Aussie crowdsourcing start-ups DesignCrowd and 99designs have gone head to head, expanding at the same time to the United Kingdom, but, according to both companies, there's always room for competition.
99designs CEO Patrick Llewellyn
US-based company Accel invested US$35 million in 99designs in April last year, while DesignCrowd sourced its funding locally, scoring $3 million from Melbourne venture-capital firm (VC) Starfish Ventures in November. Both companies bring together designers and businesses, with the latter asking the market how to achieve its creative projects, and tapping into the ideas that designers provide.
At the time of receiving the boosts in capital, both start-ups said that they would look at expansion. 99designs began that movement by expanding from its initial US market to Australia, while already locally targeted DesignCrowd eyed overseas markets, like the US markets, favourably.
The two companies appear to have met in the middle, with the start-ups both launching their UK-branded versions of their services earlier this week.
DesignCrowd CEO Alec Lynch said that he thinks it's "crazy" that there have been no dedicated crowdsourcing services in the UK.
"While DesignCrowd has been based in Australia, we've had almost 10,000 UK businesses and designers use our service. We think the UK is the next frontier for crowdsourcing, and that's why we've launched DesignCrowd.co.uk. We're sure competition there will increase, as we've seen in the US, but, for now, there will be less competition," he said.
99designs CEO Patrick Llewellyn has also seen the demand for services in the UK, stating that it is one of its fastest-growing markets.
"The graphic-design market there is three times bigger than Australia's — there's a thriving community of small businesses, entrepreneurs and designers — so we see a tremendous amount of opportunity," he said.
But neither company sees the other as a threat to the competition. In fact, Lynch said that the biggest competitors would be traditional designers and agencies.
"The long tail of traditional design firms still hold 99 per cent of a $200 billion market. The biggest opportunity for DesignCrowd is to take share from these traditional players, and it's relatively easy because our service is cheaper and better, [as] we can get a customer 50 logo ideas in five days, while an agency will give you two design options and might take a month," he said.
Llewellyn isn't perturbed by the idea of DesignCrowd encroaching on its niche, either.
"We wish them well. The market opportunity for graphic design is significant, and we see room for all. While we look at what others in the graphic-design industry are doing, our primary focus is on managing our growth, and continuing to improve our marketplace to better meet the needs of our customers and our design community."
If anything, Llewellyn said that the fact that DesignCrowd is in the same arena actually validates the business model.
"Competition in a space tends to indicate the legitimacy of a market, so, from that perspective, it's a good thing. We've always embraced our competition — they help keep us aiming high, and focused on doing what we do best," he said.
"Focusing only on design has been successful for us to date, and I think finding niches that you can own is a sound strategy for other start-ups to take, as long as the niche is not too limited in size."
Although the business model of the two start-ups is the same, the revenues of both companies are quite different. According to 99designs, DesignCrowd has paid out a total of UK$1.9 million to its design community, while 99designs has paid out UK$19 million. However, it's important to note that while 99designs appears to conduct about 10 times as much business as DesignCrowd, it has also received about 10 times as much funding.
Given that both companies consider their respective markets to be far from saturated, it might leave VCs wondering whether DesignCrowd is an easy target for investment, or it might encourage other would-be start-ups to jump in on an already-proven model.