The Venture Capital, the Startup and the Designer. The most beautiful love story ever told.
An alternative title could be “I’m a designer and I want to move into Venture Capital”.
This is a story with three protagonists: the European VC, the Early Stage Startup ($3mil to $15mil valuation) and the Designer.
Once upon a time a VC fall in love with an Early Stage Startup.
Venture Capital is a people business. One of the main criteria in the evaluation is the quality of the team and their track record.
VC asks Founder:
How much experience do you have in the industry?
Do you have good connections?
Do you have leadership experience?
Do you have a great team that a larger company might want to acquire, even if the startup’s product is a failure?
Did you start companies in the past?
There are other criterias that the VC learns from experience.
Consumer startup valuation is tied to number of users and user engagement.
Enterprise startup valuation is tied to market size, revenue and customer acquisition.
VC would like to ask Founder some delicate questions:
How are your competitors and do you have special competitive advantages?
At what stage is your product?
Do you have any sort of traction? Can you show growth?
Do you make any revenue?
…but love is a path of faith. Founder, even though he is keen to show his ambition, doesn’t really have historic data. His hypotheses still need to be validated and growth is tangible but not a graceful curve across time.
VC trusted his capacity to judge Founder from first impressions but this stopped VC from learning.
VC used to look at his portfolio of Startups. He was proud of the business and technology skills that he managed to accumulate. Everybody knew that to build a successful tech company you need CTOs and MBAs.
The solution to each new problem in tech was linear: more tech, more process and more features.
But something happened that changed the situation: silently design was taking over Silicon Valley. The coincidence that Vimeo, YouTube, Path, Etsy, Airbnb and Instagram had designer founders became such an evident pattern, the tech myth of Moore’s Law was compromised: the creation of value is not anymore related with the computing power.
The distinguishing factor, of the brightest technology companies, is in the ways they enable users to do simple tasks in a exciting new way. There is nothing special in sharing images online but three Startups accomplished this task adding a new meaning:
Instagram simplified our social relations
Pinterest made our knowledge shareable
Snapchat created ephemeral experience rather than a permanent one
VC suddenly looked around and realised that the context had changed from what it used to be:
Thirteen of the 2014 Fortune 125 companies have executive-level positions or CEOs supporting design.
Seven startups that were co-founded by designers have been acquired.
Six venture capital firms invited designers onto their teams.
Five startups co-founded by designers have raised more than $2.75 billion.
Nine design consultancy firms have been acquired by technology companies including Facebook, Flextronics and Google.
Designer started to walk hand in hand with VC.
Real love can make every moment special, and VC met Designer.
Design plays a key role in economic and social value creation but there is no one-size-fits-all process; VC realised that design principles are modular and they can be applied to different stages of the startup journey. It’s no surprise, that design methodologies quickly found their way into startup letterature. Founders started reading about customer development, lean canvas and fast iterations design cycles. Slowly, VC started to use design patterns to cope with uncertainty.
Startup now has design support on top of advice, network and funds and Designer helps VC:
In London, there is a short supply of talented designers to support the growth. Designer can help with the screening and the recruiting strategies.
To run due diligence
Financial investment is a risky business and design research can mitigate risk. Designers have unique skills in understanding human needs and discovering unarticulated opportunities.
To work side-by-side with Startup using collaborative design patterns.
Designer is a facilitator who builds things. He runs workshops to understand problems and empathise with the users. He defines and synthesise the findings, generate ideas that go behind an obvious solution. Designer build prototype fast to facilitate better understanding, collect feedback and reframe the problem.
If Design has been around for such a long time, why are we talking about it now?
The answer is that design matters now more than ever. These days, design is everywhere, it’s inclusive and people don’t buy tech without design. The entire technology industry is drowning in the complexity of ubiquitous computing and good design is the only differentiator.
There is no way back: Designers, Founders and VCs will live happily ever after.
I’m a designer, moving up and down the product stack crossing design, technology and business strategy. I’m on a mission to help VCs and Startups.