Evernote?
Malone: Absolutely, because work plays such a big role in daily life here. The DNA of people in India is not to sit
back and relax after putting in the mandatory number of hours. They are ambitious. They want to be more productive. They will probably not work less, but we can help them get more done in the same amount of time.

How do you deal with the famous Indian penchant for customisation?
Gullicksen: We hear that word a lot when talking to partners, but I must say there are several countries around the world—Japan, China, Korea—which are similar. When we entered some of those markets, we were advised to roll out all sorts of customisations. We resisted, and ended up being quite successful. Fortunately, we are not a gaming or media company, where the pressure would have been more acute. Of course, it’s different when you talk of marketing—that has greater room for localisation, especially language localisation. Also, all our eight offices across the world with 350-plus employees stress on hiring locals.
Malone: There’s one more thing: Wherever I travel, I try to experience Evernote like our local users do. Last time I was in India, I used a Micromax Canvas phone with a local SIM. It’s difficult to make decisions for a region as diverse as this sitting in Silicon Valley.

Is there a plan to set up base in India?
Malone: We are looking at options. Right now, we have only one contractor who works on marketing and business development. Obviously, one guy is not nearly enough in such a large country.

Anand Mahindra tweeted after the $19 billion WhatsApp acquisition that young people may no longer have any incentive to build anything “real”. Do you feel that there is still more virtue associated with building physical things, rather than something nebulous like software?
Gullicksen: The idea of attributing value to software is something that people have to just face. Different societies are at different points in the curve, but they are all moving there.
Malone: To your point of building real things, I know of architects in Korea who use Evernote to master intricate, traditional Korean architecture, which is a thousand-year-old art form. Evernote is not something that replaces “real” things—it’s very much an additive. We have close to 15,000 businesses that use Evernote to create very real, utilitarian objects. I even used it to build a skateboard ramp with
my son.

Who or what is your biggest inspiration?
Gullicksen: This may be a cliché, but we look up to Apple. Before Apple, the idea of beauty was alien
to technology. It was all about functionality. Thanks to them, companies now don’t start with market research but with user experience design.

The Wall Street Journal named Evernote among 30 startups worldwide with a billion-dollar valuation. When’s the big IPO?
Gullicksen: We don’t spend a lot of time thinking of the IPO, it will happen when it does. IPOs don’t create value. Serving people’s needs does.