When it comes to good web design, one company is quickly becoming a household name. With almost 250,000 graphic designers competing to create your customized design on 99designs, you’re pretty much guaranteed to leave with something you love.
While this extremely successful company may look like it belongs in a totally different world than your young, bootstrapping startup, 99designs was a little startup too, once upon a time. CEO Patrick Llewellyn gave us the rundown of the fascinating story behind the birth of 99designs, some info on where they’re at today, and a bit of excellent startup advice to round it all out.
Check it out.
Let’s start with the fun stuff. What’s your office like?
Well, it’s an old 1900s building that has survived five earthquakes. It’s kind of a small boutique building, stripped back, with lots of wood and lots of bricks and a nice open plan. I also like to say that the best coffee in San Francisco comes out of here.
It sounds great!
We love it. It’s kind of classic 99, you know? I think in Silicon Valley you have a lot more extravagant offices. Our beginning was pretty modest and we spent the first three years building our business with a bootstrap mentality. That has definitely stuck us.
I moved to San Francisco in 2010 to set up our office here. We had one guy on the ground who had been operating out of his bedroom so he and I were like, yup, it’s time to make the first official office.
And where was that first office?
It was a tiny room in a startup area on Pier 38, which was a very cool workspace right on the border. Ultimately, the pier got shut down for safety reasons, which gives you some idea of the quality of the building. (Laughs)
But yeah, we had a little room there and we incrementally built the team here in San Francisco over time, like we did in Australia. Growth was pre-measured, hiring was very measured, every dollar we made had to count.
So have you been with 99designs from the get-go?
No, I talk like I have but I joined September of ’09. The business as 99designs had been around for about eight months, but it had really been around longer because it started to gestate back in another company called Sitepoint.
Tell me a little about that.
Sitepoint was started by two founders, Mark Harbottle and Matt Mickiewicz. What’s interesting is that Matt was based Vancouver, Canada, and Mark was based in Melbourne, Australia. Mark was a marketing manager for a dotcom during the Internet 1 period.
He was marketing a product called Hotdog, which was on of the first websites in box. It was quite a successful product, distributed across the world. He noticed he was getting some sales at a pretty good rate through this one little site called Webmaster Resources. He developed a relationship with the founder of that site, who was Matt.
Eventually he reached out to Matt and said, “Hey, you’ve got something. I’m thinking of doing my own thing and I’ve got some ideas around how you could improve what you’ve got. If we were to join forces, I think we could do something a lot bigger. Are you interested?”
Little did he know that the guy he’d been talking to for a couple years had just gone from being 15 to 17, was still in high school, and was operating this site Webmaster Resources from his bedroom in his parent’s house.
So how did Sitepoint develop into 99designs?
It’s early incarnation was as a site providing information to early adopters of the internet. So if you were interested in learning about how-to on the net, this was one of the places you could go.
It had good quality content, it was really functional about helping you learn a new skill or understand something that was going on and it was monetized through ads. There were two forums: a designer forum and a developer forum. It was in these forums that the 99designs business model was created.
On the designer forum, the designers were playing a game called PhotoShop Tennis. For fun, a designers would create a fictional bid – typically for a logo project but sometimes for other things – and then the designers would submit their ideas and they’d basically have an informal vote.
Lucky for us, one day one of the designers went to the forum and said, “Hey, I promised a web design client a logo. I don’t really like doing logos and you guys like doing this for fun. How about you submit your ideas and if I pick one of you, I’ll pay you.”
The designers figured they were already doing it for fun, so why not do it for money?
And that, in essence, is how our business model started. At the beginning it was designers to designers exchanging skills using this contest format in a content thread. Then people in the developer forum started learning about what was going on in the designer forum and using it to source graphic design.
The forum got very messy. Mark and Matt and the team at Sitepoint were looking at it and trying to figure out if there was a business opportunity there, if they could clean it up.
Which there obviously was. How did they make that transition?
The first thing they did was just charge people to list on the forum. More listings came so they doubled the price for a listing and listings still came. Then they were starting to get real feedback from people and they were like, well, now that you’re charging us for listing our contests, here are the things we need and they listed off a bunch of different things.
It was instant feedback and they decided then to build their minimum viable product marketplace, kind of taking the most asked for features and testing them inside Sitepoint. They realized they were onto something and 99designs was spun out in February of 2008 as it’s own little business.
When did you jump on board?
I joined in September of ’09 and Mark and I decided pretty early on that what we wanted to do was get some presence in San Francisco where we could be a lot closer to our customers, closer to potential partners, closer to the venture community and ultimately to be closer to potential acquirers.
We always felt like we were already a dotcom that was operating in USD and we needed a presence in the US. By building and having a presence here, we were able to learn more about what it is customers wanted and how we can improve so we can convert traffic better. We did a lot of changes to our business model in that first twelve months that I was here.
Ultimately that led us down the path to a pretty large Series A round of funding. In April 2011 we raised over 35 million. That’s a pretty strange number for a Series A and the reason is because we were self-funded, we were cash-flow positive to cash-flow neutral depending on how we were spending in any given month. We had to produce enough money to pay for ourselves or else we couldn’t exist.
We were able to create a transaction that meant we could put funding in the business as well as give Mark and Matt some liquidity for their efforts over the last 10 or 11 years of being the founders of Sitepoint.
For us, as a business, it’s been pretty exciting. What that’s mean for me is that roundabout six or seven months of being in the business, Mark was like, I want you to be CEO. I feel comfortable that you know where to take this business. I don’t have time.
We basically transitioned and after I’d been in the US for about a year, we formally announced that I was the CEO. That helped set the path for us. Once we did that deal, I could really focus on building a management team here and in Australia and across the world.
What were you doing before you joined the team?
My background was a little unusual for coming into this business. I was working corporate advisory. So for ten years before that I’d been helping primarily Australian companies raise money, sell themselves. I worked for a very boutique firm doing the very hard to do transactions.
In Australia there’s no real venture capital community so if you’re raising money, there are only a few VCs you can talk to. You’re mainly reliant on angel investors or corporate funding strategic type transactions.
The way I met Mark was through a business associate names Lenny who came to me and said, hey, one of my colleagues is going out on his own with this thing called Sitepoint. He’s asked me to invest and I was wondering if you could help me with my term sheet.
Lenny and I would meet regularly and he would give me updates on how it was going. Eventually I met Mark. He and I got to know each other a bit and in early 2009 Mark was starting to think about what he could do with these little assets he was growing. Sitepoint was an established business, he’d spun out 99designs, he’d spun out Flippa.
Our initial discussion was around how to think about these different things and I quickly fell in love with 99designs. I’d been doing some work in the startup topography space for an Australian business at the time and I could immediately see a lot of similarities in the way in which 99designs was creating and helping this fragmented market come together but at the same time disrupting the market.
Do you want to talk a little bit about what’s going on at 99designs this summer?
Sure. We’re now 90 people, we’ve got offices in Berlin, Melbourne, and San Francisco. Melbourne is where we build everything still. Our core base of engineers is there; we do have a couple here in San Francisco.
Mostly the division is that San Francisco is where we sell and serve and run the business; Melbourne is where we build it; Berlin is kind of another sales/customer support/marketing focused hub for us in Europe. Then we have some people on the ground in Paris and London.
Over the last 12 months we’ve been focusing a lot on internationalization. We’ve launched in five new languages. Our major focus is acquisition and we bought a small business called 12designer, which was a German company to give us that European base.
We’ve really focused on Europe and we’re coming up on the one-year anniversary of having that focus. From that we’re starting to focus on other parts of the world.
We’ve launched a Latin American site and are focusing on that are a little more aggressively. We’re still figuring out how to service that market. We’ve broken into a couple places, like Mexico, but other places haven’t been as easy.
We’re pushing into Brazil and we’re going to continue focusing on our internationalization efforts. We think it’s important that we get out on our own in the major markets of the world. We’re investing in local support and local marketing.
Do you have any advice for other startup entrepreneurs?
I think one of the key things as a startup entrepreneur is trying to maintain focus. It’s very easy to get wrapped up in a whole lot of other things that are going on around you.
One thing that we’ve focused on and that I think has been really instrumental in helping us build our businesses is we really focus on the customer. For us, we have two customers: the designers and the people who are buying the design services.
Our early efforts were all around focusing on them and trying to produce the best product solution we could and then providing a level of service behind that so they could build trust in us. We’ve always taken great pride in the fact that a lot of our growth comes through word of mouth and that’s through building a good service.
Anything else you’d like to add?
Yeah, there’s another thing that’s the important thing to work toward as an early startup entrepreneur: what is I’m trying to do? What problem am I solving? Is someone prepared to pay me for that?
Ultimately I think it’s important to try to understand where the value is in what you’re doing, you know? And it doesn’t have to be monetary. It could be value in the entertainment it’s providing or the service it’s providing that ultimately could provide the opportunity to be monetized.
I think it’s important to really focus in on the value and understand the value and engage with those users, any users that you get early, and work out, okay, this is something that I can now replicate.
I think sometimes you can get too focused on building something too elaborate. You can focus too much on fundraising and company structure. There’s a lot of things that can distract you but if you maintain a laser-like focus on customers and customer outcome and understanding what your value proposition is and whoever it is you’ve chosen to serve, that will pull you in and give you a solid base that gives you something to work with.
From there it’s understanding the major mechanics. I have this core, I can solve this problem, I can provide value to this style of customer. Now, how many of these sorts of customers are there out there?
The other thing I certainly value is if you do receive funding, when you start hiring your early team to make sure you know exactly what it is you’re hiring for and what those people are going to be doing. I think it’s important that the organization you builds stays focused and that people are super busy and they understand their role in that.
I think sometimes startups can scale and quickly lose some of that focus through having people who don’t have a clear understanding of what they should be doing. It that happens, it can impact the culture of the startup negatively. It also probably means that you’re wasting money.