In systems with a high density of multi-gigabit per second communication channels---each spanning distances of a few cm to about a metre---optical interconnects are put forward as an alternative to traditional electrical interconnections. The optics should introduce several advantages: higher channel bit rates, denser interconnect and less drive power. While the technology of VCSELs, photodetectors and different guidewave systems has made much progress over the past decade, the design space of their integration into a full solution has not nearly received the amount of exploration as the individual link building blocks have. In this paper, we discuss the development of a design methodology for optical interconnects, beginning with a systematic exploration of their design space. To this end, circuit-level simulation models for optical interconnects have been developed that enable prediction of some important system-level properties (such as timing characteristics) of various setups.