Interview with Erik Sandsmark founder of Graphiq
By: Anton Koval
Tags: Startup, Mvp Development, Interview, Marketplaces, Bootstrap

I have stumbled upon a text about Graphiq on Zapier. It told a story of a marketplace that was built using Zapier as well as some other tools. Erik is a co-founder of Graphiq, a B2B marketplace that connects designers with companies.

Graphiq is considered as a concierge or a closed marketplace. You may wonder what does this mean? This means that there is no discovery or search function on the platform, each designer is matched with the company manually.

This type of approach is used by marketplaces during the transition period where they validate the model before they move to automatic discovery and matching. Graphiq was able to build their whole business model on the concierge marketplace and turned this approach into their advantage. Enjoy.

Anton: Tell us about Graphiq. Could you please tell me a few words about the company?

Erik: We can say that we are a sort of a concierge marketplace. We are from Norway and our company was founded in 2015 with my co-founder Jacob. The reason we started Graphiq is that I’m a designer. I used to work as a freelancer and Jacob used to work as a consultant, he was also trying to hire several freelance designers. We both experienced all the problems associated with that process. We carried out research and we found that (at least in Norway) there was no good solution for this specific problem, so… we decided to fix it!

Since then, it became a much bigger vision because we now see a huge global trend of people working freelance and companies working with a distributed workforce where not everybody is hired within the company. Large corporations work with people outside of their companies from all over the world. Some people call it the new industrial revolution of work and I agree with that. I think that we have to rethink the way we look at work. We call it a “new way of working”.

Now, our bold vision is to build a global digital infrastructure to support this new way of working, hence we are starting with the creative and design industry. This is a pretty mature market since there are a lot of freelancers already working in this space, and we don’t see why we shouldn’t go into different categories over time.

Anton: How did you meet with your co-founder?

Erik: My co-founder and I went to the same Technical University in Trondheim, which is the biggest university in Norway. We took a master’s degree in entrepreneurship, it’s a renowned degree called School of Entrepreneurship. The great thing about it is that on one hand, you take a lot of courses as a normal student however you’re also supposed to actually start a start-up while you are attending the school with the help of an incubator program.

We started with a different business for the first year which we decided to not follow through. The main reason was that in this other startup we were a bigger team with more people. After six months, Jacob and I figured out that we really work well together and could do more things faster. The previous team was just a bit crowded to build an agile startup in my opinion.

Anton: At what stage are you currently and how did you validate your idea?

Erik: I would say that we are beyond the MVP. First of all, we built an MVP in eight days and had the first sale in two days. Basically, after 10 days from the start, we had the first MVP out, and we had the first customer. At that time we saw that we have something of value. I wouldn’t call this product-market fit but it might be a product customer fit. We have a product that at least one customer would buy.

Then about 6 months later we landed the first big client and that was kind of the next big step. Still, I wouldn’t say we achieved the product-market fit but rather a product large customer fit. The third time we figured out we had something of value was when people started coming back to us in a year after we started. We observed that several clients were coming back to us for more projects.

We started seeing that we had something that looked like a product-market fit. Today I would say we’re at step 4 where we have a sales funnel with a positive ROI some like VC funds are calling this a channel market fit. It means that it’s working on the market, and we are starting to figure out how to make it scalable.

Anton: How did you find your first designers and how did you onboard them on your platform?

Erik: As I told you where I’m a designer myself therefore at first, I offered my services! The t 10–15 designers we had on our page were mainly from my network, student class. We also had a PR article in the newspaper in Norway specifically for designers that boosted a lot of interest in our service and suddenly we had 50 people signing up for our service. This is how we got our initial supply.

Anton: Are you now working only with designers based in Norway or is this a global network?

Erik: We decided at the beginning that we didn’t want to be like other marketplaces connecting people from low-cost countries with high-paying clients. We saw a need for clients in the Norwegian market to be connected with Norwegian designers. So today about 80% of our clients are Norwegian and 80% of our designers are Norwegian with the rest being from outside but our mission is to be a global company. We are going to do the connections locally because we see a lot of people that want to have a local connection due to language, currency, cultural fit,and understanding.

Anton: How does your business model work?

Erik: I would say that in a way we’re not a traditional marketplace because we are more like to straight value chain because we invoice the client and then the designer invoices us so it’s not the transaction between the client and the designer where we take a cut out of it.

It is actually a transaction between us and the clients and then the designers and us. However, you can compare it to a commission fee. That is how we earn money. Also, there are no subscription fees no set up fees,etc.

Anton: How do you make sure that they trust you and what is your value proposition for the designers?

Erik: Good question. Our first model was a more open marketplace where designers can register their profile and you as a client can see all of them and contact whoever you wanted. That was the first version of our product. There we saw some issues with clients trying to bypass the service in order not to pay the fees.

After we pivoted to a more concierge type of service, we had no problems with the clients trying to bypass our services. We bring so much value to the process and the client just trusts us to connect them with the right person.

Sometimes they don’t even know who is the person doing the job, but they trust us, and they believe in our process. So you could compare us to a more traditional agency in the way clients act with us. Let’s imagine, if I was to hire a developer from Braincode, I wouldn’t try to say to him: “hey, let’s make our own deal”.

Anton: That happens anyway… Do you provide some other project or product management for the client or you only match them with designers?

Erik: We do provide some project management. First and foremost in the first step, we will help the client with a brief. We have done over a thousand projects, so we know how to scope the project. Once the brief is created, we help the designer to create a proposal. In many instances, we actually create a proposal for the designer, and he just says “Yes, I agree, this seems good”.

So we take a big part at the beginning of the project but when the project is in process and when the proposal is accepted, we leave the project management to the designer. The reason for that is that the designer wants to have direct communication with the client, and we also see a big success when the client talks directly to the person doing the job. After that, we just act as support in case something happens or if there are some legal issues. So we are quite active, but we’re not the project manager during the project.

Anton: What happens if the company doesn’t like the design? This is especially important in design, because it may be very subjective and guided by emotions.

Erik: I would say first and foremost our client base are mostly corporate and serious clients, and they are a bit less emotionally attached to the project, then maybe if we were to work with startups. That doesn’t mean design does not have an emotional aspect, it obviously does.

Large corporate clients are more understanding. For them, it doesn’t really matter if I, as a corporate client, like the design or not. The most important part is whether the design is doing a job for their end customers. If I’m creating a website, it’s not me that has to understand and like the website, it’s my clients. We are really trying to explain that design is not really some kind of art, but it is a business function, and we are really serious about getting that out to both clients and designers sides. That should remove the emotional attachments but obviously, they are still there.

We deal with that in two ways. Firstly, we have rounds of iterations so you always have the possibility to change the direction if you don’t like the work. Secondly, before the start, the client always sees the designers’ portfolio, so they can get the feeling of whether this designer will be the perfect match for this project or not. We always do thorough testing before selecting designers that should match clients’ needs. We had this problem one or two times — the client wasn’t really happy with the results, so we just changed the designer for a different one.

Anton: Is this some kind of project work or is this like hourly pay as you go?

Erik: It is mostly project work because we believe in scooping up the project and giving it a fixed project price.

Anton: Wow, that’s a tricky one!

Erik: Yeah it’s quite bold but it actually works well for us. We have some ongoing hourly projects but that is for a really long relationship we have with a client that basically rents the designer from us. These are the relationships that last for more than 1 year so it’s almost like a hire. So we either try to do a specific project for a fixed price or do something more like a long-term engagement.

Anton: As you said your customers are mainly large corporate customers?

Erik: That’s true. The main reason is that obviously, they are the ones who have a lot of projects so it’s more valuable to us. Also, we see that working with startups is much more difficult. We are a startup ourselves so we are really aware of it. Generally, they are more indecisive, have lower budgets, and are more difficult to work with because they are very emotionally attached to their businesses. We really want to pay our designers what they deserve, so we don’t take on jobs that are not well paid.

Anton: How do you sell to large companies? From what I know, to get an enterprise client it is not enough to have just marketing, SEO optimization,and remarketing. You need guys who will knock on door, write dozens of emails,and do the calling. Do you have a sales team that’s actively reaching out to companies?

Erik: We actually don’t do any marketing, and we don’t have a marketing department! We just pick up the phone and go to meetings. Old school sales model actually works really well for us. Of course, marketing is important, and we will definitely be focused more on marketing in the future. However, to get those large clients you have to do the calling as you said, but the other great thing about it is that you learn so much about the client when you talk to them directly and come to the meeting.

This is much more difficult to learn when you just do the marketing because you don’t get direct feedback. I think we’ve learned a lot on how to find our product-market fit by actually being really close, on the phone, in the meeting with our clients both before and after they buy our product.

Anton: Did you have any tough moments?

Erik: Running a startup is always tough. The hardest part is always getting the funding. We got customers from day one, but you obviously need some funding as well. The problem with getting customers from day one is that you have to handle customers and operations while you are trying to build the product and the team.

That balance has been really hard for us all the way, so we always had 50% of our time used on operations and the other 50% used on building a company. This is a tough nut to crack but I think we came up with our heads up high even though it has been a lot of work. I wouldn’t say we had really low points or specific moments when things were going terrible but it’s been a tough ride.

Anton: Do you still use Zapier for all the automation tools or are you building a custom platform?

Erik: We are not using Zapier at all at this moment. That said for almost two years our product was Zapier, Slack, Typeform, and Hubspot with a bunch of other tools sewn together. Right before Christmas in November (2018) we launched our own platform built on all the things we had learned from what we called the “MVP with Zapier” for almost two years.

It obviously did something a bit different but it was almost the same client journey or the same user flows that were tightly linked into one custom product which obviously made the UX for both the designer and clients better. It also makes us a lot more scalable and removes a lot of administrative work and gives us the possibility to make the next step.

Anton: So Zapier was a kind of wireframe and once you tested all of it you could build the real platform?

Erik: Very good way to say it. It was a prototype for us. We were able to design and build the product using Zapier and some other tools. After a lot of iterations, we could say: ‘okay this is finally a prototype that we are happy with’. Then we took the next big step — we hired a developer. We actually worked with developers from Poland!

It took us a year to build our own platform and now it’s live and working. I would not recommend people building their own software as the first thing that they do. If you spend a whole year on building software and you don’t know if that’s going to work or not, it’s almost certainly a bad investment. Instead, we went for the MVP prototype way first. We took it really seriously and didn’t build anything before we were 100% sure that this is what is going to work.

Anton: I think this is a very good approach. Are you guys bootstrapped or you have some financing?

Erik: We have been bootstrapped for a long time, then we got into one round of equity funding with some prominent Norwegian investors. Now, since everything is working well and our traction numbers are going well, we plan on making a larger round of funding next year. This will allow us to take our model to other countries, so if there are any investors reading this, don’t hesitate to get in touch with me, I’ll get back to you!

Anton: What are your plans for expansion into different countries? Do you want to match local customers with local designers the same way you do in Norway?

Erik: We want to match locally. In the Nordics, it’s quite easy to connect Swedish designers with Norwegian clients but we want to do the local connection. The way we are going to scale this is that now that we are confident we can sell using our method in Sweden, Denmark and Finland probably in the same way.

Nevertheless, it might be different in Poland and Germany. I think that with proper funding we would be able to scale in those markets. The US is also a fascinating market for us as well. This year we will enter other Nordic markets. Next year we will probably try to focus on a bigger market, like the US or Germany.

Anton: What are the key metrics that you keep track of?

Erik: We are really revenue-driven. We have clear revenue goals each month so that is our north star metric as you would say. We also keep track of our conversion rates. Since we use the old school sales model, we have a well-defined lead funnel all the way from taking the first call, through meetings up to the first projects. The third important metric is the NPS score — how happy our clients are from using our service.

We are looked upon as those who work in the old school way. I think startups really have to understand that if you’re in the B2B segments you should often postpone many of the marketing efforts you do and go really into just picking up the phone and doing it the old school way. We learned so much and it gave us a great return on our investment.

For us, spending 3 hours doing cold calling can lead to better results rather than spending this time on, for example, optimizing Facebook campaigns. I’m sure that this is adaptable to many other B2B cases and I know that a lot of startups in Norway put more effort into looking for these quick growth hacks, while actually they should just pick up the phone and talk to clients.

Anton: Like in the movie “The Wolf of Wall Street” Jordan Belfort said, “Pick up the phone and start dialing”. Do you use any other ways of reaching customers like cold emails or LinkedIn?

Erik: For now we are almost only focusing on calls. Our policy is that we want to talk with the person on the phone first, after that we usually send an email. During the call, we try to qualify the customer — should we have a meeting or not? If we’re able to qualify them straight away and they are interested in attending the meeting, we usually try to set up a meeting on the phone. If they’re not quite clear at the beginning, firstly we send them an email. Sometimes it takes a bit of email exchange before we can successfully book a meeting.

Anton: Did you have any problems at the beginning with talking to enterprise businesses and dealing with large contracts, long negotiations, and tenders?

Erik: This is a fun story! We actually found our first large client really fast. It happened while we were still attending the University. I don’t remember exactly how it happened, but there was this innovative lady in one large company. She found our service and she needed a designer for her project. We had a meeting, and we were able to convince her that we would find the perfect fit for her job, and we did. So our first experience with a large client went really well!

In many cases, if the client is ready to do the project, the whole process can go very fast, and sometimes we are able to bypass big contacts. Obviously, with big corporates, you have to have tender agreements so some of them take a lot of time. When I say that we target corporate clients, our main customer base are companies just beneath the biggest corporations. They don’t have very large businesses where a project manager or marketing manager can make the decision of buying a project on phone instead of having to talk to the finance department.

Anton: What would be your message for other startup people who are building their marketplaces?

Erik: Pick up the phone and start dialing!

Anton: Erik thanks for your time and a great story. I think it can be very inspiring.

Erik: Sure, it was a pleasure.