Mike Samson, Co-Founder of crowdSPRING on Raising Angel Funding [Part 1]

by Wayne Liew

in Biz Brains Exchange

crowdSPRING should not be new among web designers but most of us don’t know the founding story behind the site, which is one of the largest crowdsourcing marketplaces on the Internet.

crowdSPRING Logo

In fact, as a small business owner or an entrepreneur, you must at least pay a visit to crowdSPRING. Here’s why:

Every business needs a refreshing design or copy, whether it is your business logo, letterhead, website, product designs, newsletters, whitepapers or even a brand new banner for a marketing campaign. crowdSPRING, utilizing the power of its designer communities, allows you to adopt only the best design or creative work out of a wide range of work submitted by a large group of creative producers.

This week, I am proud to feature Mike Samson, co-founder of crowdSPRING in a two-part interview series. In the first part below, Mike shared with me how crowdSPRING got started and how he and Ross Kimbarovsky, another co-founder of crowdSPRING, pulled off the stunt of raising $3 million from angel investors to kick their idea off the ground. Enjoy!


Interview with Mike Samson, Co-Founder of crowdSPRING

mike-samson-crowdspring 

Wayne: First of all, I would like to thank you for taking time out to do the interview with me. I really appreciate it.

Mike: You’re very welcome.

What is crowdSPRING and How It Works?

Wayne: For those of us who are constantly connected to the Internet, crowdSPRING is not new but Mike, some of my readers are actually small business owners who are not that savvy when it comes to the Internet. Is it possible for you to make a short introduction of what crowdSPRING is all about and sort of, briefly explain how it works?

Mike: Of course, crowdSPRING is an Internet marketplace for creative services. It is a place for buyers who are looking for design services or writing services to source their creative needs. We use a crowdsourcing model, which means that when buyers come to crowdSPRING, they post their projects, determine how much that they would like to pay, describe what they are looking for and determine how long the projects will last.

Mike: In turn, designers and writers from around the world (we have 73,000 designers and writers that come from 185 different countries), in response to the buyers’ description of their projects, will submit actual work that is created to the buyers’ specification. Not bids, not proposals but the actual designs or the actual written work.

Mike: For instance, Wayne, if you wanted a new logo for Wayne Liew Dot Com, you would come to crowdSPRING, post your project, describe what you’re looking for, what your business is, who your customers are, your audience, your own price and in turn, designers will submit actual logo designs to your specifications. You will have the opportunity to interact with those designers, to give them feedback, and they will revise their designs, iterate and submit new concepts. At the end of the process, you pick the one you like.

Mike: We handle payment, file handling, project management tools and we give you a free legal contract that transfer the rights to the intellectual property to you so you know that you own your design.

How the Idea for crowdSPRING Comes Along?

Wayne: That is actually a pretty great concept and I have been following crowdSPRING since it’s launch date. Prior to this interview, I did some research on both you and Ross and found out that you were in the film and production industry while Ross was a trial attorney. How did both of you meet and where did the idea of crowdSPRING comes along?

Mike: Well, we like to joke that we have rather unusual backgrounds for startup entrepreneurs. Ross and I have known each other for quite a long time. Although Ross wasn’t my attorney, we would talk about our businesses, ventures and so forth often.

Mike: At the time when we first came up with the idea for crowdSPRING, I was still working in the film industry and I was looking to acquire companies in the video and post-production space (editing and motion graphics). I was looking at how, with a creative product or a creative service, a business could leverage outsource so specifically, I was looking at companies in India and looking to outsource video post-production work to India.

Mike: This is primarily because India has a very robust film industry. They have wonderful creative artists, uses the same processes and software that our artists use here in the United States and the labor rates are significantly cheaper so it was really looking at the strategy for lowering prices in the creative industry through outsourcing.

crowdSPRING Co-Founders

Mike: Ross at the time was in a law firm here in Chicago and he was in charge of technology at the law firm. He was the Chairman of their technology committee and one of the things that his committee was doing was having their website redesigned. It turned into a very frustrating process for him. They went through an RFP process, received bids from some important companies that did web design work, chose one of those companies to redesign their website and they were very unhappy with both the results and the process.

Mike: Ross was looking for alternative ways to source web design and he knew what I was working on so he called me one day and said: “I know the outsourcing things that you’re working on are a little different but come meet me for lunch and let’s talk.” That conversation, Wayne, turned into the seed of the idea for crowdSPRING. We started looking at how to source for creative services by accessing talent from around the world via the Internet and the seed of the idea evolved into this crowdsourcing model that we have today.

Group of Malaysian Design Students Inspired crowdSPRING!

Mike: By the way, let me share with you one of our early inspirations when we started doing a lot of research and looking on the Internet for design communities. One of the early inspirations we found was actually a group of design students in Malaysia that had created their own website and they were holding internal contests for design. They are doing their own design challenges, not for money but to help each other and for learning purposes.

Mike: The work was phenomenal and Ross and I were very impressed that a small group of students, halfway around the world, could produce work that was as good as anything that we could locally. It really inspired us to find a way to connect people globally, who are either buying or providing creative services.

Tips on Pitching for Angel Funding

Wayne: Wow, that’s a good story right there. From what I’ve gathered from CrunchBase, which is sort of the Wikipedia for startup companies, you guys raised like $3 million worth of angel funding in 2008 from 16 angel investors. Is that correct?

Mike: That’s correct.

Wayne: $3 million is a lot of money for most entrepreneurs out there. How did both of you manage to pull of a stunt like this?

Mike: When we started thinking about how we wanted to launch this business and how we hope to fund this business, we knew that we wanted it to be a real business. First of all, neither of us are technologists so we didn’t have the skill sets to build the site ourselves, the skills to design the site, the marketing ability to actually build awareness and build a community so we would have to bring people in to help us. All of that meant money and we needed funding to actually get this off the ground and create a business that could hopefully grow to a serious presence on the Internet.

Mike: We basically opened our address books and said: “Each of us knows people so let’s think about how do we reach out to those people and identify potential investors.” But more than anything, Wayne, long before we started doing our funding, we did our homework. Remember, Ross was working full time as an attorney; I was still doing a great deal of consulting work in the film industry so this was sort of a side project for us but we spent six months for doing the research, writing the business plan and building a financial model so by the time we started introducing the idea to investors, we had answers for ourselves the questions that we know the investors were going to ask.

Mike: We thought that we have a very solid proposal. The homework paid off! What it allowed us to do was to convert potential investors pretty quickly. Once we identified a potential investor, we have a very good success rate at converting them and getting them to commit in investing. We were actually able to do our first round funding in about 4 and a half months. We think that was testament both to the power of the idea itself and also to the fact that we really have done our homework, hit on our research and could answer the questions that investors will ask.

Extensive Research Prior to Pitching Investors

Wayne: What kind of research are you referring to when you say you did your homework? Are they on the background of the investors, industries that they are interested in or other things?

Mike: Well, there was that but much more important than that was the business itself and really understanding or having a detailed understanding of the marketplace, the industry, as well as both the buyers and providers that make up the community. We did a lot of research into online communities in general and our competitors (even though at that time, there were no real competitors, at least in terms of creative crowdsourcing).

Mike: There were plenty of other ways that you can go online to get this kind of work done so among the companies that we looked at and researched early on are companies like Elance and Guru, which are marketplaces for freelancers. They use a very traditional model – an RFP model. We looked at all sorts of forums for different industries and different interest groups to understand communities, how communities are built and strengthened. We also looked at providers of the services, designers specifically, and how they were using the Internet to service their services.

Mike: We took that information and built a very extensive financial model. We spent a great deal of time trying to understand how we can make money with this business, how much money would it take to start this business and how long we can survive in this business.

Mike: When I talk about homework, that’s the kind of homework and investors really need that kind of detailed research to make their decision on whether if it’s a good investment for them and whether if they want to take the risk to start. We talk to startup entrepreneurs and young people a great deal about the value of doing the research, doing the homework and how that can pay off in launching a startup.

Wayne: I’m just wondering here. How many angels were pitched by you guys? You know, before it ended with the 16 that actually invested?

Mike: Sure! Well, we have 16 investors, Wayne. We pitched a grand total of 36 people so we converted almost half of the people that we pitched to and they ultimately became committed investors.

Wayne: Other than doing the homework, do you have any other tips on pitching for investment that you would like to share with my readers?

Mike: One of the things I would say is listen to people. All of us, everybody, has a network and both Ross and I had lots of smart people within our networks – people who were not necessarily be investors but people who were very smart, people who understood business, law, marketing and the marketplace. What we would do before we started showing this to investors is we would meet with people, introduce them to this idea and answer their questions.

Mike: Every time we did one of those meetings, they would ask questions that we had a hard time answering, questions that we didn’t necessarily have the answer for or they would find a weakness. We would learn from those conversations and improve on the idea so by the time we got around to introducing the idea to investors, we have already met with many people who had tried as hard as they could to poke holes in our idea.

Mike: We have plugged those holes one at a time so by the time we got to the investors, there were very few questions that hadn’t been asked and answered already. We were very well prepared and our idea was greatly strengthen through that process.

Stay Tuned for Community Building Tips from Mike Samson

There are tons to be learned from Mike. Tomorrow, I will be posting the second part of the interview where Mike shared a lot of tips on community building. Note that on crowdSPRING, there are not only one, but two communities – buyers and creative providers. If you want to learn about community building, there’s no better person to learn from other than Mike himself.

Do you have any questions for Mike? Have you personally tried crowdSPRING before?

Share with us your thoughts and experience with crowdSPRING in the comments section below!

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{ 1 comment }

Martin Beamish December 22, 2011 at 7:45 am

An interesting article. What is not mentioned is that CrowdSpring used 99Designs to create their logo. 99Designs is running the same business model as CS, so the idea was not really that original, in fact their business is a direct copy and competitor to 99Designs.

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