DesignCrowd out of 99designs' shadow

In the start-up universe, first-mover advantage is a law that like gravity, can weigh on a company's fortunes, but Sydney-based DesignCrowd hopes to become the exception to the rule.

Started at roughly the same time as the crowd-sourced marketplace poster-child 99designs — where designers respond to a customer brief and compete for a dollar prize pool — DesignCrowd has always seemed to come off second best, at least in the public eye.

99designs joined the ranks of Australian start-up royalty in 2011, when it raised $US35 million from US venture firm Accel Venture Partners, and it seemed like a case of follow-the-leader when late last year, DesignCrowd raised $3 million from Melbourne firm Starfish Ventures.

Last month, they simultaneously announced plans to expand their operations to the UK, which again raised questions over who was first.

DesignCrowd COO Chris McNamara admits that the company has to date lived in the shadow of 99designs, but said that this changed with the $3 million funding round, which was the catalyst for him to join the business founded by long-time friend Alec Lynch. The equity raise also saw the appointment of Starfish partner Anthony Glenning, who sold his business Tonic Systems to Google in 2007.

After the cash infusion, the headcount grew from three to 10 staff, McNamara said, and with the majority of the $3 million still in the bank, DesignCrowd plans to double its business over the next couple of years (he would not discuss revenues). The site has over 68,000 designers, aided by its acquisition of collapsed design-template site BrandCrowd earlier this year, and he said it plans to reach the 100,000 milestone over the next 12 to 24 months.

According to public figures, 99designs is ahead in key metrics of designers, projects and funding awarded to designers, but he believes that the crowd-sourced design industry is only in its first iteration, and there are significant changes to come, including providing new design products.

"If you look at when the two businesses were founded, we started at roughly the same time; the sense is that 99designs has been able to accelerate growth and secure funding more rapidly than DesignCrowd, because of success in a couple of key product areas," McNamara said. "Where 99designs is up to right now is a similar place [that] we're up to, in terms of internationalising their business. The majority of sales volumes is centred in the US; we can see they're now looking to expand their offer overseas, and that's something we're also doing.

"I think that success in those markets will very much depend on how you're able to tailor the business model to suit the differing preferences of local clients, and the way in which you're able to make your operations suitable for serving those local clients, having multi-lingual capabilities in non-English-speaking markets."

The company is also looking for growth by addressing philosophical issues that were first introduced by crowd-sourced design marketplaces, where creative professionals are forced to publicly hand over their IP with no guarantee of payment.

DesignCrowd hopes to change the perception amongst designers via three measures: making design submissions private in the contest phase; participation payments; and giving designers an alternate platform through which they can reach their target clients (for example, selling templates via BrandCrowd).

"Historically, crowd-sourcing business haven't always done a good job of creating a fair way of remunerating designers," McNamara said.

"What we've tried to do is address that.

"Part of our business is all about enabling the designer to post design at a price they think is fair; BrandCrowd is a very different offer to the core offer of DesignCrowd or 99designs.

"How do you balance the interest of the client against the interest of the design community? To be successful, we need to engage both those groups, and unless we get folks like good designers participating, our website doesn't work.

"At the same time, [we] want to create a process to create the best result for the client. We make the tactical choices that best balance those dynamics, provide the right incentives for designers to participate in the community and offer those designers appropriate reward and attention."

SWOT

Strengths

It's raised $3 million in funding and established a customer base.

Weaknesses

It's a second mover in the crowd-sourced design market.

Opportunities

Crowd-sourced design is in its infancy, and there are applications and customers for the service waiting to be developed.

Threats

The biggest threat is that companies may tire of the quality of design that is being produced, or the design process, or that these providers become a commodity.

Conclusion

Despite playing second fiddle to 99designs, DesignCrowd has established a large customer base and designer community. It has to innovate in order to succeed, and has some interesting ideas on the boil. It also has the funding and talent to execute ideas.

Verdict: BOOM