2020 was supposed to be a victory lap. New Deal Design (NDD), one of Silicon Valley’s leading design firms known for hit products like the Fitbit and sci-fi moonshots like Google’s modular Ara phone, planned to enjoy its 20th year of operations, hot off a successful 2019. Then COVID-19 struck. “I should have been very happy and proud. The team should have been happy and proud,” says founder Gadi Amit. “Instead, we’re dealing with survival.”
Founded in 2000, NDD is one of Silicon Valley’s last standing independent design studios from that era. Large companies acquired the firms of many of his peers. Other studios couldn’t make their business plans work. But NDD stayed afloat and managed to weather the fallout from two major economic crises—first the dotcom crash, then the recession of 2008-2009.
COVID-19 has been different. The worst financial crash since the Great Depression, it has left nearly half of all Americans out of work, and corporate clients have slashed budgets and canceled projects. “This is probably the toughest year I’ve had since starting the business 20 years ago. It’s been really precarious,” Amit says. “We’re set more or less for the next two months, but beyond that, I have no idea what things are going to happen.” NDD’s struggles point to a precarious future for other independent design studios—and for the future of independent design itself.
A CHALLENGING BUSINESS MODEL TO BEGIN WITH
The core problem is that design consultancies, even those as storied as NDD, get most of their revenue on a per-project basis. So a client commissions the studio to design a speaker or a phone, and NDD gets a flat fee for it, no matter how successful the product eventually is on the market. At times, they are so strapped for cash that they only have a quarter of runway, which means they’re constantly on the hunt for new work to keep the operation afloat. What’s tricky is that the business of a consultancy doesn’t necessarily scale its returns as many businesses do. The more clients you sign at any one time, the more designers you need on staff to accommodate them. The ratio of expenses to revenue doesn’t dramatically shift.