99designs gets $15M to make strong push into Japan

From left to right: Patrick Llewellyn, CEO and president of 99designs; Akihiko Okamoto, president and managing director of Recruit Strategic Partners; David Kaplan, CFO of 99designs; and
Joe Saijo, senior VP at Recruit Strategic Partners

Australia-based design crowdsourcing site 99designs today announced it raised a US$15 million series B funding round led by existing investor Accel Partners and Japanese conglomerate Recruit Holdings’ venture capital arm, Recruit Strategic Partners. It had raised a huge series A round of US$35 million back in 2011, so this brings its total to US$50 million.

It is unclear if this “down round” would affect the valuation of 99designs, and CEO Patrick Llewellyn declined to comment on this. He is quick to emphasize, however, that hard cash isn’t the highlight of this deal. The opportunity to build a close relationship with Recruit Holdings was its motivating factor, since the funding will largely go towards expanding into Japan.

“Gaining access to Japanese market knowledge and marketing and communication channels throughout Asia within the Recruit network was an opportunity for 99designs that we couldn’t refuse,” he explains.

Why Japan in particular? Llewellyn says that the rise of like-minded online marketplaces there shows promise for 99Designs. He elaborates:

We see this as an early indicator of the growing acceptance for the on-demand economy. The market for graphic and web design in Japan is significant. The total market is estimated to be US$14 billion, and with our core SME offering for logo design at over US$1 billion. Graphic design plays an important role for Japanese businesses, and its strong internet penetration rate (top four in the world), affluent population base, and shift towards self managed careers makes it a logical step in our internationalization strategy – our stepping stone into Asia.

Given its sizeable online media presence, Recruit Holdings could make a good partner in spearheading this strategy. “Investing in 99designs fits in with Recruit’s goal of becoming the number-one company in global matching across multiple sectors,” adds Recruit Strategic Partners’ president and managing director, Akihiko Okamoto.

Since it first launched in 2008, 99designs has been on an upward trend, with ever-increasing traction figures. Right now, it has around 1 million registered designers, to which over US$110 million has been paid out across some 390,000 contests. Llewellyn claims that they are able to connect customers and design experts for jobs or design changes in under one hour.

It has also recently added website building and hosting to its offerings through a partnership with Jimdo, making 99designs the one-stop shop for customers looking to start a website for their business.

“Beside logo design, the next thing they really need is a custom-designed website to provide their customers with fully-branded experience. It was an obvious product line extension for us,” Llewellyn says. In the past month, about 1,000 logos and websites have been created, he adds.

99designs has come a long way since the early days. Back then, it received a lot of hate from naysayers who felt it was devaluing the work of designers. To combat these complaints, in 2011, 99designs launched one-to-one projects for designers who preferred to work with 99designs customers outside of a design contest.

Today, its numbers and strong community vindicate the team’s efforts. “99designs has helped launch careers for aspiring designers, and has helped talented designers find more customers,” says Llewellyn.

Update (April 16, 240pm): A representative from 99designs has clarified that the current round of funding is not a “down round,” and that the company has in fact achieved “a five times uplift on its Series A valuation.”