99designs looks to conquer the European designer market

August 7, 2012: 3:00 PM ET

CEO Patrick Llewellyn discusses the company's purchase of 12designer and its plans to bring the leading U.S. design marketplace to the Continent.

By Alex Konrad, reporter

FORTUNE -- When a startup or small business has a design need in the United States, there's a good chance it taps into one of the over 170,000 registered designers in 99designs' network. But while the company was founded in Australia, it's done most of its business in the U.S. market since moving to San Francisco two years ago. Before heading out to Germany to meet his new team last Friday, CEO Patrick Llewellyn spoke with Fortune about how purchasing German firm 12designer will break open the European market.

Co-founders Mark Harbottle and Matt Mickiewicz spun 99designs off of their first company, SitePoint.com, in 2008. (The two also have spun off another site, Flippa.com.) The site has a new design uploaded every 5 seconds and has earned designers $38 million so far in categories such as logos, business cards, and t-shirts. Last year, the company made waves when it announced a Series A round of $35 million in funding from heavyweight Accel Partners. Then in March, Mickiewicz told Fortune that money would help with international expansion—and that time appears to have come with 99designs' first acquisition.

Why make the purchase?
International expansion has been a big portion of what we've been working on this year. We are currently only in English. We've been rolling out currency options and local support in places like Australia and Europe, but we wanted to get local language.

Is Germany a natural hub for graphic design in Europe?
Germany is #5 after our top four English-speaking markets. In Berlin there's so many startups that it's become a design hub. There's an artistic feel to the city and it's fresh, young, with a lot of energy. That's where the 12designer office already is.

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As a small operation, what does 12designer bring to the table?
A lot of people may look at it and say, five people isn't a lot, but those five people provide coverage across five languages [99designs had 65 employees before the purchase in offices in San Francisco and Melbourne]. We were seeing excellent growth in English in Germany, and 12designer's strength is in the German language, then Italy and France.

We first met [12designer founder] Eva Missling in October at a crowdsourcing conference in San Francisco. She was a long way behind us but had a similar passion and has the vision of a startup founder. She'll continue to lead 12designer as it stands alone and she'll be our European manager.

Is this deal putting some of Accel's investment to work?
When we first talked to Accel, we were doing business out of cash flow, and we got to know them for a while prior to the investment. When we talked, the Accel guys shared their experience in internationalization and localizing your service in local markets. And we are lucky to have Michael Dearing on our board; he brought eBay to Japan. But first we had to go out and conquer the day in the United States.

Will 12designer remain an independent site or be folded into the 99designs brand?
Their marketplace will be left relatively standalone in the near term. I'm arrogant enough to say there's a loyal following for both. We will support them as we localize 99designs in those markets, then we will assess the synergies to be gained. Ultimately, the vision is to consolidate the brands over time.

Right now, 99designs pays out $1.5 million a month to designers. How do you see the European market moving that line?
We want to double where we are today. 12designer is still a relatively small business, they have 120-130 contests on their site where we have about 1,600. So it won't make a dramatic difference on day one, but in twelve or eighteen months we want to double the size of our marketplace.

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