CEO interview: 99designs CEO and president Patrick Llewellyn – part 2
The 99designs CEO reveals why the business overcame scepticism to take venture capital, the ‘forgotten’ parts of international growth, and shares his golden rules
You could probably name the number of UK start-ups that have raised more than $30m in venture capital on two hands.
So, when 99designs’ CEO and president Patrick Llewellyn flew in from Silicon Valley, we took the opportunity to find out more about how he has led the international growth of the ‘world’s largest’ graphic design marketplace.
From Melbourne to Silicon Valley with offices across key European tech hubs 99designs has become a globally recognised brand for small businesses looking to establish an identity.
More than a crowdsourced logo design site, 99designs has extended its offering to provide access to a vast community of designers capable of creating collateral for websites and apps; advertising brochures, banners, and infographics; clothing and merchandising; packaging; books and magazines.
With close to a million designers registered and localised versions of its site for German, French, Spanish, Dutch and Italian speakers, equity finance was a necessity to achieve its aims.
99designs secured $35m from Accel Partners, alongside angel investors who had backed eBay, Survey Monkey, Flickr and Squarespace. Here Llewellyn talks through the process of securing the finance and delivering a global strategy, while sharing tips to help ambitious UK start-ups with similar goals.
What persuaded the management team that equity investment was necessary?
“Because we launched out of a spin-out company we were able to bootstrap initially and we also focused on generating some revenue from the get go. We’re from Australia and there’s not a ton of venture capital (VC) money there so we didn’t raise equity investment at first because we didn’t think it was there. Secondly, we weren’t really sure if we needed the cash or what we would spend it on because we weren’t spending aggressively on marketing at that time.
“99 designs co-founders Mark and Matt were a bit sceptical of the value of VCs; I think the Australian marketplace was seeing more negative experiences than positive. But with me being able to go the Valley we were surrounded by all these businesses that had benefitted from funding.
You went with Accel. What stood out about them as a VC given the founders’ scepticism?
“Accel were a terrific fund for us and we first met them in October 2009. We were going down to Palo Alto and Mark said these guys from Accel have reached out to us, ‘do you think we should go say hello?’ I said ’yeah mate, let’s go check them out, they’re a really cool fund’. We went for coffee and they asked us what companies we liked in their portfolio. We told them that we loved Dropbox, and that we were planning to go to New York so would love to meet with Etsy. The next minute they’ve arranged meetings for us with Etsy and we got to talk with the founders of Dropbox.
“We could start to see the value of the Silicon Valley network and how it was a much more collaborative space then we’d ever given credit to. By being amongst it, it gave us the confidence to raise VC investment but it took 18 months for us to take investment from Accel.”
“From that very first meeting, Accel offered to invest in us so we were kind of lucky that we had some time to think things through. It was eventually about us knowing what we wanted to spend money on and getting terms that made sense for the co-founders.”
Following the investment, 99designs has gone global. Tell us more about the process of internationalising:
“We wanted to internationalise our product which is expensive to do and it takes a while for markets to catch up so we invested in that. We’ve done a couple of small acquisitions along the way and we’ve started to work out spend and testing marketing. Before Accel we never spent on marketing, we now have a chief marketing officer and a marketing team actively trying to acquire customers through a range of different channels.
“As the market is right now, another funding round is certainly something we would consider. We have a lot of support from Accel so we’ve always got them there if we were to look for further investment.
“When you’re a bootstrapped business, it takes a lot to change your DNA. We’ve continued to operate much like a bootstrapped business; we haven’t really spent a lot of the cash.”
Marketing’s a tricky area for fast-growth tech start-ups to get right. Is it an ‘overlooked’ area?
“I’ve definitely said before that we should have looked at spending on marketing earlier – it’s a strength to have a business that can grow through word of mouth alone but it took us a lot longer to scale. If we had our time again, we would maybe have allocated a bit more of our spend earlier and conducted more market testing.
“Our DNA was to hire engineers and build something great, it’s always great to focus on product and the value of the product but consumers are more and more savvy than ever before so you have to get that balance right. Understanding how to acquire customers, what channels might be available to you, what messaging might resonate are all things we would probably have dove in to a little bit earlier.”
You’ve talked a lot about bootstrapping and it’s clearly ingrained in the company’s ethos. What advice would you give to others trying to emulate aspect of The Lean Startup philosophy?
“Think about who you are and what your company stands for from the get go. The more that you can talk to your customers, or potential customers, and the more you do to profile the market, the better off you are.
“Part of your execution phase should be trying to work out how quickly you can get your brand out to real people. We’re big supporters of minimum viable product (MVP) and we still apply that to our business today; what’s the smallest thing we can do to test a hypothesis and as a start-up you need to think about doing that in a way that’s as easy as possible. If it’s spending £100 on keywords to see if there’s traffic for the idea you’re working on, or it’s some kind of guerrilla testing or door knocking, whatever it is you should want to get feedback from real people as soon as possible.
“It’s always good to look at brands in other segments that are adjacent to the market opportunity you’re going after, or competitors you’ve already identified. Look at those characteristics and work out what you like, what you don’t like and then identify the style you want, the customer you’re after, how you want to stand out from the market, and then try and incorporate all of that.
“Be engaged and enjoy it. It’s an exciting time giving birth to a business.”
How about internationalising a tech start-up, what advice would you give?
“My first bit of advice is don’t think about going international until you really know who your customer is and what your product is and when you’ve successfully delivered that in your own market. You can spread yourself too thin and please no one. Our model was to build traction within our own market and I would recommend that, especially for UK-based start-ups. The more you do to test the market here, the better off you will be as you need to be well capitalised to take on international markets.
Where do companies commonly get it wrong?
“Often European start-ups think internationally but […] it’s really difficult to do and it adds complexities to launching products, timing and management, overheads etc. Stay focused longer on a market you can surface easily. If you raise money then you can start to think about it. You really want to have a strong balance sheet.
“The approach that has worked for us is the MVP approach, we basically tried to set up small start-ups in different countries, we localised the language, we localised telephone numbers, and currencies etc. We’ll then have a country manager and it’s their job to make sure that the localised version of the site is growing correctly. It’s then about networking, going to tech events; we look at markets that have a strong start-up scene and early tech adopters.”
How would you compare Silicon Valley to Tech City?
“There’s nothing like Silicon Valley in the world and there never will be and London has no chance of recreating it but London has a great start-up scene. I’ve been regularly coming to London and have really seen it evolve, there is momentum building here. There are more and more local success stories but it’s the weight of capital that makes all the difference. There’s like 650 VCs in a 30-mile radius in Silicon Valley, there’s nothing like that in London and the UK. Capital attracts people.
“It is however great to see tech hubs such as London, Berlin and Dublin constantly growing as and attracting more talent and investment as a result.”
For tech start-ups looking at the US market, describe the attraction of Silicon Valley:
“Venture capital is like a really bright light and we’re all moths flying towards it, and the Valley has that. It’s really hard to stand out in Silicon Valley as success stories are a dime a dozen there and everyone’s trying to do something that’s really innovative to stand out.
“We’re lucky in that what we do resonates with people and we make a tangible difference to people’s lives – that helps give us a sense of what we’re doing. I describe Silicon Valley as a gold mining town; everyone’s there chasing their dreams.
Finally, give us three golden rules for starting a business:
- Know your customer and what market you’re trying to address
- Make sure you have everyone engaged in your product
- Focus as much as you can on product and delivering it as locally as you can, there’s a lot on offer in your home market. There are a lot of accelerators and co-working spaces here in the UK so establish connections and get your business out there.