Bruce Nussbaum, in a businessweek.com article today, is calling it Venture Capital Design, I prefer Venture Design Capital. The investment of design capital, rather than financial capital into a venture deal.
Since the dawn of our industry in the 1940s and 1950s the business model has been pretty consistent and fairly straightforward. Package design firms waited patiently for the phone to ring. And when it did there was, on occasion, a client asking that we bring their idea to life with some design support. Simple.
The design firm created some great work, and the client was happy. If it was a good idea, the client lived happily ever after, and the designer went back to their desk to wait for the phone to ring. Again, simple.
But as the services that designers are providing, and that clients are asking for is being redefined, so is the business relationship, and for two very constructive and exciting reasons.
First, designers are increasingly being asked to provide both strategic services as well as their traditional design services. Or as Nussbaum calls this emerging combination of traditional design and strategic consulting, “the thinking and the doing”.
Secondly, clients are asking for more accountability from their designers. And just as ad agencies have experimented with performance based compensation for some time, package designers are also beginning to get, dare I say, creative with their compensation options. And one way they are doing this is to receive equity as part of their compensation plan.
We have done this for several years now. While we haven’t retired from any of these deals yet, I have found that there are benefits beyond just the obvious long-term potential of these financial arrangements. Our clients are truly our partners, in every sense of the word! The advice we give, and the response it receives can’t help but be different with these kinds of relationships.
And selfishly, as the owner of an independent design firm, this is a potential differentiator between us and the large, often global, design agency holding firms that we often compete against. I have the flexibility to accept this compensation model. Large design agency holding companies, often public companies with short-term quarterly financial goals to meet, may not.
I also recognize that this is not completely new. As a case history at the NC State University’s Center for Universal Design points out Smart did this years ago with OXO. They took a small advance and a 3% royalty for their work instead of a more traditional work-for-hire arrangement. And Yves Behar’s fuseproject incorporates this model openly on its web site in its description of 3 potential client business relationships; Strategic Engagements (traditional), Partnerships (entrepreneurial with equity), and Civic Works (pro bono).
This arrangement has been much more common, and for some time, in the product and furniture design world, less so in the brand design world. Its nice to see it getting some attention and I would encourage the growth of this business model. It truly makes partners of us all.
Much better than waiting for the phone to ring!