Venturing through Design
Reflections on bringing design to Japanese startups from a venture capitalist
I was trained as a lawyer and had worked for most of my career so far as a management consultant. But since joining D4V (Design for Ventures) and collaborating with IDEO, I have gained new perspectives on how design can create significant impact for businesses.
A recent McKinsey study reported that companies that committed to design principles had 32% more revenue and 56% more total returns to shareholders. In the venture space, the impact of Design is captured nicely by former Kleiner Perkins design partner John Maeda’s annual report called “Design in Tech”. Maeda shares his key observations on the intersection of design and ventures with some notable trends:
- “27 startups that were co-founded by designers were acquired since 2010 by companies like Intuit, Google, Facebook, Adobe, LinkedIn, and Yahoo” (2015)
- “Five (20%) of the top cumulative-funded VC-backed ventures that have raised additional capital since 2013 noted to have designer co-founders” (2015)
- “Designers in VC have increased. More designers entered VC in the last two years than the previous 4 years combined.” (2016)
As noted by Maeda, the role of design has been gradually recognized by venture capital and startup stakeholders in the US over the past few years. However, in Japan, design has not quite penetrated the Japanese startup market to the same level — and therein lies the opportunity for D4V. We believe that D4V is uniquely positioned to utilize design as a differentiator in regard to the Japanese startup ecosystem.
During my last 18 months working at D4V, I have learned a great deal on how to really utilize design to meet the needs of our Japanese startups (a constant evolving prototype on its own!). Below are a set of working principles, inspired by taking on a designer’s mindset. It is something we’re trying to encourage our startups (and ourselves) to adopt and evolve.
- Be user-centered: Be clear about your target user and why they will want your service
It is tempting to say that “everyone” is a target user for your product or service. But define clearly what your target client profile looks like, speak directly to them and find out what it is that they truly desire. When conducting user research, go out and actually talk to them and not just rely on online surveys. Observe them in their native element with which they would be using your product/ service, and let insights from conversations with them guide how you define the opportunity. To make something that people want (to find product-market fit), you need to really understand their lifestyle, and their (unverbalized) needs, frustrations and desires.
2. Constantly prototype: Prototyping is an iterative process
It is never too early, nor too late to prototype an idea. You can test early concepts with simple sketches and use them as a medium for dialogue. By making it tangible, you can introduce it to real users early and frequently. Additionally, prototyping should be seen as continuous experimentation without a specific end date. Check out the following blog and video from IDEO to learn more about prototyping for a service.
3. Tell Meaningful Stories: Communicate clearly your value proposition
Do not forget the importance of clearly communicating to your target audience what you are doing and why it matters. Creating a vivid narrative that sticks will help capture the attention of your target demographic and help with user acquisition. But a clear narrative also helps pull in potential investors, the media and even potential recruits — the support of all of which is needed to help your startup succeed.
How is D4V currently helping startups in our portfolio?
D4V currently supports our startups primarily through 1–2 week long design sprints. For these sprints, D4V brings in IDEO designers to support on a design challenge involving a specific core issue currently faced by our startups. While the role of design is recognized in some markets more than others, here in Japan others still wonder what types of issues could be addressed through a design sprint. To this end, we created and shared a simple slide with our portfolio companies showing a non-exhaustive list of questions that can form a design challenge for a sprint.
In reflecting on some of the more recent sprints with our portfolio companies, here are 3 of my takeaways:
- Address a core business need
In an ideal world, we would like to support all our startups no matter how granular the ask. However, in reality we need to prioritize. Resources are always limited and so devoting time away from regular operations for a sprint is only appropriate when it concerns a core business issue; an issue that if addressed, could create disproportionate impact compared to the time invested. It isn’t enough to say that you would like help to create a new concept video for your product. Rather what is needed is alignment on how this can unlock certain roadblocks, and help pull the startup to where it needs to be for its next value inflection milestone.
Early and constant communication between the capitalist and the startup founders is also required. When our startups take an active role in keeping us abreast of business developments, a design sprint can also be actively proposed by us to address a potential misalignment of a core assumption or value proposition. When properly scoped, taking the time to do a design sprint now, can save the startup time in the long run. Imagine fully building out a product or service to only later recognize a core assumption to be wrong at a much later stage.
2. Align on scope and expected outcomes
Key decision makers from the startup (ideally the founding team) need to be involved when setting the scope of the sprint and participating in key touchpoints to ensure alignment of direction and expected outcomes of the sprint. Furthermore, depending on the scope of the proposed design challenge, some sprints are only appropriate if the startup has an in-house designer. The intention of the sprint is to accelerate our startups and/or supplement their capabilities, not replace the potential need for some startups to have internal design leadership.
When scoping what can be achieved in a 1–2 week-long sprint, it is vital to be clear and realistic with regards to expected outputs. Thus, startups that have at least some internal design capabilities allows the D4V/ IDEO team to (1) collaborate and mentor a startup design team, and perhaps more importantly, (2) ensure that there is a counterpart to whom we can handover the work, such that any finishing touches not originally scoped can be completed and get to see the light of day.
3. Prepare to be agile with regards to the process
Sometimes the work might take us through processes or outcomes that are unexpected for the startup. And that’s OK. For example, when we first decided to collaborate with one of our portfolio companies on the onboarding experience for their service, the team determined that there is a need to re-evaluate their overall value proposition. Similarly, when we were asked to help create a concept video and landing page for another one of our portfolio companies, we realized that the company would benefit from having a brand guideline first that would aid not only on the video and landing page, but future communications as well. “Moving backwards” might feel counterintuitive and scary, for both startups and enterprises alike. However, the team might recognize a need to revisit certain assumptions, and as John Maeda mentioned, the design thinking process requires one to be comfortable with non-linearity
As we continue to support and learn from the startups in our community, D4V will also continue to evolve and prototype our service offering in order to be a progressive value-adding partner for our startups here in Japan.
So please stay tuned! More coming soon!
Vincent
D4V (Design for Ventures) is a venture capital firm in partnership with IDEO
