my take on the question:
For the pure ‘design consultancy’ business model, I see investment potential on a small scale, and only in specific points in the business cycle. A saavy investor could theoretically partner up with a designer, and with a bit of $$, hire some top notch designers, a PR firm etc. etc. and start up a design consultancy. Beyond the initial startup, investment potential seems limited unless the company needs capital to grow. ROI requires growth, or an increase in sales. For a design consultancy (assuming they have the correct number of designers for their work load) this means increased business (and hiring of more designers) to create some ROI. For large scale investing or an IPO, this seems like an impossible model, as it would require the potential growth of the company to be unlimited, and from what I’ve seen in consultancies thus far, this doesn’t happen. (the largest and most spread out firm that comes to mind is IDEO, and they seem to be having trouble living up to their past glory; indicative of the fact that you can’t make cookie cutter satalite studios based on one model).
IMO it is possible to create an investment model that WOULD work on a larger scale, but would stray from the pure consultancy model.
I believe the investments would in someway be linked to royalties, or licensed products. In other words, the investors money would basically ‘float’ the design consultancy, and allow it to focus on it’s own products or innovations. Once the products are developed, the investors, and design firm would decide how to turn the products into cash (royalties, licensing, enterprise, etc.)
There are two reasons why the latter model works;
a. development, protection and marketing (or pitching) of a product is quite costly. (this creates a need for investing)
b. The potential cash flow or ROI from the marketing of the products is unlimited. (creating the drool in investors)
to address the previous points by constantinople, the design firm might indeed limit its client base to clients that aren’t direct competitors. However, there are so many product categories out there that at any given time, the firm should still be able to land plenty of contracts. If the firm became completely investor funded, this wouldn’t matter anyways.This doesn’t dilute the core of the design firm. It still does what it does best : design. What it does change is where the design projects come from. (now, internally, vs externally)