Cashed-up 99designs aims to boost growth

Crowdsource design giant 99designs says start-ups looking to secure funding need to justify how the money will be used, after the company revealed how its $35 million investment will be used to accelerate its growth. 

Founded in Melbourne in 2008 by Mark Harbottle and Matt Mickiewicz, 99designs is the largest online marketplace for crowdsourced graphic design services. 

Last year, the company received $35 million in funding from venture capital firm Accel Partners, known for its investments in Facebook, Groupon and Dropbox. 

Now it’s been revealed 99designs has doubled the number of monthly design contests held on its site year over year, and has hired key staff to meet demand. 

The company, which has held more than 115,000 design contests on its site, has doubled the run rate of new contests from a year ago. It is on track to surpass 200,000 contests by year end. 

The amount of money 99designs distributes to its designers each month also continues to surge. 

The company expects to pay out approximately $1.5 million to its design community for contests held in January alone, which is twice the amount designers earned for January contests last year. 

To date, 99designs has paid out more than $28 million to designers, and projects it will pay out $25 million to its designer community in 2012. 

The company has also doubled its staff to more than 50 employees, including Jeff Titterton as chief marketing officer, and former eBay executive Caroline Moon as chief financial officer. 

99designs chief executive Patrick Llewellyn says 2011 was a standout year, from rapid growth in contests and payouts to the launch of localised versions of the site in Australia and Canada. 

“In 2012, we’re focused on continuous improvement of our services as crowdsourced graphic design enters the mainstream,” Llewellyn says. 

In addition to the company’s recent recruitment drive, Llewellyn says the $35 million investment from Accel Partners has been used to provide shareholder liquidity. 

“We’ve been able to provide the founders, and early stage investors and employees, with some liquidity,” he says. 

“We’re still focused on running the business pretty much the same way we did when we were bootstrapped… [So the funds are] sitting in the bank.” 

“We’re still mindful of producing a business that can pay for itself – we’re focused on making sure the business model is self-sustaining.” 

Llewellyn admits more money is being spent on things like international travel as a result of the investment, enabling 99designs to “grow up” as a business. Expansion plans are also underway. 

“We’re continuing to look at international expansion opportunities, all the while trying to ramp up recruitment,” he says. 

Aside from the US, Australia and Canada, Llewellyn sees opportunities for the company in the United Kingdom, Europe and Latin America, while Asia is also pegged as a future target market. 

“We’re looking to hire aggressively in Australia – it’s the best place on earth to develop software and has built a great web presence,” he says. 

“We’re fitting out a new office in San Francisco, and need to fit out a new space in Melbourne.” 

Llewellyn points out that 99designs didn’t seek investment “until we thought we knew how to spend it”, urging other start-ups to do the same. 

“It’s important to have a business plan you believe in, and clearly identify areas you wish to spend money on… Feel like you can really justify what you will spend the funding on,” he says. 

“Distributing funding is a challenge [so] have a plan.”

This article was first published in StartupSmart