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Summary:

Evernote announced it has raised $20 million, enabling it to expand on its mission to capture memories and ideas in the cloud. The new round of funding will allow for faster product development and expansion into new markets and validates Evernote’s freemium model.

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Updated. Evernote today announced it has raised $20 million in Series C funding, which the company says it will use to expand its features and boost the number of customers who pay for its cloud-based, note-taking product. The new round of funding was led by Sequoia Capital and includes existing investors Morgenthaler Ventures and DoCoMo Capital, and Sequoia partner Roelof Botha is joining the Evernote board as an observer. The company said the financing will allow for faster product development and the addition of new sharing tools and features, as well as an overseas expansion.

In less than two and a half years, Evernote has amassed 4.7 million users of its digital note-taking application on a variety of mobile devices and computersm and has been adding 10,000 new customers a day over the last two months. The company said it still has $9 million from the $11 million it raised last year, but that the new funding is necessary to help the company achieve its goal of 1 million paying subscribers, which would be 10 times the number the Mountain View, Calif.-based company has now. CEO Phil Libin said that while Evernote’s overall conversion rate is about 2 percent, it has been able to get 20 percent of its users who’ve used Evernote for more than 2 years to pay for the service.

Evernote’s success in converting users to paying customers is a testament to the freemium model, which has also worked well for other cloud-based services like Dropbox. Evernote allows users to store and sync free text notes as well as pictures and voice memos, but offers expanded storage, broader document format support, better security and collaboration tools for a monthly or annual fee.

The company has already been expanding its offering with a “Trunk” service that allows apps and hardware to integrate with Evernote. The most recent addition to Trunk was Livescribe, the electronic pen that digitizes your handwriting. Libin said as the company expands, it could push Evernote into the path of cloud syncing services such as Dropbox or SugarSync. But with a war chest of almost $30 million, Evernote seems equipped to maintain its growth story.

Update: Phil Libin, CEO of Evernote, emailed us to clarify that the company has no plans to compete with Dropbox. “I love Dropbox, and we use them all the time at Evernote,” he said. “I think we’re much more likely to be integration partners than competitors. We don’t really focus on files, synchronization, etc.; we focus on human memories. Sure there’s some overlap, but we don’t really worry about it.”

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Post and thumbnail photos courtesy of Flickr user Sun Dazed.

  1. Congrats to the crew at Evernote!

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