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The 1M/1M Deal Radar 2011: crowdSPRING, Chicago, Illinois

Posted on Tuesday, Feb 8th 2011

Package design for a new type of potato chip, new pasta shapes, a name for a new building, the next LG cell phone – all are current or past projects on crowdSPRING, which describes itself as “the world’s largest online marketplace for buyers and sellers of crowdsourced creative services.” The designers and writers who join crowdSPRING provide logo, graphic, website, and industrial design; and company names, copywriting, taglines, and other creative services through a competition-inspired model in which they submit posted projects to buyers, who chose the entry they like best. The model has generated controversy, mostly about nonpayment of independent workers, the protection of creatives’ intellectual property, and the idea that companies want professional-quality creative work but are unwilling to pay for it. crowdSPRING says that it is attempting to address these concerns as part of its goal to disrupt old ways of buying creative services and introduce crowdsourcing into mainstream business. 

The Chicago-based company was founded in 2008 by Ross Kimbarovsky, a former trial attorney specializing in business and intellectual property and one of Illinois’ “Forty Under 40″ lawyers to watch, and Mike Samson, an Emmy-winning producer and production manager who worked on movie and TV projects such as “Wall Street,” “Bull Durham,” and “New York Undercover.” Kimbarovsky was leading the redesign of his firm’s website and was not happy with the design submitted after a lengthy RFP. Samson had been wanting to outsource video work, and together they began to think about how they could change the way small and mid-sized businesses buy creative services.

In the traditional model, buyers ask for proposals and creatives submit bids. The buyers then look at the creatives’ portfolios, weigh the bids against one another, and choose a professional to create the design. For small and medium businesses in particular, the cost of hiring a professional or paying an agency’s hourly fee is often beyond what they can afford. Further, companies outside of major metropolitan areas might not have access to as deep a pool of creative talent as their urban counterparts.

Part of crowdSPRING’s goal is to make it easier and more affordable for such businesses to buy creative services. On the crowdSPRING platform, a buyer posts a project and a brief, names his or her price, and creatives submit design ideas. Unlike with some competitors, crowdSPRING requires its members to put up finished designs and not just concepts. crowdSPRING charges a $39 posting fee plus a 15% fee on top of the total award amount. So, if a project award is $400, the total cost to the buyer is $460 plus the $39 posting fee. On average, buyers post logo projects at more than $200. crowdSPRING says that it may help guide buyers, but buyers set the final price.

There is no bidding involved. If a buyer is unsatisfied with any of the final creative choices, crowdSPRING has a 100% buyer satisfaction guarantee polity that allows buyers to get their money back, minus a $39 posting fee. crowdSPRING still pays one creative a winning fee up to $100. There is also a Pro division where project details are not in the public domain. Such projects may require to designers to sign nondisclosure agreements or meet certain citizenship or green card requirements.

On a deeper level, crowdSPRING says that it is helping to level the playing field by giving talented designers and writers all over the world an opportunity to showcase their talent and contribute and communicate their ideas. “By helping creatives reach a new, global market for their creativity, sites like crowdSPRING have challenged the current thinking on where great ideas come from. The truth is that a great idea can come from anyone, anywhere – whether they’re a janitor by day and a designer by night or a stay-at-home mom who doesn’t have the time to run her own Web studio,” say the founders.

crowdSPRING’s general buyer are small businesses; however, mass brands such as Philips Electronics, LG, Starbucks, Barilla Pasta, ConAgra, Air New Zealand, Livestrong, Forbes, and others have begun to use the crowdsourced model. There are also projects from major publishers, authors, and media outlets such as Forbes, Economist, Guy Kawasaki, Random House/Doubleday and McGraw-Hill. The U.S. House of Representatives’ Ways and Means Committee has also used crowdSPRING. The buyer may be any small business, but there are many from the technology, marketing, financial, real estate, consulting, publishing & media, and professional industries. Competitors are numerous and include 99designs, Kluster, CrowdSpirit, and Fellowforce.

As covered last year in the Deal Radar post on 99designs, opposition to spec work (work done without promise of payment) remains. What’s more, nonpayment is still a problem for freelancers: In its 2009 survey of more than 3,000 independent workers, the Freelancers Union reported that 40% of respondents had trouble getting paid. Such problems are certainly not limited to the crowdsourcing model, but crowdSPRING and competitors have been criticized being little more than enablers of spec work. crowdSPRING says that it is serious about attacking problems and protecting members:

“[Before,] you simply paid the hosting site a fee to post your project and you were done. Payment of the winning creative at the end of the project was not only entirely optional, but was also done entirely off site. As you can imagine, because of this, theft of designs was rampant and designers say that over 50% of all projects on these sites went ‘unawarded’ – meaning that hundreds of designs were submitted and then no one was ever contacted to buy the rights to those designs. This was not only wrong but illegal, and we vowed to change that. We launched our service and required buyers to pay up front for every project and then we hold those funds in escrow until the end. This was an industry first and the entire industry, including 99designs, has now followed suit.”

crowdSPRING also says that it is tougher than competitors in helping creatives protect their ideas. It does not use template-based fill-in-the-blank contracts, which it calls inadequate and useless, and opts for customized contracts that take into account the country of origin of both parties and the type of work being done.

As Mark Glaser of MediaShift points out, crowdSPRING is not for every designer, writer, or business. But there are many who have found it a good solution. To date, the more than 83,000 creatives on crowdSPRING have completed about 18,500 projects, and the site has more than 25,000 registered buyers. The company has also worked with major agencies such as Crispin Porter + Bogusky, Element79, Bartle Bogle Hegarty, and DraftFCB, which have hosted projects on the site and collaborated with crowdSPRING on projects.

The company raised $3 million from 16 angels in 2007. It is profitable, with revenues ranging from $5 million to $10 million, and is not seeking funding at this point.

crowdSPRING added more writing services to its offerings in May 2010. Its plans to continue to grow and take advantage of the increasing use of crowdsourcing by professionals, businesses, and governments. There are no specific plans for an exit – crowdSPRING took the angel funding it did because it wanted investors who were comfortable in helping to build a business.

Recommended Readings
The 1M/1M Incubation Radar: CrowdEngineering
The Crowdsourcing Dilemma, an interview with Mike Samson broadcast on National Public Radio’s On The Media show, and a response from Steve Douglas of The Logo Factory blog

This segment is a part in the series : The 1M/1M Deal Radar 2011

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Nice view on crowdSPRING. Also its good to see perspective from both angles.

Manik Tuesday, February 8, 2011 at 9:19 PM PT
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