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Facebook investors think 99designs is the next big thing

Australian business 99designs is the number one online crowdsourced graphic design site in the world. If you think a website for designers to pitch for logo design work isn’t worth big money, think again. This year founders Mark Harbottle and Matt Mickiewicz, who didn’t go out looking for investors, accepted an offer from Accel Partners (thought to own 10 percent of Facebook) for $35 million.

It’s likely you’ve heard of 99designs but assumed it was an American site. If so, that was the intention. This business has always thought globally, as online businesses truly can. This was a carefully planned move. Melbournian Harbottle wanted to rapidly build scale for the business by reaching a global freelancing community. In fact, 70 percent of 99designs customers are from the USA. He even relocated the company to San Francisco, appointing CEO Patrick Llewellyn to run the US operations.

Global strategy pays off

Pursuing a global expansion strategy up front paid off. 99designs is a pioneer in its space. Over 60 percent of all design contests held online are run through the site, making it by far the original and biggest design marketplace. The company is profitable and is growing revenues at a rate of 120 percent a year. Last month 30-something Harbottle appeared in BRW’s Young Rich list for the first time.

This year’s multimillion-dollar investment, leaving Harbottle and Canadian co-founder Mickiewicz as minority shareholders, will help the site achieve localisation and customisation. Australian, UK and Canadian versions of the site launched last month and there are plans for Germany, Portugal and Spain in the next 12 months. 99designs is now ramping up its headcount in Australia with Melbourne becoming the global HQ for R&D, product and technology innovation. But it still has less than 60 staff worldwide.

The new Aussie site, launched last month, means designers can get paid in Aussie dollars and speak to Australian customer support. Australian designers could use the global site before but they had to charge in US dollars and there were sometimes credit card currency conversion fees.

Three years ago in Melbourne

99designs started life in Melbourne just three years ago. Harbottle (formerly of Sausage Software, the dotcom darling of the Australian media in the nineties) had previously created the enormously popular web design information portal SitePoint with Mickiewicsz in 2000. Competitive designers used to challenge each other in SitePoint’s forums to see who could come up with the best design. And this sparked the idea for 99designs. “The design contests in our forums were extremely popular,” Harbottle says. “99designs began as an 18-month proof of concept in which we built the online platform, and worked to bring design projects to the table.”

They didn’t go looking for investors but sometimes an offer is too good to turn down. “I was actually dead against venture capital money,” he says. “But I thought if we are going to do a deal it needs to be this and that and I was very specific. I thought they’d walk away at that point but they pretty much met all our demands! There had been a lot of inbound interest and we were talking to a couple of others. Theirs wasn’t the best offer but we felt they understood the business and that was important to us.”

The first round capital investment of $35 million was led by Accel Partners with participation from angel investors Michael Dearing (eBay), Dave Goldberg (Survey Monkey), Stewart Butterfield (Flickr) and Anthony Casalena (Squarespace).

Crowdsourcing is here to stay

Harbottle strongly believes that crowdsourcing is the way of the future and the phenomenon won’t be going anywhere. “A few years ago if you were tagged as a crowdsourced company there were negative connotations. Everyone was running away from the term. But we stuck with what we were and ran with it and we got a bit of negativity from the community. These days, ultimately, everyone wants to be one too!

“Crowdsourcing is definitely here to stay because it serves a purpose. If you’re a small business that needs a logo for business card, say you’re Joe the plumber, you don’t need a whole brand story, you just want a decent image. In the past they’d have no option but to use Clipart or ask their teenage son to put something together. Not exactly professional but they couldn’t afford to use a graphic design agency. It serves a great purpose. We still use 99designs designers for our own work.”

Helping small businesses buy and sell design

So as well as allowing freelance designers the chance to grow their own micro or small business, it’s giving small businesses access to affordable and accessible design services previously only available to large corporates.

Harbottle does think crowdsourcing is probably a bit too overhyped at the moment. But it is getting a lot of designers work and they’re competing on the quality of their work above everything else. It doesn’t matter if they’re a talented student or working for one of the most expensive ad agencies, if they’re in Melbourne CBD or country New South Wales, the best design ‘wins’.

“Designers are getting repeat business, which we encourage, and they’re using it as a lead generation tool,” says Harbottle. “They don’t need to win every contest and sometimes they put the time into designing something which isn’t used but overall, the economics stack up. I met this guy the other day who happened to live around the corner from me. He was a designer who had started up his own company thanks to 99designs. It was great!”

The site supports the freelancing careers of over 100,000 designers around the globe and soon the company will be reaching a milestone of 99,999 projects hosted on its site to date.

“Ultimately we want round the clock support in every country that has a local site,” says Harbottle. “We are ramping up our marketing spend to acquire new customers and cementing our number one position. Just like eBay, we want to be number one and very hard to catch.”

Feet still firmly on the ground

Despite the multimillions, it’s clear that down to earth Harbottle hasn’t changed his outlook or suddenly started spending big on sports car and flash holidays. “I’m happy at the moment,” says Harbottle, who is married with young children. “I haven’t had time to buy anything or work out what I’m going to do with it”

He is phasing himself out of the day-to-day running of the business though, which has been happening for some time. “I’m like a proud parent with a teenager who has moved out of home. The last time I went to the US office there were all these people I didn’t know and they had no idea who I was, it’s a bit weird like that. It’s just grown so fast. It’s still my baby but it’s moved beyond me. For the first two years I was 110 percent focused on 99designs but now I’ve stepped back.”

Harbottle loves nothing more than a new startup and that’s what he’ll be spending his new spare time on as well as acting as an advisor to the existing businesses. He’s an investor in Learnable.com and has other projects in the pipeline.

“Next year I want to start something new. I’m not exactly sure what yet. Yes, I’m the startup guy!”

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Jen Bishop

Jen Bishop

Jen was the publisher at Loyalty Media and editor of Dynamic Business, Australia's largest circulating small business magazine, from 2008 until 2012. She is now a full-time blogger at The Interiors Addict.

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