Sylvia Pennington August 08, 2012
Eva Missling, new Europe general manager, 99Designs, with the company's CEO Patrick Llewellyn in Berlin.
Aussie start-up buys Berlin-based competitor, after expanding to the United States.
Australian internet start-up 99Designs is expanding its reach in the European market with the acquisition of a Berlin-based competitor, 12Designer, for an undisclosed sum.
Both firms operate graphic design crowd-sourcing sites, which allow customers to have logos, business cards and flyers created for a fixed price, via contests which are open to designers around the world.
It's part of the new wave of online middlemen, including the Australian-owned freelancer.com, which has carved out market brokering deals between buyers and sellers of professional services.
The 12Designer acquisition comes 16 months after Accel Partners, the Silicon Valley financiers whose other winning bets have included Facebook and Dropbox, made a $35 million capital investment in 99Designs.
99Designs CEO Patrick Llewellyn said the firm had experienced strong growth in Europe this year. Established in 2008, 99Designs is based in Melbourne and opened a satellite office in San Francisco in 2009.
While 15 per cent of the 155,000 customers who have used the site to date are in Europe, time differences and language barriers have made it a difficult market to service from afar. Despite the fact that 99Designs is an online business, connecting designers in Stockholm with customers in Sydney, it still pays to be based in the right city.
The relatively high cost of transactions meant customers wanted the reassurance of dealing with a company with a bricks and mortar base on the same continent, Llewellyn said.
The average value of a 99Designs contest is $500 and the firm makes a premium of 20-30 per cent per contest. Contests attract an average 100 responses and around $1.5 million a month is remitted to winning designers.
"It's a lot of money to put on a credit card and trust someone," Llewellyn said. "A lot of customers want to call and make sure we're real."
99Designs was beginning to introduce localised currency and support options for some European countries when the possibility of expansion by acquisition arose, Llewellyn said.
Setting up shop in Berlin was the European equivalent of hanging up a shingle in Silicon Valley, Llewellyn added. "It's the epicentre of Europe and the hottest tech start-up hub. There's a burgeoning young and dynamic workforce who are really chasing the tech dream."
The economic storm clouds enveloping Europe have a silver lining for start-ups like 99Designs, which promise to cap the cost of professional services. Depressed conditions mean more designers willing to do work on spec while mass lay-offs have forced thousands into self-employment, putting them in the market for cheap business cards, flyers and internet graphics.
Once the 12Designer deal is bedded down, Llewellyn plans to turn his attention to the Latin American market and will consider further regional acquisitions. While the Asian market is "super interesting", language barriers and differing price points make it a tougher beast to tackle and one that will likely keep it away until 2014.