Yves and Mitch's Excellent Venture

Mitch Pergola, the business strategist behind Fuseproject, talks about how design firms can take a page from the venture capital playbook

by Georgia Biondo Flight

Alex Fradkin

Design-scene followers have no trouble putting a face to the San Francisco-based industrial design studio Fuseproject. Fair-haired founder Yves Béhar has appeared on conference stages, magazine covers, and national-TV ad campaigns. Less visible is Mitch Pergola, 41, the firm's managing partner since 2004. Yet Pergola exemplifies the way in which more and more design studios are doing business. By taking a page out of the venture capitalist's playbook, he's helped turn an award-winning creative shop into a "machine for investment."

What's your precise role at Fuseproject?
As managing partner, I'm responsible for everything that happens at the company that isn't creative content: client relations, new business development, finance...

You've done everything from run a restaurant to supervise West Coast operations for Frog Design. What prior experience would you say best prepared you for this job?
For almost my entire career—15 years—I've been the business guy in the creative shop. I was an animator at a video-game business right out of college. My friend was the art director. Pretty soon we both realized we were terrible at our jobs. Our boss was some 19-year-old guy who said, "Go ahead and switch roles, I don't care." So I became the art director, then the executive producer, and finally general manager. What I proved to be good at was finding ways to bring business rigor to creative environments. I realized you have to do two things: make money and build an environment where creative folks can excel. Both are difficult.

What do you consider your most important contributions to Fuseproject so far?
The biggest is building our somewhat unique business model. The main focus of Fuseproject is to do important game-changing design work, and everything else is there to support that effort. We like to reinvent things, including the way we do business. We wanted to escape the head-count agency model.

Head-count model?
The notion that the only way to make more money is to add more heads. We're 30 people, and we've got a desire to stay small and close to our clients because that's where we add value. So Yves and I have built a machine for investment that allows us to diversify revenue. We've developed a three-pillared approach: One is what I'd call strategic engagement, which is long-term contracts with corporate clients like Coca-Cola or Johnson & Johnson. Another is civic projects, such as One Laptop Per Child, which we designed and branded because we feel the need to do good work. The third, slightly unusual pillar is true partnerships with the companies we work for.

Tell me more about that.
In some cases, we partner with earlier-stage companies that might not be able to afford our fees but that share our goal to disrupt the marketplace. We're in a position to make an investment in a company and actually build its business rather than just getting customers to buy its product. We'll do the design for the product, the naming, branding, placement, everything.

Doesn't that involve a lot of risk for your company?
It can. The knobs we turn for each individual partnership are fee, royalties, and equity. There's a lot of due diligence required. It's very similar to a venture fund. Some clients will come to us with an idea and say there's an opportunity now, and so we'll load that in terms of royalties, for short-term ROI. But another project might require a lot of R&D, in which case we'd focus more on equity, for long-term ROI.

That model offers more control than a traditional designer-client relationship. What does it do for the client?
Double-digit improvement in sales. Some clients have seen a 10, 20, or 30 percent sales increase because of our involvement. I wouldn't say we're in control, but we're a unified influencer, someone at the leadership table who's responsible. That is very important, especially for smaller companies.

What's been the bottom-line impact of your strategies?
Revenues have increased dramatically. It's a small, privately held company, and that's all I'm willing to go on record saying.