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    from designer to vc....

    Gregory Walker Jan 25 '12 9

     

    been swamped doing proposals (green shoots in the air!) but fast company beat me to by next post, which was going to feature fuseproject, the industrial design firm headed by yves behar. 

     

    best quote: 'Where most design firms work for a fee and then part ways with their client, Fuseproject usually focuses on work with start-ups and takes an equity stake in whatever they work on. "I truly believe that’s the future of design," says Behar. "The traditional consulting model is broken."

     

    (does that sound familiar to anyone on the archinect forums?)

     

    the article out today builds upon an interview from 2008 that was, literally, a fundamental turning point in how i began to rethink practice. that interview, conducted with fuseproject's chief business strategist mitch pergola, laid out a 3 legged approach the company was taking towards diversifying revenues: 

     

    traditional design consulting fees

    recurring royalties on products

    a percentage stake in start ups they were working with

     

    the model is so deceptively simple: items 1 and 2 above were what funded the business - they had to break even (at a minimum) and item 3 is what drove the long term profits for the founders/shareholders of fuseproject. 

     

    this isn't foreign territory for some architects but.... it just doesn't factor into the thinking of so many firms. and it's not something which can easily translate. in the profession, you rarely see item 2 (unless the firm is doing product design of some sort in addition to the main work) and if a firm's taking an equity stake in a project, it's usually a real estate play, something which can have more risk and/or difficulty getting into and out of. 

     

    what's vexed me over the past 3 years though is this: why, even with some of the issues outlined above, are more firms not looking at developing a similar 3 legged model? my full post will be looking into the 'why' that is. 

     

    unfortunately, that'll come next week. enjoy the articles in the meantime.

     

     

     
    • 9 Comments

    • Paul PetruniaPaul Petrunia
      Jan 25, 12 1:52 pm

      Very interesting. I'm curious to know what you think about how the scale and pace of architecture, compared to product design, the primary medium of fuseproject, would be translated into this business model. Will you be sharing any architectural precedents?

      Gregory WalkerGregory Walker
      Jan 25, 12 2:51 pm

      paul - architecture itself, yes, moves at a glacial pace compared to just about everything else. what was fascinating to me is the 3 legged model - if one stumbles, then there's some backup sources.

       

      yes, sharing some architecture firms (predominantly) that are, maybe not so explicitly, doing something similar. the one trait is that they have their 'alternative' incomes don't rely on something nearly as slow as traditional architecture....

      Paul PetruniaPaul Petrunia
      Jan 25, 12 2:55 pm

      Nice, I look forward to the next installment.

      Donna SinkDonna Sink
      Jan 25, 12 9:02 pm

      SHoP has long been involved with percentage stakes, yes?

      Gregory WalkerGregory Walker
      Jan 25, 12 9:18 pm

      donna - i believe so. i'd really like to interview one of them - think sharples is coming down to lecture at tech this semester. maybe i can get him for 20 minutes to do a follow up. 

      futureboy
      Jan 26, 12 7:01 pm

      Good questions as I've been thinking long and hard about this as well.  I think you should definitely speak to someone at SHoP as this is a keystone of Pasquerelli's talks.  On top of that I think it is interesting that many product designers work in the manner that Yves Behar describes and this type of approach was more prevalent in the world of architecture than might appear at first glance. I can't help but think of the Eameses and figures like Eliot Noyes.

      Gregory WalkerGregory Walker
      Jan 26, 12 9:42 pm

      well, i started this thing out (in my drafts and conversations) looking at the following criteria: 

       

      the practice had to have as a central focus (at least in part) a fee for consulting model. which means you couldn't have started as a traditional firm, then made a pivot to furniture/product/graphic/whatever design and left architecture behind. there's plenty of those kinds of firms. 

       

      second condition was to find firms that had managed to balance a fee for consulting model with some kind of recurring revenue (either royalties, rental income, etc.). 

       

      third, ideally, i'd find firms that were 'investing' in their start-up clients. not just in a fee/goods exchange (eg - doing a restaurant and getting free meals for 4 years in lieu of design fees), but something where they were legit equity stakeholders. 

       

      getting all three in a single firm is incredibly difficult.... interestingly, though, i've had a few people contact me after just this post to talk about different models they're using. may have to expand the post to include them or break it up into several parts. 

       

      maybe i can get a contours posting if it comes out? paul?

      Nam HendersonNam Henderson
      Jan 29, 12 10:23 am

      Greg, perhaps more than a contours feature it might fit better as part of the Upstarts series? Assuming they are not all well established firms that is....

      I too am interested to hear how architects could use the royalties model for their work...

      Gregory WalkerGregory Walker
      Jan 29, 12 11:21 am

      nam - i'll leave it up to you guys. but to answer your second part: the easiest way to think about royalties is that your selling a 'thing' as opposed to a service. that's very different than the professional models we were generally taught. the real question, for me, is what is the 'thing' that you're selling...

       

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About this Blog

Central to the blog is a long running interest in how we construct practices that enable and promote the kind of work we are all most interested in. From how firms are run, structured, and constructed, the main focus will be on exploring, expanding and demystifying how firms operate. I’ll be interviewing different practices – from startups to nationally recognized firms, bringing to print at least one a month. Our focus will be connecting Archinect readers with the business of practice.

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