Zypsy, a design firm with a track record of helping early-stage startups, has launched a new and somewhat unique venture investment program.
It will be offering 10 startups up to $100,000 of brand and product design services, spanning 8 to 10 weeks of engagement, for no cash payment. Instead startups will pay by issuing Zypsy 1% equity of their companies via a SAFE (simple agreement for future equity). There is one potential gotcha: If a startup needs more work than outruns that cap, it will need to pay for it. “After the initial 8 to 10 weeks program, we work on a retainer with cash depending on the further project needs,” Kaz Tamai, co-founder and CEO of Zypsy, told TechCrunch.
This type of work-for-equity arrangement isn’t unheard of, particularly in the design world, but Zypsy has particular bona fides. Its founding team hails from global design firms and tech companies, including IDEO, Fantasy, Meta, and Saatchi & Saatchi. The company is profitable, with an annual revenue run rate of $3.2 million and $250,000 in annual net cash flow, the company says.
Zypsy can help startups with brand strategy, logo, websites, product design, app interface and marketing content. The outfit believes that a fledgling startup can scale up and rise from obscurity by combining design expertise and investment support.
The startup plans to work with 10 startups for the upcoming design capital cohort, Tamai said, adding that it mainly works with early-stage startups via selective referrals from founders or venture capitalists. It focuses on industries such as computing infrastructure, machine learning, AI, data analytics, cybersecurity, and the creator economy.
“Fundamentally, all startups are evaluated on four things: market, team, product, and traction; and founders are stretched thin, wearing many hats and seeking capital to drive those four elements,” Tamai said.
Zypsy has already added five startups to the first cohort of the design capital program (listed in alphabetical order):
Copilot Travel: a Tennessee-based B2B2C travel cloud platform that connects travel companies and consumers through its travel infrastructure.CrystalDB: a Reid Hoffman–backed startup that offers a serverless cloud-based database service.Formless: a Boston-based blockchain startup that helps creators with revenue sharing and managing their digital offerings. In December last year, it raised $2.2 million in pre-seed funding from investors, including a16z.Noxx: a San Francisco–based AI-powered platform for hiring remote engineers.Zylon: A generative AI startup with a chatbot for small and midsized businesses built on a popular open source model called PrivateGPT. Zylon raised a $3.2 million pre-seed funding round in February.
Pilot projects with over 25 startups for three years
The six-year-old design company has worked with more than 25 startups. The outfit initially began the design project for web3 founders. Given the interest it generated from the first client, Zypsy extended the program to a broader range of tech companies, Tamai told TechCrunch.
Before launching its official Design Capital Program, its previous clients via pilot tests included Cortex, a startup building an internal developer portal that helps engineering teams build better software at scale; Captions, an AI-powered video editing startup; and Robust Intelligence, an AI startup that helps businesses protect their AI models from security and operational risks; and Anyplace, a hospitality startup.
Zypsy does not own stakes of the clients via pilot projects, Tamai noted. “They are ‘cash-based clients, not an ‘equity-based portfolios’ like five companies we mentioned in the first design capital program,” he said.
At the moment, the company doesn’t have plans to grow into an accelerator or an investment firm, Tamai noted. “Our mission is to partner with exceptional founders and collaborate towards the next $1 billion in delta value, or valuation growth, through creative excellence,” Tamai said.
In 2023, Zypsy raised $3 million to establish Design Capital. Investors included 1kx, Lattice, founders from Japanese e-commerce company Mercari and web3 company Cega, angel investors like CDO at Rakuten, and the head of investment at SoftBank Vision Fund.
