Any way you slice it, 2016 was a milestone year for online art marketplace Redbubble. The Melbourne tech start-up made headlines when it pulled off a $288m IPO in May. Then, just three months later, it announced plans to launch its first European office – plus the roll-out of three localised websites – as a means of rapidly growing its already enormous customer base in the region.
Initially conceived by entrepreneurs Martin Hosking, Peter Styles and Paul Vanzella as platform through which to showcase and sell their own artwork, Redbubble now boasts a community of 400,000 independent artists worldwide. Launched in 2006, it provides creative types with the means to not only reach an international audience (in 2015, Redbubble had 150 million site visits) but profit from having their designs incorporated into merchandise including clothing, housewares, bags, stationary and wall art. Although its head office is in Melbourne, Redbubble also has offices in San Francisco and Berlin – that’s because the US accounts for 65% of its sales, followed by Europe with 27%.
“From the start, Redbubble was naturally a global business,” Hosking, the company’s CEO, explained. “Much of the art is applicable across markets but we also attract local artists in each of our major markets who focus on things of specific local interest, e.g. political events and social memes. Last year, we added German, French and Spanish language capability to give a better experience to people in these languages.”
With Styles no longer involved with Redbubble and Vanzella’s core focus being his boutique design studio, Hosking – a former diplomat – has been left to steer the company himself. Dynamic Business spoke to him about his transition from public servant to business leader; the hurdles he and his Redbubble co-founders had to overcome on the road to success; the impact – if any – of the company’s ASX listing; and what 2017 holds for the company.
Dynamic Business: What was your experience of being a diplomat?
Hosking: I was recruited straight out of university by the Department of Foreign Affairs and Trade (DFAT), which looked favourably upon my honours degree in history and economics. I was thrilled by the opportunity serve an organisation with a deep history, travel abroad and represent my country. During my seven-year tenure with DFAT, I served in embassies in Egypt and Syria – it was a lot of responsibility but I received excellent training and it was an invaluable experience. I left primarily because I met my wife, who is a veterinarian, and it would have been difficult for her to continue in her profession.
Dynamic Business: How did you wind up in the tech space?
Hosking: After I left DFAT, I returned to the University of Melbourne to undertake an MBA. I didn’t have any strong feelings about what I wanted to do at that stage but I knew an MBA would be very useful. It’s a great course for bridging careers and it exposes you to new opportunities and new people outside your normal peer group.
This led to a role with global consultant McKinsey. I spent two years with the firm, before transitioning into the technology space due to a strong desire to be part of something big – I’d begun to see the potential for the Internet to change society and wanted to get involved… but McKinsey wasn’t yet working with high tech firms in Australia. Fortunately, two of my friends – Tracey Ellery and Evan Thornley – had just got some seed funding for what would become online advertiser LookSmart. I joined them as the company’s senior vice president, a role I held until 2001.
When Redbubble launched in 2006 I was also the chairman for SaaS company Aconex. In 2011, I departed Aconex and Southern Innovation – another technology company I was the chairman of – to devote more time to Redbubble.
Dynamic Business: What has informed your career trajectory?
Hosking: Each stage of my career has been an evolution of what came before with the constant thread of pursuing things I genuinely believe in. I have never taken a short-term view when it comes to what I’m most passionate about and financial considerations have always come second to genuine commitment to purpose. My choices have also been driven, in part, by a pretty broad view of societal trends and a willingness to make risky decisions if I thought the rewards would compensate.
Dynamic Business: How would you define Redbubble’s success?
Hosking: On the financial side of things, we achieved $115 million in revenue in FY16 and we’re on track to turnover $140 million to $148 million in FY17, which represents year-on-year growth of 22-29%. However, the main measure of our success, in my view, is the fact that we’ve generated almost $60 million in earnings for our artists, who retain full ownership rights to their works and have complete control over how much they sell for. This measure aligns with our mission to create the world’s largest marketplace for independent artists and bring more creativity into the world. We have a workforce of 200, so I’m also proud of our status as an employer of choice, measured by our position in A Great Place to Work standings.
Dynamic Business: Was the road to success an easy one?
Hosking: The first three to four years were challenging for a reason that is common to all marketplaces. In the beginning, we didn’t have a significant number of artists, which meant there was no reason for buyers to engage with us… and without buyers, artists had no reason to join us. This “two-sided” problem was compounded in our case because we also needed third-party fulfillers to create the products and at first they had no reason to work with us because we were small.
Only time, patience and persistence helped us overcome these issues. Now we are on the other side and any potential competitors face an almost insurmountable hurdle – not only would they confront the same challenges we did but Redbubble is already at scale. For this reason, we’ve not seen any major competitor emerge in the past decade.
Raising capital, getting employees, attracting customers were all very difficult during the first few, lean years. Fortunately, the artists were tolerant and we had some good supportive early investors including Michael Birch (who founded and sold Bebo to AOL), Simon Baker (of REA fame), Su Ming-Wong (a leading PE investor in Australia), Richard Cawsey who still sits on the Board and Simon Yencken (a Silicon Valley entrepreneur).
Dynamic Business: Has becoming an ASX-listed company had much of an impact?
Hosking: Surprisingly, very little. We have been around for more than 10 years and from the start have worked on our corporate governance and internal processes. We have been audited from our first year, for example, and have always had legal advice on the company structure. With steady improvement in governance, commensurate with the scale and growth of the company, the IPO felt like just another step rather than a seismic change (as it is for many less mature organisations). The main benefit of the IPO has been providing all investors, and employees, with liquidity in their shares and giving us access to larger capital markets. That said I currently see no reason to take advantage of this given our strong cash flows.
Dynamic Business: What does the year ahead hold for Redbubble?
Hosking: We’ll continue to work on the European experience, mostly by way of local marketing – we’ve no immediate plans for more languages. We will be launching new products but our focus will be on optimising the user experience with mobile improvements plus greater personalisation and relevance – with over 10 million images and counting, one of our main challenges is helping customers to find what they are looking for. In addition, we’re looking at deeper integration with the social networks, both for artists and customers. Many of the most successful artists on Redbubble have strong social presences and use the tools we provide to help promote their work to these networks.