IT’S TIME TO INVEST WITH OUR MINDS AND HEARTS

Why is now the time to wholeheartedly invest in solutions that create positive impact? INDEX: Design to Improve Life® CEO, Kigge Hvid, explains why life-improving design is now emerging as one of the most attractive business opportunities.

As suggested by the name, Danish Ventures – Investing in Design to Improve Life, the objective of the fund is to collect DKK 300 million from Danish investors to invest in sustainable design. These designs come from all over the world and are presented to us through the submissions for INDEX: Award – the world’s biggest design prize.

Instead of ‘just’ to acknowledge and reward the world’s best life-improving design via INDEX: Award, we will now heavily invest in projects to ensure they can be brought to their full potential. Fulfilling the entire goal of our existence – to improve the world through design!

The fund has been our dream since 2010, and now the time is finally right.

It’s not only our assessment, but more importantly our partner’s assessment, that there’s a growing pool of investors interested in this unique business opportunity. Danish investors are now prepared to invest in design to improve life at a very broad scale. Everything from emerging sustainable forms of energy, to a new chain of cheap and accessible dental clinics for Indian villages.

These kind of investments are known as ‘impact investing’ – capital invested in a project not only for an economic return, but also to create positive social or environmental impact.

From back to front
To understand why it’s logical to start a venture capital fund for Design to Improve Life, let’s begin by looking at what’s happened in the capital sector within design to improve life.

In 2008, our organisation established a new international strategy for the coming year entitled ‘From awarding backwards to investing forwards in Design to Improve Life’. The move came amidst the feeling of many, but very vague, sensations of the start of something new in the design capital markets. Something that could have a major impact.

Subsequently, we received many international nominations for INDEX: Award 2009 that were focused on people using technology as an intermediary to borrow and lend things to one another.

The same happened for INDEX: Award 2011, where we received several nominations acting on what we now know as the ‘sharing economy’. We were then able to infer that designers were among the drivers of this new economy. For example, Airbnb, Flickr, Instagram and Kickstarter are all founded by people with a design background.

The sharing economy was also the final proof that designers were evolving beyond developing specific products, to also building essential skills for the design of services, processes and systems.

And finally, it was around the end of the zeros that it became clear that a lack of capital was the number one obstacle in getting design to improve life to where it’s most needed.

Over all the years we saw a steady growth in interest of design that is not only beautiful, but design that also generates positive impact. An example of this increase can be seen in INDEX: Award 2015, where we received more than 1,100 nominations from 72 countries. And an increase which materialised significantly since we, together with State of Green in 2013, produced the largest Danish editorial collaboration with CNN International. In 2015, we did this again when the INDEX: Award appeared on the front page of The New York Times.

New development in financial markets
Back in the early 2000’s, there was almost too much capital, but it was only going towards certain parts of the market. Then Professor C.K. Prahalad identified the potential value at the bottom of the world’s pyramid (BoP) in his book (The Fortune at the Bottom of the Pyramid).

It was completely new thinking and led – along with the UN Millennium Development Goals – to a different understanding of the economic potential in designing solutions targeted at the poorest.

Later when the financial crisis hit in 2008, many realised that our financial markets are in some way flawed. Many investors, who were enlightened by the crisis, then began to share thoughts with the new generations part of many family-owned funds and companies. These thoughts were based on the idea that the world’s greatest challenges will not only be solved by environmental and humanitarian enthusiasts, but will need substantial capital. These thoughts were also based on viewing these challenges as great commercial opportunities. On that basis, impact investing gained momentum.

The economy also played a vital role here. Just a few years later it became evident that it was economically worthwhile to rethink ownership and value. Airbnb was born and is now the world’s largest accommodation provider. They own nothing beyond a website and an algorithm, and are now valued at US 20 billion (2015).

In 2014 we received the first iconic proof that the world was beginning to realise the economic potential of design. It happened when the American designer and tech-geek John Maeda – with whom I had the pleasure of being the co-founder of the World Economic Forum’s Global Agenda Council for Design – was appointed as the world’s first design partner in a venture capital fund, Kleiner Perkins Caufield & Byers (KPCB) in the Silicon Valley. The appointment of Maeda reflected the critical role of design in product development and leadership at KPCB. And the value of design in companies has only appeared to grow: in the past two years since Maeda’s appointment, we’ve seen seven other major funds appoint design partners.

Impact investment is gaining ground
JP Morgan Chase & Co. publishes an annual report that attempts to paint a picture of the current state of global impact investing. According to the report, 146 respondents in the latest survey said they have already invested 250 billion in impact investments, and that they also plan to increase their investments in the philanthropic genre.

We’ve tried to identify and develop all this and much more through our Design to Improve Life Investment initiative. Launched in 2010, the initiative now includes business acceleration support for design entrepreneurs, a knowledge network of investors and funds, and an investor day where designers can pitch their business plans to Danish and foreign investors.

Around the INDEX: Award last year we held a series of these events where designers met investors. Ten designs among the finalists for INDEX: Award 2015 were selected to pitch to potential investors, and today four of the designers have received substantial investments. For example, the Danish app Be My Eyes, which allows sighted people to lend their eyes to the blind, received a huge capital injection from the USA. The company is currently in the process of moving to the Silicon Valley.

These life-enhancing investments are not only great for solving global issues, but are also largely gilt-edged investments to support, as we’ve seen in the past. Looking back, Tesla, Skype and Airbnb were all candidates for INDEX: Award. And today, they are all companies worth billions.

The time is right, and now we are ready in January 2016 to launch the venture capital fund, Danish Ventures – Investing in Design to Improve Life.

Not only a fund that invests in the now-obvious value in design, but a fund that invests solely in Design to Improve Life.

Design that improves people’s lives by addressing global challenges with sustainable, and better solutions.

Establishing Danish Ventures – Investing in Design to Improve Life has been labor-intensive and challenging. There is much to be learned, and a new culture to be established between us and our partner Dansk OTC. But, most of it has been incredibly interesting, and we’re confident that it’s going to pay off for investors, design entrepreneurs, and for the world. Of this I have no doubt!

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