Sequoia Capital To Double Down On Evernote With Big New Investment
Evernote is as hot as any startup in Silicon Valley, even if they don't get quite as much press. Last year they raised $20 million from Sequoia Capital, on top of the $25 million they'd already raised.
Context & Ripple Effects
Evernote came into mid-2011 with $45 million already banked: a $25 million raise followed by the $20 million round Sequoia Capital led last year. TechCrunch framed the company as 'as hot as any startup in Silicon Valley' despite relatively light press coverage.
What changes with this report is the shape of the next round: Sequoia is confirmed as planning a major new investment, meaning the firm intends to deepen its existing stake rather than let an outside fund set Evernote's next price. An insider doubling down within roughly a year of leading the previous round is a signal about both the company's traction and Sequoia's conviction.
First-order effects
- Sequoia adds to its Evernote position without a competitive process, letting the company raise from a backer that already knows the metrics instead of courting new leads.
- Evernote extends its runway on favorable terms, since an existing investor motivated to protect its 2010 stake has little incentive to lowball the company.
Second-order effects
- Outside funds eyeing Evernote must now bid above Sequoia's insider price, and any rival note-taking product raising in 2011 pitches against a competitor Sequoia has backed twice inside twelve months.
Third-order effects
- If marquee firms keep recycling capital into their breakout portfolio companies through insider rounds, late-stage dollars concentrate around fewer proven winners while broad seed portfolios thin out — the pattern the corpus tracks under frontier capital concentration.
The trend: Top-tier venture firms are increasingly doubling down on proven consumer-productivity companies via insider follow-on rounds, concentrating later-stage capital in fewer hands.