Phil Libin On Evernote's Close Call: Just 3 Weeks of Cash Left During The 2008 Financial Crisis

While Evernote now has north of 75 million users and a valuation that’s reportedly more than $1 billion, the company faced many close calls. In fact, it had just three weeks of cash left during the 2008 financial crisis when an investor bailed at the last minute, said CEO Phil Libin today at Y Combinator’s Startup School in Cupertino. The investor dialed Libin saying they had seen 60 percent of their fund value vanish into thin air as equity markets crashed on Lehman Brothers’ bankruptcy filing. They called Libin and told him, “We’re not going to do it.” “We panicked,” he said. “I spent a week frantically calling everyone that I knew.” Because he had entered “exclusivity” in those financing talks, Libin had given up his right to move discussions with other investors further along. So he was left in a lurch. With two weeks left of funding, Libin made the painful decision to shut down Evernote and fire everyone. (He said that you can’t burn your cash all the way down to zero because you need reserves for the legal costs of shutting down a company.) “I remember sitting there at 3 a.m. thinking that this is what it must feel like to be an adult,” he said. “This is what it feels like — making adult decisions. This sucks.” But then something just short of a miracle happened. A passionate Evernote user from Sweden dialed him up. He told Libin that he had been using the product for two months. He said it had changed his life — it had made him happier and more organized. Libin remembered thinking, “That’s nice. This makes me feel better. Maybe if you can make a difference to one random guy in Sweden, that’s enough.” The user, who asked to remain unnamed, went on to offer some investment. Twenty minutes later, they ended up on a Skype call and then within about a week or so, the investor had wired Evernote a half-million dollars. That gave the young company enough runway to prove traction and fix a complicated legal structure that had scared off earlier investors. They went on to secure investment from Japan’s DoCoMo Capital, then several rounds of financing with participation from Sequoia Capital. After talking about his close call, Libin also offered a couple key pieces of advice to young founders. 1. Make friends with potential co-founders. “I think the

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