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So Evernote is doing $18M a year on 750K paid users with 20 million free users. It has just turned profitable - company of the year? Let's not forget they've t

So Evernote is doing $18M a year on 750K paid users with 20 million free users. It has just turned profitable - company of the year? 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.

lupatus 15y ago
"Evernote primarily makes money by paying customers" How exactly is this business model profitable for them?
- rubyrescue 15y ago
  FROM paying customers he meant, vs ad-supported free customers
  - lupatus 15y ago
    Okay. 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."
- scarmig 15y ago
  They make up for it in volume.
- Skeletor 15y ago
  Evernote primarily makes money from paying customers (by charging paying customers. I don't think they give money to their customers.
webwright 15y ago
I think a big part of the "company of the year" bit is because they've done something most people thought wasn't possible-- build a big business charging consumers. It's refreshing! 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."
- benatkin 15y ago
  Here's the comment (from a new user): http://news.ycombinator.com/item?id=3330038 http://news.ycombinator.com/item?id=3330038
- jpark 15y ago
  Shouldn't you narrow down "build a big business charging consumers"? 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?
jpdoctor 15y ago
> assuming you gave them a generous valuation on 20x revenue and completely neglect profitability. The fact that this is a fashionable valuation tells me everything I need to know about the market.
- hemancuso 15y ago
  I would hope nobody would value a company like that. I pulled that multipier out of the air for what seems both absurd and reasonable.
  - jpdoctor 15y ago
    I got the absurd part but missed the reasonable part.
    - nl 15y ago
      missed the reasonable part 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.
      - jpdoctor 15y ago
        > and that was really, really good value. Perhaps. It will be interesting if that is still the prevailing wisdom after Europe melts down.
        nl 15y ago
        I don't understand your comment. 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?
nl 15y ago
or somehow figure how to get 10x more users 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-stats/ http://blog.evernote.com/2011/01/04/evernote-2010-a-year-in-... [2] http://www.reuters.com/article/2011/09/09/us-evernote-idUSTRE7885JV20110909 http://www.reuters.com/article/2011/09/09/us-evernote-idUSTR...

lupatus 15y ago

"Evernote primarily makes money by paying customers" How exactly is this business model profitable for them?

rubyrescue 15y ago
FROM paying customers he meant, vs ad-supported free customers
- lupatus 15y ago
  Okay. 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."
scarmig 15y ago
They make up for it in volume.
Skeletor 15y ago
Evernote primarily makes money from paying customers (by charging paying customers. I don't think they give money to their customers.

webwright 15y ago

I think a big part of the "company of the year" bit is because they've done something most people thought wasn't possible-- build a big business charging consumers. It's refreshing! 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."

benatkin 15y ago
Here's the comment (from a new user): http://news.ycombinator.com/item?id=3330038 http://news.ycombinator.com/item?id=3330038
jpark 15y ago
Shouldn't you narrow down "build a big business charging consumers"? 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?

jpdoctor 15y ago

> assuming you gave them a generous valuation on 20x revenue and completely neglect profitability. The fact that this is a fashionable valuation tells me everything I need to know about the market.

hemancuso 15y ago
I would hope nobody would value a company like that. I pulled that multipier out of the air for what seems both absurd and reasonable.
- jpdoctor 15y ago
  I got the absurd part but missed the reasonable part.
  - nl 15y ago
    missed the reasonable part 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.
    - jpdoctor 15y ago
      > and that was really, really good value. Perhaps. It will be interesting if that is still the prevailing wisdom after Europe melts down.
      - nl 15y ago
        I don't understand your comment. 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?

nl 15y ago

or somehow figure how to get 10x more users 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-stats/ http://blog.evernote.com/2011/01/04/evernote-2010-a-year-in-... [2] http://www.reuters.com/article/2011/09/09/us-evernote-idUSTRE7885JV20110909 http://www.reuters.com/article/2011/09/09/us-evernote-idUSTR...