Phil Libin talks about his early angel investments around 2000, most of which failed, and a $60K return he reinvested into Evernote. He describes how his Boston team merged with Stepan Pachikov's Newton-era team in 2007 to form the modern Evernote.
Did you, from that point on, you started angel investing a little bit? I've heard you say that you were a really bad angel investor. Any stories from angel investing at that time? Yesterday we had Jason here, and he spoke about how he hit 6 unicorns on the head very early on. How was your experience as an angel investor?
Well, I mean, Jason does it like as a serious thing. We didn't really We just thought, well, we'd sold a company, therefore we must be brilliant and we know about angel investing. So we just started writing checks in the year 2000, as soon as we got any cash, and all of those went to pretty much nothing. So we raised— we set aside a pretty small amount of money, I think like $300,000, that we were going to use to angel invest. About 18 months later, it was all gone. It was gone, and it was down to basically zero, because everything we invested in just went out of business immediately. And we're like, well, that was that. And then we kind of forgot about it. And then 3 years later, we remembered that one of the companies that we'd wound up investing in wound up pivoting and pivoting and pivoting and somehow stayed alive, and then wound up being bought by Microsoft.
Wow.
And we got like, I think we invested like $20,000 with them. We wound up getting like $60,000 back. So our fund had gone from $300,000 to zero. And then a few years later, totally unexpectedly, we got this like $60,000 and we were like, wow, okay, we didn't expect this. I guess it wasn't like a total disaster. But then we had this problem where we had $60,000 sitting in this fund that we hadn't even thought about in like 5 years. No one was investing out of it. We didn't know what to do with it. We were like, well, what's like the simplest thing to do? I guess we could just like divide up the money But that was when Evernote was just getting started, and we were like, well, we could just invest it in Evernote. So we just put the $60K into Evernote as one of the first checks in, and then that wound up returning more than the $300,000 fund. So in the end of it, that $300,000 fund was actually super profitable, but it was all because we made one deal that we forgot about that happened to give us back $60K, and then we just put it in Evernote. Cool.
So you were starting Evernote. Can you guide us a little bit through that story? You had a team already, and— Your other founders now, co-founders, had a different team, and you guys merged them together?
Yeah, there was 2 teams of people. So there was a company that was started by Stepan Pachikov, who was this brilliant Russian-American scientist entrepreneur. And he had a team of people going back to the '80s that had stayed together mostly. And it was the team that Apple actually brought out of Moscow in the late '80s to do the Apple Newton. So if any of you remember the Apple Newton, it was like the first tablet computer. practically way ahead of its time. It had handwriting recognition. It was really ridiculed a lot because it was just way too early, but it was super impressive. It came out in the early '90s, I think, late '80s, early '90s. So they had made that, and then they sort of stuck around, and they had this vision of making something that was infinite human memory, like a cognitive prosthesis. Excuse me. Pardon me. They were in California, and then we My team, we were in Boston. We had just sold our second company. So after Engine 5, we made a security company called CoreStreet. We were doing government security stuff. We started that a month after September 11th. We all wanted to do something more meaningful after September 11th. So we got this co-founder from MIT, started a security company, ran that for 6 years, sold that company. And then we were trying to figure out what we wanted to do for our third company. And we decided, well, we want to work on— we want to make a product, because we don't want to do consulting anymore. But we want to make a product for ourselves. Like, we got— our first company, Engine 5, was, you know, we didn't have a product, we were just consulting, so that sucked. Our second company, CoreStreet, we had a product, but it was a— it wasn't a product for us. Like, it was for, like, government agencies and big banks. And so we had to keep asking ourselves every day, like, you know, what is it— what does a big bank want? What does the government want? We just got really tired of that. And so we said, okay, the third time around, we want to make a product, but we want to make it for us, where we're the target market. So we just asked, like, what do we want? And we built the product for ourselves. And we thought that building the product for ourselves was going to give us an unfair advantage because we could iterate faster. Because, like, when we were building products for, you know, for the Pentagon, like, you know, we'd build something and we'd ship it, and then we'd have to wait, like, 18 months to, like, get some feedback and figure out, you know, how to improve it. So, like, the iteration cycles were, like, 2 years long. Whereas if we were building something for ourselves, we're like, well, we could iterate every 20 minutes. Like, we can make something and then, like, We could just try to be honest with ourselves whether it was getting better or not. So we thought, if we can get much faster iteration cycles, we can have many more cycles to actually get to a good product. And maybe it takes 10,000 cycles, 10,000 iterations to actually get to a really great product, but we can do those 10,000 iterations in a couple of years, whereas if we were building it for somebody else, you'd never get to 10,000 iterations, which is why most enterprise products are so awful, is because they just can't iterate fast enough. So we decided to start a company that we were going to call Ribbon. like tie a ribbon around your finger to help you remember things. And then I met Stefan, who was talking about— had a very similar vision, already had a team. And we had went to this really bad sushi restaurant in Sunnyvale and decided to just join forces and do this together rather than doing it separately. So we kind of combined the two teams, the two entities, recapitalized the company, and that was the kind of the modern Evernote in 2007 came from that. Great.
