Venture Capital In The Age of Design
Is It Time For VCs To Get Designers Onboard?
We live in the age of design. Many understand that design has become one of the biggest factors in venture-funded success stories. Companies that struggle with design are likely to have challenges attracting & retaining customers. According to the data from the Design Management Institute, design-driven startups have outperformmed their peers by 228%. Many other studies prove that every $1 spent on design brings $2–100 in return.
Designers have already made their way into many corporations and a growing number of startups, but VCs haven’t picked up on the trend yet. While it seems natural that VCs should start adding designers to their investment teams, today’s reality is very different.
Certainly, some VCs have already recognised design as a competitive advantage. The last five years have seen an increasing number of US-based funds turning to design to guide their investments —Google Ventures, KPCB, Khosla Ventures, and True Ventures all added multiple designers to their teams (as explained in Marc Wilson’s brilliant article on Co.Design). There are also first initiatives to encorage more designers to become entrepreneurs. For example, San Francisco-based Designer Fund, a community of angels and mentors, makes seed investments in design-led startups. However, the speed of change is still very slow.
European VCs are lagging behind their US peers with no design experience in their investment teams.
Late 2015, the team at TechStars Berlin published a great overview of 300+ European investors joining Seed, Series A or Series B rounds. These investors manage more than €15 billion of capital to be invested in European startups. Reviewing the backgrounds of their team members, one could easily notice there weren’t any designers onboard. Which means no design competence in European VCs to help us lead €15 billion+ of investments. Quite alarming, isn’t it?
Why aren’t there more venture capital firms that turn to design to guide their investments? The resistance to design might be caused by the lack of urgency, the lack of the necessary skill, or a combination of the above.
Design Partner is a fairly new position, established around 2010 (when Braden Kowitz was the first designer to join Google Ventures as Design Partner). It’s not a surprise that only a few could adopt it during the past 5 years — due to the nature of the business, experiments in VCs aren’t easy. Typically, one has to stick to the same team for 10 years. While research proves that diverse teams are both more creative & more profitable, working with people one knows and understands is a lot more comfortable.
At the same time, the European VC landscape is changing. Increased competition is the best thing happening to Europe today, as many VCs are forced to differentiate. Along with many new funds come new approaches to investing. In addition to bankers, consultants and technologists come entrepreneurs, marketers and data scientists. Next, we could be seeing more designers.
Change can take many forms. There are already different accelerators, providing mentorship on design-related topics. There are seed VCs supporting startups with design — either as their core added value (e.g.London-based Proxy Ventures), or alongside other “services” (e.g.Helsinki-based Reaktor Ventures). Finally, there is the first Design Partner onboard a European VC — Ted Persson, co-founder of the digital agency Great Works, joined Stockholm-based EQT Ventures earlier this year. Soon, I’m expecting to see many more designers around.
The best designers could be truly spectacular, both for their investors and for the entrepreneurs with whom they partner. Despite there is still little data available to prove that a designer can improve a performance of a VC, I believe that using their skills in the area of venture capital is one of the best ways to bring smart money into the European tech ecosystem.
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I’d love to hear of any other initiatives or designers in the European VC landscape — I hope there are more than I’m aware of. So do leave your comment here or drop me a line ekaterina@inventure.fi.
