DesignCrowd seeks to differentiate itself from traditional graphics design studios as its international growth continues8:29PM | Tuesday, 12 August
Australian crowdsourced marketplace DesignCrowd has set $100 million a year in gross revenues as its next major target, according to chief executive officer Alec Lynch. Lynch told Private Media he sees traditional design studios, rather than online competitors (such as Canva or 99Designs), as his main rivals. “Design is a $4 billion industry that’s highly fragmented, with thousands of traditional studios. So our main focus is differentiating ourselves from traditional studios,” Lynch says. The business began in 2007 when Lynch, then a 23-year-old consultant for Booz & Co, saw an opportunity to disrupt the design industry. “I was working as a strategic consultant and I could see the design industry had problems,” Lynch says. “For people buying designs, it was expensive, slow and risky. And for designers, you needed a portfolio to get a job and a job to get a portfolio. So there were 20,000 designers employed – and 60,000 graduates.” Lynch says there have been three key phases the business has gone through since starting. “We bootstrapped for the first two years, then in 2009 we got a seed investment of $300,000. That angel investment allowed us to grow 13-fold,” he says. “Then, in late 2011, we raised $3 million from Starfish Ventures and we’ve used that funding to scale internationally, increasing our revenue six-fold and go from employing three people to 30,” he says. In November of last year, the business raised a further $3 million from Starfish Ventures, with the aim of launching teams in the United States. The company’s expansion continued in June, when it acquired design and photo site Worth1000, having previously purchased Texas-based company Brandstack in 2011. Over the past year, the company has grown by 83%, and now boasts over 400,000 designers from more than 165 countries. The strong growth led EY to name Lynch its 2014 Emerging Entrepreneur of the Year for the Eastern Region. “Primarily [the most recent funding] helped us scale internationally. Australia used to be our strongest market. Today, 75% of our revenues are from overseas and 40% are from the United States,” Lynch says. “We see huge opportunities to scale further, from $15 million to $100 million or $200 million in gross revenues. That’s total revenues and sales, include what gets redistributed to the designers.” Follow StartupSmart on Facebook, Twitter, and LinkedIn
As the world goes digital and businesses embrace the opportunities presented by features such as the cloud and responsive website design, there’s one old-school business tool that’s refusing to die – the business card. A recent survey of 1000 Australian businesses by online design marketplace DesignCrowd has found 88% of Australians still hand out business cards when they meet new clients. And of those receiving cards, 70% either immediately enter their details into their smartphone or keep the card in a rolodex. Recognising the value of a business card, businesses are seeking out good designs to stand out. DesignCrowd says in a statement that it saw a 357% increase in business card design projects in 2013, making it one of the fastest growing categories on the platform. Founder and chief executive Alec Lynch told StartupSmart that while people are still including traditional information such as name, title and company logo, some are dropping references to physical addresses in favour of websites and where to find them on social media. Some are also including features such as QR codes. “Business cards aren’t dead,” he says. “What we see is that even businesses that are predominantly online, like our own, we still meet and conduct business offline.” Lynch says he think most people in business realise that if they go to a meeting with clients or investors or suppliers and they forget to bring a business card it can be “embarrassing”. “Not having one can also look unprofessional,” he says. Lynch says his team at DesignCrowd all have business cards and he encourages them to include a humorous title for themselves alongside their official title. “Mine is ‘Head Honcho (self appointed)’ and another ‘Dear Leader’.” He’s also seen some unusual requests for business cards come through DesignCrowd. Lynch says one of the more unusual was a card for someone in the US who wanted a card to hand out to attractive women he met in bars. Earlier this year we looked at the “dos and don’ts” for what you should have on a business card.
The Australian start-up scene has spawned several billion dollar online marketplaces. Just think Seek, carsales.com and realestate.com.au. And there’s a fresh crop, such as Freelancer, FlightFox and GoCatch coming through. But what is it about this particular kind of start-up that Australian entrepreneurs and investors find so sexy? Marketplace start-ups, those connecting two distinct groups of customers and managing their transactions, are relatively easy to build with little funding and to scale, providing the founder has identified a genuine pain point for both groups. But it’s finding the right problem and pair of customers that can be challenging for start-ups. Locating your market’s pain point Leni Mayo is an early investor at SitePoint, which launched website marketplace Flippa and world-leading multi-million dollar design crowdsourcing platform 99designs. He told StartupSmart the allure of the marketplace models is sustainability profitability and defensibility. “They’re popular because when you get them right, they make money in a sustainable fashion,” Mayo says. “Once you’ve got the scale and network effects, it becomes difficult for people to compete with. Because of that, you have pricing power and can maintain your prices.” With this in mind, start-up pitching events almost always include a marketplace or two, but Mayo says the key misconception about the model is assuming two sets of customers is all you need. “A marketplace isn’t a marketplace if it’s just two groups of customers. It becomes a marketplace when more of one kind of customer makes it even more valuable for the other, then you get network effects and it just grows.” Co-founder of the RecruitLoop Paul Slezak told StartupSmart the nexus between their two markets, recruiters and companies, was the engine of their growth. “Managing momentum is really important. If you’ve got a two-sided marketplace like we do, there is no point in having 200 recruiters if only five are getting work. And it’s not worth promising solutions to people in 100 countries if your recruiter base is only in one,” Slezak says. Launched in 2011, RecruitLoop connects recruiters and companies. The start-up now offers services in 10 countries, with offices in both Sydney and San Francisco. Ann Parker, coordinator of Telstra-backed Muru-D accelerator, told StartupSmart two-sided marketplaces were popular in Australia due to the legacy of companies like Seek, but also a smart choice because of Australia’s geographic isolation and small population. “Trying to be global first is the right solution for Aussie start-ups as a population of 20-odd million won’t make your start-up a colossal success. If you want to be a truly successful digital start-up, you need to be heading elsewhere pretty quick,” Parker says. Ned Dwyer is the co-founder and chief executive of small business solutions marketplace Elto, which launched as Tweaky in 2011 in Melbourne. They recently moved the company to San Francisco as 60% of their customers are in the US compared to 5% in Australia. “The great thing about most of these marketplaces, like RecruitLoop and Elto, is you get to connect people all over the world with different talent. The geographic restrictions in Australia doesn’t matter at all, provided you can connect those people efficiently and they can have a great transaction and experience,” Dwyer told StartupSmart. Elto’s pivot was to enable Dwyer and his team to add new suppliers to their marketplace, opening up new fields of revenue. “Marketplaces are sexy because it’s winner-takes-all, or at least most,” Dwyer says. “The biggest challenge a lot of new founders face is not picking a market that’s big enough.” Global scale thinking Attacking a problem with sizeable global market is exactly why DesignCrowd founder Alec Lynch and his investors are confident about his start-up despite his key competitor being 99designs, the largest design marketplace worldwide. “Globally the design market is over $44 billion dollars, so it’s very big and it’s also very fragmented. Six years into this and I’m confident if you added up the revenue of all the 30 or 40 crowdsourcing sites globally, we’d only have 1% of this market so there’s space for a few players,” Lynch says. Launched in 2007, Sydney-based DesignCrowd has grown to include 150,000 designers and have processed over $14 million worth of design jobs through their services. “Offering something different and building a brand around that is really important. Word of mouth is a big one because that dynamic is critical for growth. If you’re a newer brand, that can be tough. But once you’ve built both sides, a marketplace is valuable and defensible,” Lynch says. Once a big enough market is located, the make or break factors for marketplaces is building both sides sustainably. DesignCrowd recruited their designers first, by targeting design colleges and running their own competitions. Elto (then Tweaky) built their development capacity and market first, before reaching out to customers. RecruitLoop developed both sides at the same time, carefully and slowly. “There is no right answer about how to build a marketplace. It’s very context specific, so you need to really know your space. It boils down to relative sensitivity,” he says. Mayo says founders need to identify which market will be more excited about the solution they’re building. “If one side responds massively well, then it’s the other side you need to get first so it can take off,” he says. Now a start-up strong suit for Australia, the successful waves of marketplace start-ups have established an ecosystem of mentors and money with a passion for the dynamics involved.
DesignCrowd, an online marketplace for graphic design, has raised $3 million from Starfish Ventures. The funds will go towards setting up offices and launching teams in the United States in early 2014, and the United Kingdom and Canada in late 2014. Co-founder and chief executive Alec Lynch is also exploring markets in Europe, South America and Asia, and says they plan to launch the service in two yet-to-be-determined languages in mid-2014. Lynch told StartupSmart the expansion would enable them to better scale the company. “We’ve done a really good job at scaling from Australia, but about 75% of our revenue comes from outside Australia. We’ll be looking to hire local sales and marketing staff first,” Lynch says, adding he will be based in the United States with the new team from early next year. According to Lynch, there are 40 start-ups worldwide offering design marketplace services in a global graphic design market worth $44 billion each year. DesignCrowd is one of several Australian graphic design start-ups such as 99designs and Canva that are performing well in the United States and increasingly globally. “Australia is emerging as a bit of a powerhouse when it comes to crowdsoucring and design services online, and that’s really exciting. We’re really happy to be contributing to Australia’s leadership in that space,” Lynch says. He adds given the size of the market, the increasing global penetration of technology and the rapid uptake of online design solutions he’s confident there is space for a range of companies. “Crowdsourcing sites around the world have a tiny fraction of that market share. It’s very early days, and there are huge opportunities in the space,” Lynch says. “The big challenge for us is scaling our infrastructure and designer community along with the customers demand which is taking off.” This is the second $3 million installment from Melbourne-based Starfish Ventures. Starfish Ventures investment director Tony Glenning sits on the DesignCrowd board. DesignCrowd processed over a million dollars’ worth of transactions in October 2013.
Coming up with a brilliant idea is the first key step to becoming a successful entrepreneur. But unless you execute that idea in a timely fashion, others could beat you to the finish line. This was the challenged faced by Alec Lynch when he founded DesignCrowd, an online marketplace providing logo, website, print and graphic services via a worldwide network of freelance graphic designers. According to DesignCrowd, the top crowdsourcing countries are the United States, the United Kingdom and Australia. However, the company is also seeing strong growth from the likes of Brazil, Singapore and Germany. Designer demand for crowdsourcing has doubled in the last 12 months, with 100,000 registered designers now on DesignCrowd. Small business demand is also booming – DesignCrowd has seen more than 50% growth in posted projects already this year. But as Lynch explains, the company almost didn’t make it past the starting block. “The biggest mistake I made when I was starting DesignCrowd was not starting sooner. I first had the idea in 2006 but at some level I assumed I was the only one with the idea. I was wrong,” Lynch told StartupSmart. “After getting my co-founder (Adam Arbolino – a friend from uni) to build a prototype, I sat on the idea for six months while I worked in management consulting at Booz & Co before quitting my job and starting to work fulltime on the business in 2007.” “Within four months of quietly launching DesignCrowd out of the garage in January 2008, two competitors had started and both were better resourced.” “One had three staff and the other had $3 million in funding while I had $10,000 in savings and three credit cards.” “The reality was, while I was working on my business idea trying to perfect it, other entrepreneurs were working on the same idea.” What did Lynch learn from this? Entrepreneurship requires speed. “Moving too slowly meant that our competitors, initially, grew more quickly. They raised money more quickly, and they were able to hire staff and grow in key markets like the US,” he says. “One of the solutions to this challenge was raising capital. In 2009, I raised $300,000 from three angel investors, which helped us get our first office and employee, and grow the business 14-fold in two years.” “Then, in 2011, we raised $3 million from Starfish Ventures. “Since then, we’ve grown from three staff to 20 staff, acquired two US websites, launched in the UK, Canada and Asia, and more than tripled the business.” Lynch believes the business is better off as a result of his early experience. “My early experience taught me the importance of speed and the value of capital, which helps you move more quickly. It also trained us, perhaps most importantly, to do more with less. It forced us to develop a better product and make every marketing dollar count,” he says. “For example, we’ve been able to grow in the US, which has become our biggest source of sales, without having any staff there. “We’re now approaching $10 million in projects and the US accounts for about 40% of our business. We’re now planning to open an office in the US this year and make our first hire there.” “Whatever we do, we’re going to move quickly.”
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Australian crowdsourcing marketplace DesignCrowd has made its first foray into Asia, after launching its service in Singapore, India and the Philippines as part of a global expansion plan.