Image Courtesy of Flynn Talbot

Screening and evaluating early-stage investment opportunities from a design perspective.

Ekaterina Gianelli
Oct 19, 2016 · 6 min read

To evaluate a potential investment opportunity, every VC firm typically runs due diligence — a process to determine whether or not to invest in the company and at which valuation. While technical, financial and legal stages of the due diligence process are already widely used in the industry, design due diligence hasn’t taken off yet. Many still focus on product functionality, and underestimate the value of design in the process of building a business.

For us, design due diligence is a process that aims at: a) identifying key risks and opportunities related to the adoption of design thinking in the company and b) developing a plan to mitigate these risks and develop design culture further.

Instead of just focusing on the look, feel and functionality of the product, we want to understand the company’s relationship to design. We believe that today more value is created by designers than ever before. Companies that struggle with design are more likely to have challenges attracting and retaining customers. We also want to understand the potential of design to increase the value of the business (and respectively our investment). Can we help the team improve by crystallising their vision? Or by involving more people in the design process? Or by introducing service design methods?

As part of design due diligence, we investigate the key elements of any successful company from a design perspective — 1) the context, 2) the team, 3) the processes, and 4) the user experience — to be able to make a more informed and objective investment decision.

Design due diligence could be conducted at the earliest stages of the investment process (e.g. screening stage, follow up meetings), or later on in the discussion. The list of questions below serves as a checklist when evaluating the potential investment opportunities (some of them might be overlapping with tech or financial stages of the process).

This framework could be used by any member of a VC firm, not only designers. At the same time, it might be a good idea to get familiar with the methods and tools that service design has to offer. Ideally, you would also involve a designer in the process or add one to your team, as there are many ways a designer can help in evaluating potential investments.

1. Understanding the context

Many startups fail, because the problems they are solving aren’t big enough. That’s why we start with assessing the opportunity, understanding the market trends supporting it, and studying the competition.

We look for founders with a strong vision that they can communicate to their team, investors, and customers. Design can help them crystallise their vision and turn it into an attractive service, but if the vision isn’t compelling enough there is not much value design can add.

  • What is the vision of the founders? Is the story attractive enough?
  • Can they clearly communicate it?
  • What are the trends supporting the vision?
  • What are the needs of potential customers addressed by the trends? (e.g. entertainment, security, self-improvement, recognition)
  • Why are these trends emerging now (and not earlier)?
  • Are there competing solutions? How are they supported by the trends?
  • How can design help the company achieve the vision?

Talk to: Industry experts to better understand the trends and dynamics in the sector, and to validate the opportunity.

Look at: Competitive landscape. You can turn to consumer trend canvas to better understand how market trends can support the vision of the founders.

2. Understanding the team

People are at the heart of any business. Their thinking and execution capabilities define the potential of the business to succeed. Therefore, it’s crucial for us to understand the team’s relationship to design. First, we want to get to know the founders better. What motivates them? Do they understand the value design can add? Are they able to attract a diverse team around them?

Then, we talk to designers in the team to find out if they feel happy and inspired. The lack of empowerment among the design team often indicates leadership and communication challenges in the company (as pointed out by Irene Au in her article about design team morale).

  • What is the background of the founders?
  • What is their leadership style? Do they lead by example?
  • Can they attract the best talent available in the market?
  • Do they understand the value of design? Have they been able to execute?
  • Are they open for feedback and new ideas?
  • How deep is design embedded in the company? (not at all, outsourced, employee level, management level, founders level, everyone)
  • How involved are designers in product development? (executing based on founders’ requests, part of the product team, in charge of the product)
  • How diverse is the team today?
  • Are they aligned to a common vision?
  • What are their key KPIs? Are they incentivized on customer satisfaction?

Talk to: a) Designers in the team to see if they happy and empowered. b) Get references on the founders to understand their leadership style.

Look at: Personnel incentive programs. You might also want to join some of their internal workshops or product planning meetings to see if there is a strong collaboration culture in the company.

3. Understanding the processes, methods and tools

The way things are run in the company can often tell us much more than the current version of the product. When we look at the processes established in the company, we want to understand if the company is customer-centric, collaborative and agile. We love seeing the companies that are not only good in design thinking, but also in design execution.

  • How well does the team understand their customers?
  • How are users involved in product development (not at all, asked for feedback, tracked online, observed, co-creating with the company)?
  • Do they use any service design methods & tools?
  • How does the company carries out user research? How do they evaluate user experience (field studies, surveys, user tracking, A/B testing)?
  • How do they make decisions (based on their own opinion, based on customer feedback, data-driven)?
  • What do they optimize for (speed, quality)?

Talk to: Design and product teams to understand how customer feedback and customer behaviour data is being used in product development. Do they know how to remove their assumptions using data?

Look at: Results of user studies, analytics, product/service prototypes. GV provides an awesome guide to design research that might be useful to evaluate the processes established in the company.

4. Understanding the users and user experience

Many startups pay too much attention to developing their own technology instead of focusing on their customers. It’s important for us to see that the team has a good understanding of the customers, their user journey and their current experience with the product.

  • Who are the (potential) customers (personas, demographics, segments)? Can selected customer segments have high business impact?
  • How do the customers solve the problem today? How do they make decision to purchase?
  • Will the company be able to convince the customers with their story?
  • What is the current offering of the company? Does it serve the need?
  • What is the customer experience today? Is there an alignment?
  • What are the areas of strength and weakness? Is there an actionable plan for improvement?
  • Does the team know how to grow the number of engaged customers?

Talk to: Existing customers to understand their experience with the company. How could they be served better? Have they recommended the product to their network?

Look at: DAU/WAU/MAU, customer engagement, NPS, product roadmap, retention, cohort performance. You can use personas, customer journey, service blueprint, and The Love Index by Fjord to support your evaluation.

To sum up

When screening and evaluating potential investment opportunities, pay attention to the four key elements of any successful company — the context, the team, the processes, and finally the user experience. Either one of them will only tell you a part of the story. Startups that can demonstrate solid understanding of all the four areas can unlock the full potential of design to build a successful business.

Once the design due diligence process is complete, you will have a good understanding of the role of design in the company, and a list of potentials risks and opportunities. Based on this list, you could help the company develop the design culture further.

If you have any questions about our design due diligence process, I’d love to hear from you. Do get in touch at

Ekaterina Gianelli

Written by

Passionate about #design, #technology, #digitalhealth. Early-stage VC at @InventureVC, previously design agency @Fjord & adtech startup @Kiosked.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade