How Runyon’s Design x Venture Approach Gives It an Edge
Anthony D’Avella (left) and Joseph Rizk share how their company blends a venture studio with design services.
In the books industry, there is obviously a major player and they serve a specific value proposition in that market. But, as Runyon Design learned when it set out to build a new way to find books online, book discovery was still a nascent space. Avid readers don't have a lot of options to find credible recommendations due to algorithmic-driven experiences. There had to be a more enriching way.
So the Runyon Design team spoke with avid readers, book community moderators, authors, and publishers. Sure enough, they saw the potential to link together discovery, community, and commerce to design and build Tertulia–if a book has moved someone to talk about it, you can find it, buy it, and share it on Tertulia. But they didn’t create Tertulia alone. Runyon Design’s approach is to incubate companies, validate the concept, create the branding, and bring strategic partners to the table–then hand it off to a new CEO who will spend years growing the team and company. Aside from Tertulia, Runyon has incubated ventures across consumer and enterprise spaces from commerce to insurance to education. Within financial services, some of their early hits and clients include Goldman Sachs, New York Life and American Express, and more broadly within media and commerce they’ve worked with The New York Times, Disney+, Amazon, Bloomberg, and the NFL.
Here, Runyon Design Managing Partners Joseph Rizk and Anthony D’Avella share how their company blends a venture studio with design services, the benefits and challenges of incubating companies, and what led them to become partners in the first place.
Runyon Design is more than a venture studio. Tell us about your full offering and how the professional services and product design side powers your process that yields the companies you incubate?
JR: For our venture incubation business, we have two primary pillars of design and partnership. In deciding which opportunities to incubate, we're looking for spaces where design can play a distinctive role and where outcomes are more determined by a differentiating user experience. We think there are a lot of ways to build great companies, but there are categories where our design methodology gives us a unique edge.
With something like ‘marketplaces’ for example, you have two very different stakeholders in the buyer and seller, with distinct needs and behaviors. There is a good deal of complexity in creating an experience that satisfies both of those needs and reconcile things that may not line up exactly. That in essence is a design challenge, and we look for those kinds of dynamics that can give us a distinct advantage. A lot of what we focus on during incubation is crafting where differentiation is going to come from to stand out in the market.
Our other pillar of partnership is the idea that we want to give our businesses some unfair advantage to launch with beyond a differentiated experience. Because we are a broader studio with a services arm, we're able to tap our network for strategic partners who can give our early companies a customer, data, distribution, or operational advantage. We want to bring our corporate network to bear to bring those key advantages for our businesses so they have an accelerated and de-risked go-to-market. Each of the ventures we've incubated to date have had some day-zero strategic partner.
AD: We also see the movement between the two sides of our business - design services and venture incubation - inside of our corporate partners. If we have the sensibility and muscles to create new ventures from scratch, what might leveraging those muscles look like within corporations, too? We're working with one company right on how to transform their core business, moving from a tried and true business model to more of a platform play. We also partnered with them on a pure-play incubation where they were the strategic partner to the venture. And now we're going to design a new venture that they wholly own. By the middle of this year, we'll have run all three forms of Runyon with them.
That’s what we think about when we think about deep design partnerships for the most advanced, product-minded leaders out there. There should be space to do all three parts of our offer because that's what a design-driven, venture-driven approach to growth looks like.
How did you get to this model?
JR: It’s reflective of our backgrounds. We have a mix of venture, design and services in the different roles we’ve held prior. Anthony and I worked together at IDEO and spent time working with big companies around new product innovation and corporate incubation, along with venture design. I also spent time investing as a VC before that. The muscles to drive some of these activities overlap. There is a lot of value in bringing the activity that’s percolating at the early stage of the market into corporate board rooms, and there is also a lot of insight in what some of the large incumbents have learned over the years that we can pull up into our venture portfolio. The through line is staying user-centered in all parts of the work we do.
AD: We work across financial services, insurance, media, e-commerce, and spend time with those end users by virtue of that design research. We feel like we're on the leading edge of what is happening behaviorally across verticals and where they are beginning to move next. For example, in e-commerce we worked with The Wirecutter by The New York Times. We learned through that design partnership that new product discovery is a hard experience to design for online. We also saw this same theme in media work that we did, and so then we knew it was a consistent theme across verticals and we started to work with people who could give us a deeper perspective, whether it was a founder, our teams offering new conceptual ideas, or end users giving us new behavioral perspectives to consider.
Whereas other people will say e-commerce and media are different businesses—and they are at the surface level—we saw that the behavioral insights we gleaned from each can actually be helpful to the other.
Tell us about the connection between you two. What makes it a good partnership?
AD: We got to incubate a venture together back in 2013, which is rare to have business designers working together so closely. It was a corporate incubation for a Japanese multinational company. We had the chance to experiment with different approaches that we hadn't done before, such as live prototyping in a sprint format. Joe brought a unique venture approach to our discipline that I hadn't really seen before.
Then we started to play with the way we thought designing a business should be done. A lot of the seeds for what we're doing now were there back then. We bring different things to this partnership, but our values are very much aligned. We also love a good cheeseburger.
How do you think about your incubation work in light of what's happening in the markets?
JR: What we like about our model is the control. When you're in a purely investing program, you're in a more reactionary position to fund what's available and what operators are working on - it's a function of who's operating at any given time. Incubation as a studio gives us far more range and flexibility. Incubation is the authorship of a new company, and we can author it tailored to the market conditions that we find ourselves in. If we are truly in a recessionary environment, as a first step we would look for sectors that are more insulated. We’re fortunate to have spent so much time in insurance in past years which is a more resilient sector, and so we’ve been doubling down our energy there now which is serving us well. But really we take a long term view – these conditions exist today but the hope is that these companies exist well beyond the near-term environment.
AD: We're working with companies in insurance and financial services that are trying to get ahead in this down market. We are working with company leaders who are not slowing down and who see how we can move faster if we incubate a net new venture right now. The best leaders know that a down market is the time to outpace competitors and grow. We’re very fortunate to work with some of those leaders.
Tell us more about Tertulia. What was the opportunity space?
JR: Our thesis is that there isn’t a reliable destination for book discovery. One that people trust. Reading a book is only one part of the reader experience. It’s also about the dialogue before, during and after it. We saw we could link discovery, commerce, and community if we can leverage the people and sources you already trust.
AD: We built it around this idea of: How do you typically discover something new? We found that it’s usually with people you know well, trust or admire. There are these voices you listen to–we call them vetted voices. When we hit a nugget like that, it’s everything. It gives us something to build on from a product feature and value proposition standpoint.
JR: Discovery in and of itself is far too abstract. You don't wake up one day and decide you want to discover something. It’s not how you go about finding a new product, service, or experience. It's: How do you attach discovery to tangible moments that people have and the networks they already operate within?
When you incubate a company like Tertulia, you eventually hand it off to a CEO you bring in and you give them a considerable ownership stake in the company, even though you’ve done a meaningful amount of the heavy lifting. Why?
JR: We believe it drives better outcomes. Part of it is a philosophy about what is fair and the other piece is what we’ve seen work. Venture in many people's minds is the riskiest asset class; the payoff is well into the future, and we have to offer meaningful equity if we want to attract the best operators. We are part of a company at a critical and important part of its lifecycle, but we're also cognizant that the company has all of its life ahead of it. The team we bring on is going to be directly responsible for that evolution over many years and need to make sure they are properly incentivized to lead the business.
AD: Equity plays a role in who we can attract. A seasoned operator won’t be as interested with less-than-sufficient equity. So we have to prioritize a higher equity pool because it’s the founder (and founding team) that makes the difference between venture success or not. The other proposition is that this is extremely early. It’s as entrepreneurial as it gets. So we’re essentially co-founding a business and we need to meaningfully de-risk it. We’ve validated the strategy, shaped the product roadmap, created the initial brand, and built the financial model. We’ve also likely put a strategic partner at the table. And then the founder needs to operationalize all of that. It really all goes back to the impact that we are both trying to have: launching a human-centered, design-driven sustainable business. If we do that together, we can shape a portfolio of ventures that is value accretive to all sides of our business.
Where are you focused as a studio in the years ahead?
AD: Our aim is to be the best product and venture studio, period. Eight years in, we think we have the talent and track record, and we have some very promising things coming in 2023 that we’re excited to share soon.
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