Iterating on a Design to Improve Life Investment Fund

Being witness to great innovations stemming from all corners of the globe for over fourteen years, we’d seen potential to move the world positively through sustainable design – solutions designed and conceived by people for people, communities and the planet.

Our narrative until now was a fight to broaden the definition of ‘design’ so that audiences understand how design can be used to solve some of the world’s toughest challenges.

It continues to be a battle, but over time we have seen more and more actors join the stage to give relevance to the design discipline and its application to make a positive difference. The world is listening to designers!

We understand designers who are driven by purpose and meaning, and we’re sympathetic to their needs and pain points. We grew impatient that solutions never scaled, and we thought: how can we as an organisation help?

CONNECTING GREAT DESIGN WITH CAPITAL
To make the toughest challenges tractable, we identified the need to connect great design with capacity, resources and capital to move them from idea to real commercial success, as well as measurable impact to users and society at large.

With this goal in mind, exactly a year ago, we embarked on a very ambitious journey: to create a venture capital fund to solely invest in a pipeline derived from the world’s biggest design prize – INDEX: Award.

Taking a leap from awarding a biennial design prize to selecting investment-worthy deal-flow wasn’t going to be easy. It was big on many levels – a huge challenge for our team, leadership and the wider community. Nothing like this had ever been done before by a design organisation. But, we were ready to learn and take a plunge into the unknown.

To Prepare and Perceive ourselves for this new venture, we interviewed, researched and analysed the data and what was already out there in the market. We chose to work with Dansk OTC as partners, selected from other potential colleagues. We chose a venture capital fund model as the route to realize the commercial opportunities from INDEX: Award.

Our Prototype, Danish Ventures, the venture capital fund was created.

THE FAST FAILURE OF DANISH VENTURES
After launching with full fanfare, the hard work begun. Proving the concept, as well as testing the proposed investment thesis and structuring the management company happened all at the same time. We leaned on our partners and their team; they were to deliver on leading the management company, raising funds and eventually managing investments, and we were to provide pipeline, knowledge and expertise spanning over 14 years, brand and network.

So much of this fund was based on weak assumptions – theirs and our own, and we should have validated these from the start. We’re grateful that they gave us the time and committed as much as they could. But our cultures simply collided.

We’ve been very self-critical to understand why this prototype didn’t work. And there were several reasons why this iteration didn’t reap results.

INDEX: Design to Improve Life®  facilitates a community spanning a very diverse range of people across the world and personal relations are steeped in the very core.

Through Danish Ventures we stepped outside of the core of INDEX, that’s when we started losing the spirit of what INDEX does. Enlisting new partners to represent our mindset and culture as well as be able to fully communicate that onwards proved to be difficult.

Being a creative organisation we are a stickler for boundaries and structure. We recognise the need to dream big, but there has to be actionable tasks at the end with measurable results for all parties involved, especially for the entrepreneurs and investors we want to communicate with and represent. Sadly, we didn’t see results materialise and our confidence in our partners wore thin.

Finally, beyond our cultures colliding, Dansk OTC went through an image crisis that risked tainting our brand and our ethics, and we recognised that it was going to be a short-lived marriage. We parted ways in the spring with mutual understanding and no funds raised.

This prototype of how we want to bring impact in the world was simply flawed and we needed to get back to the drawing board on our own terms, and find out how we can build bridges between design entrepreneurs and investors to get the backing in order to fully scale their impact – both for business and investments.

We went back in the process and did two things – firstly to prove that our asset really is an asset for INDEX, and secondly, to get an understanding of who our investor profile is.

SHOWING THE VALUE IN OUR PIPELINE
Since the spring we did some research, analysis and validated our archived pipeline from 2005-15 quantifying the value of our pipeline, under the guidance of Boston Consulting Group. As a result of doing this analysis, we have evidence showing successful business cases that have grown significantly since they were nominated for INDEX: Award.

A sample of sixteen cases since 2005 shows a total of today’s company valuation of over 2.1 billion DKK.

Understanding our own data is really empowering and what we know now makes us confident and resilient to the challenges ahead.

UNDERSTANDING THE INVESTOR LANDSCAPE
We have continued to speak with many investors that we initially reached out to, keeping them in close contact as we revisit the drawing board. Getting feedback loops has been essential for us to learn and move forward.

As we embark on the next iteration of working in the space of investment, we are focussing on what we know best – what we are strongest at – bringing like-minded people together – connecting purpose-driven entrepreneurs with investors who are part of the INDEX community and to match respective needs. The way we iterate next for INDEX has to be relevant and meaningful and we want to best connect purpose-meets-profits investors with Design to Improve Life designers who want to run sustainable businesses that are making an impact in the world. We want to validate further the role INDEX can play in facilitating investments from INDEX: Award and work within a model that fits our context.

To conclude and close this chapter, the moment we stopped Danish Ventures, we immediately focussed on the things that we should have done from the start!

We’re not put off that Danish Ventures didn’t work. It couldn’t have worked with the people involved and the structure we had co-created. The fuck up has been catalytic but rich in learnings and we remain optimistic and confident about what’s to come next. The investors and entrepreneurs are there and ready, and we’re right on track to Produce.

LESSONS LEARNED

  • Culture – We expected that our culture and organisational values could translate through our partners. This wasn’t the case. There is still a lag between the design and investment worlds and still demands effort especially in communicating the value both represent to each other. Understanding the language and developing the culture takes time. We devolved responsibility to our partners when it should have been fully within in our control.
  • Trust and honesty – Everything in the world of investment is revolved around trust. It’s the most valuable currency if you could call it that. Investments are risky business and everyone has a part to play to ensure fairness, a clean act and honesty. Openness is what we care about – so sharing the successes are great, we are equally driven to know the challenges too as a means of improving but also understanding why things are not working.
  • The people factor (empathy and responsibility) – People learn by doing and most importantly learn through trial and error. Setting up a Fund with people that didn’t fully live up to our expectations would have been wrong. We have to remember that a Fund is on the one-hand about growing and scaling businesses but on the other hand much about handling livelihoods, careers, and people’s savings. A Fund has a huge potential to offer great benefits to many involved, but aside from being lucrative, it is about providing a service and helping people unleash their fullest potential.
  • Evidence and results – We failed to do enough of our own due diligence on our partners, and vet them carefully to check if we were a good match before embarking on this adventure. What we learned is that we must show results, evidence and experience in order to fully gain the credibility from both entrepreneurs and investors, much like proving a concept in a innovation process, it takes getting results to feel fully confident about your theories.
  • Gratitude – We’re thankful for trying this whole experience and grateful for the help and support the Board, Investment Committee we involved for the time they volunteered. It took a lot of courage to embark on this adventure and we’re grateful for our ex-partner’s commitment and every person we spoke with. The time, critique and recommendations have been remarkable. The learnings are huge and enriching for us to make the next iteration hit the mark.
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