Product Strategy Exercise | The Allocation Problem

Product Challenge 10.30.2021

The Allocation Problem

The overarching mission of Company X is to provide founders, fund managers, and investors with the tools and information necessary to ask for and provide capital. As a platform built around the democratization of a historically opaque process, it's important that we maintain transparency and clarity as core product values.

We assume that determining an allocation is a notably challenging process for fund managers, and one that has a significant impact on the investor experience and perception they may develop of the Company X platform in aggregate.

1. Spec | Finding the allocation sweet spot

Our assumption hinges around the idea that historical Investor activity, deal appeal, and historical dealflow all contribute to an allocation's likelihood of resulting in an over or undersubscribed opportunity. Our solution to the Allocation Problem will incorporate existing platform metrics along with fund manager-provided values for distinct opportunities to produce a narrow allocation range displayed to the fund manager.

Acceptance Criteria

1. As Company X's system I should expect to
1. Collect and store the following metrics on a per-syndicate basis:
1. Avg. Allocation amount per opportunity, Avg. investor commitment per opportunity, Oversubscription rate (opportunities/oversubscribed opportunities), Undersubscription rate (opportunities/undersubscribed opportunities)
2. Deals presented per quarter
2. As an Company X fund manager user I should expect to
1. Be prompted with optional fields that can be submitted when creating an Opportunity
1. New fields: User growth rate, MAU, DAU, % Stake in company, Employee Eng to non-eng ratio, search & select field for industry
2. Be able to view a suggested allocation value and opt in to using that range for an opportunity by clicking a checkbox
3. Be able to enable email notifications alerting me when an opportunity is 75% subscribed
3. As an Company X admin user I should expect to
1. See aggregated top-level metrics across the entire platform for the values (Avg. Allocation amount, etc.) enumerated above
2. See per-syndicate metrics for the values (Avg. Allocation amount, etc.) enumerated above
3. View actual-allocation chosen by fund manager as compared to our generated "suggested" value
4. View range-match rate between the actual-allocation and "suggested" value
5. View opt-in rate for suggested allocation value and the % breakdown across over, under and adequately subscribed allocations associated

Rollout Strategy:

Deciding on an allocation is an incredibly important component of fund manager and syndicate success. Presenting fund managers with a suggested allocation amount value can have serious consequences. With the potential impact in mind, we should emphasize an approach that strives to mitigate harm.

When presenting the suggested allocation value to fund managers, we should begin by providing a wider-than-necessary range until we are able to validate our methodology as one that produces the value most likely to align with investor-demand for a given opportunity.

KPIs for Success

1. Rate of allocation oversubscription / undersubscription—establish benchmark before beta rollout
2. Investor commitments per quarter (do better allocations lead to increase in investor engagement?)
3. Dealflow for fund managers using suggested allocation (are fund managers able to increase their opportunity access as a result of more accurate allocation values?)

Rough Framework

1. Why does Company X Care
2. Who does this issue impact
3. How do we solve this issue
4. How is this solution in line with Company X's mission and values

User Personas associated and their related needs

1. Founders
1. Receive funding at the level they expect
2. Focus majority of energy and attention on the product and company operations
2. Fund Managers
1. Identify promising startups, founders and concepts
2. Retain reputation with founders as a competent operator with a finger on the pulse of investor excitement and interest
3. Engender investor interest in Syndicate's ability to source compelling opportunities
3. Investors
1. Learn about investment opportunities
2. Allocate capital to opportunities of interest at the desired level
3. Expect that commitment to an opportunity will not be downsized or rolled back arbitrarily

What I wish I knew

1. Why is the product team's attention directed toward the allocation problem?
1. Have we identified this as a significant painpoint via qualititative analysis?
2. Are there metrics related to user engagement and retention that we're looking to move the needle on with this functionality?
3. How does a fund manager "end up" with more than their allocation amount?
1. how do fund managers determine an allocation currently—any metrics and heuristics used
2. how do users commit to a fund that would allow for oversubscription
3. are users able to commit regardless of existing commitment levels
4. How often are allocations oversubscribed?
1. What current functionalilty exist to assist fund managers with oversubscription
1. Prorating investments, removing investor commitments, select-investment reduction
2. Are there usage metrics we can pull that will help us inform the need and urgency
3. Is there an observed negative impact on investor-engagement if their investment has been prorated or removed

2. External Comms:

Subject: No more guessing games!

From: team@companyx.com

Body:

You asked, we listened!

As a fund manager, your days are filled with complicated, time-sensitive decisions that require no shortage of attention. One of our goals here at Company X is to abstract away those day-to-day decisions that prevent you from digging in to challenges that are more art and science than guessing games!

That's why we're excited to announce Allocation Manager, a metrics-based tool that we hope will enable you to accurately identify the right allocation to discuss with founders.

With Allocation Manager you can -

• Identify just the right allocation value powered by Company X's access to realtime benchmark metrics across the venture ecosystem
• Fine tune your allocation value via datapoints unique to your specific opportunity
• Set custom notifications that will alert you when an allocation goal is nearing achievement to help prevent opportunity oversubscription

Allocation Manager is meant to assist in the challenging proposition of aligning investor demand with founder expectations. By tapping in to our unparalleled access to broad trends in the venture space, our goal is that you will be able to approach discussions around allocation values with heightened clarity.

We're excited to deliver these tools to fund managers across the Company X platform, and can't wait to hear what you think!

Product @ Company X