Yesterday I was listening to an interview where Ron Morris, The American Entrepreneur interviewed Matt Mickiewicz the co-founder and CEO of 99Designs.com. Matt’s story is quite incredible. He’s currently 27 years old, lives in Vancouver where he grew up, and owns 3 businesses. The 2nd business, 99Designs.com does about $1 million in revenue per month already and was founded in February 2008. It also has 78,000 designers around the world who “compete” against one another through a process called Crowdsourcing. If you’ve never heard of it, here’s how it works:
- A business person logs onto the website and says he has a design project for a website, logo, brochures, graphics or just about anything else. He dictates how much he can afford and a deadline for submission.
- 78,000 designers and members of the site (only 60% are from the US) can now accept the project, create a design, and submit it.
- The business person will now have generally 99 options to choose from and 99Designs.com automatically facilitates the payment to the designer.
For the designer, he now has a potential customer. For the business person, he now has the best possible design at the best possible price and potentially a long-term relationship with a designer he knows does great work.
So how did a 27 year old from Vancouver come up with this? It started when he was 14 and decided to start learning about websites… He started designing websites for local businesses and eventually created a site that offered marketing services to all of the Dot Com companies popping up all over the place in the late 90’s. As Ron puts it, he was selling shovels to the gold diggers during a gold rush. He was still in High School at this time and was bringing in 6-figures… He did point out, however, that he was taking too much time to grow his business and so was never a real good student. Sounds like Thomas Stanley’s profile of a millionaire held true for Matt…
After the Dot Com bubble burst, Matt and his partner started writing articles about website design, html, php and other areas related to web design. Initially he gave everything away for free but one day decided to try to see if he printed and bound their advice if people would pay $35 for that service. He sold 20,000 copies of that first online book and has since sold hundreds of thousands of copies of their many books. That website is still online and profitable at Sitepoint.com.
99Designs.com was actually an accident. Matt and his co-founder of Sitepoint.com stole the idea from someone who came onto one of their forums and said, I need a logo and I’ll pay $100 to whoever designs the best one. Since Matt already had his tribe of followers, they created the website for 99Designs and it immediately took off. He tells the story in more detail in the interview so you listen to the entire interview if you want more details.
Today I finished reading Delivering Happiness: A Path to Profits, Passion, and Purpose, which is Tony Hsieh’s book about his life and how he grew LinkExchange to sell for $265 million in less than 3 years and then grew Zappos.com from zero to $1 billion in sales in 10 years. Moreover, after telling his story, he talks about his purpose in life now as CEO of Zappos.com to help other companies develop a culture of happiness like he has done with Zappos.com. For a current business owner, that final section of the book is the most interesting and valuable but is beyond the scope of this blog…
What was most interesting to me about Matt and Tony was that they were entrepreneurs from the beginning… Tony says he was always fascinated with making money and discussed his first button-making business in middle school through his restaurant at Harvard and the businesses discussed above. One way or another, Tony was going to figure out a way to make a lot of money. And considering he’s worth a few hundred million today at the age of 36, I’d say he succeeded…. Along the way he discovered he didn’t really want or need all that money but you’ll have to read the book to fully appreciate his whole story…
Viral Loop talks about Hotmail, Facebook, Myspace, Twitter and a dozen other companies that grew to hundred million or billion dollar entities in a very short time… The stories are amazing and inspirational but can also be quite detrimental… How can such remarkable stories be detrimental? Well that depends on what you learn from them.
There are nearly 13 billion websites in the world and all of the ones I’ve mentioned are in the top 1000 (99Designs.com is still relatively small but is currently ranked 2561). That’s the top .0000077% of websites. That’s a whole lot of zeroes. I point this out because none of these current businesses (aside from maybe Hotmail) had any vision of how huge they would be or how much they could potentially be worth when they got started. Why not? Because no one knows exactly what the customer wants except the customer. No one can predict exactly what is going to make money online.
If you’re an entrepreneur and starting a business and trying to create something to compete with a major online retailer keep in mind that you have a .016% chance of getting struck by lightning at some point in your life. In other words, you’re 2078 times more likely to get struck by lightning than to create a top 1,000 website. Granted, creating a major online presence is more than just luck as is getting struck by lightning, but it’s still a tough business to plan.
So let me ask you, do you have the next multi-billion dollar internet idea? Even if you did, you probably wouldn’t know it. Moreover, sometimes internet billions take $10’s of millions of dollars in funding and 3-4 years of unprofitability as Zappos.com, Yahoo.com, and Amazon.com all required. Without a millionaire such as Tony Hseih to back your idea, now what are your chances at success?
The point is you can learn a TON from these and other stories of internet riches and you should always work on those crazy ideas just in case you do have the ability to become the next Mark Zuckerberg or Tom Anderson or Sergey Brin or Jeff Besos or Tony Hseih.
If going for an internet business, the chances of creating a business the size of Matt’s ($12 million dollars per year) is much better, however 99Designs.com is also a top ranked website at 2561. More importantly, it took him over 10 years to build a following so that when the idea for 99Designs.com came up, he instantly had customers and designers… That’s a long time to build a following without even knowing how you’re going to profit from them. So what can you do in the mean time to create an income and some time?
You know the answer already don’t you?
You start buying, building, and selling businesses. Every time you go through that cycle you’ll hopefully upgrade to a larger business with more cashflow. It doesn’t matter if the businesses are internet or brick-and-mortar based, either. As a matter of fact, even Tony Hseih got involved only after the original founder of Zappos proved that people were interested in buying shoes online. Buying an existing business takes out much of the guessing work that a start-up has such as:
- Will anyone want this product?
- How much will they be willing to pay for it?
- At those prices can we make money?
- Will our business model and structure prove profitable?
- What’s the potential size of our market?
- How easy will it be for competitors to copy me?
- How much will staff, insurance, and overhead cost and will it all be scalable?
And on and on and on… You can’t answer a single one of those questions definitively about a start-up but with an existing business you can answer those and dozens more because someone else already has been answering those questions to stay in business. This can help you to determine more precisely what you’re getting in to and how much you can grow the business. More importantly, with creative financing, you won’t need to rely on Venture Capitalists.
The other major lesson that Tony’s book taught me was, whether you’re running a business that does $1 million or $1 billion in sales per year, the rules are the same. Tony outlines mistake after mistake that he and his leaders made at both LinkExchange and Zappos.com. As I was reading the book I was literally getting upset thinking, “No, that’s not how you run a business!” I’m not saying that because I’m better or smarter than Tony however, many, if not all, of those mistakes can be learned with a smaller business. How do I know this? Because I’ve made many of the same so when I was getting upset it was partially because I could feel his pain. 🙂
The final major lesson was that when you have a strong business model, if you can scale it and become a leader online to a worldwide market your growth is almost limitless. Figure out how to do that and I’ll be reading a book about you.
My final thoughts are simply:
- If at first you don’t succeed, try another business
- Learn how to build a business
- Learn how to grow your business online
- Keep working on those one in a billion side ideas just in case you really do have a good one
To your entrepreneurial success, Bryan
P.S. What Tony has done with his team culture, something I blogged about over 2 years ago before ever hearing of Zappos.com, is quite remarkable so you’ll be sure to learn a lot from Delivering Happiness.