Many studies emphasise the need for supporting higher education students to develop general competences. In this study, we report on the first cycle of a designbased research project conducted in the Design Factory context. The aim of the project is to understand how general competences can be integrated into course modules and within university-industry collaboration in a successful way. In this study, we report on a theoretical problem analysis and describe the design solution, namely the Design Factory implementation. We then move on to an empirical problem analysis and investigate how students reported developing general competences in the implementation. When discussing the implications for further developing the design solution, we conclude that communication has a vital role in university-industry collaboration; it is essential in clarifying the multilevel learning opportunities (e.g., the subject content, development of general competences) for students, and in aligning industry interests with educational learning objectives. We also reflect on the first development cycle as a whole and provide implications for refining the design process. Finally, we draw conclusions from the whole DBR project and provide a new theoretical perspective (cf. Edelson, 2002), namely design-based education in the co-creation contexts, that can be utilised when investigating the development of general competences in the Design Factory context.