Transforming Fund Management with Innovative Solution

Ontra | 2022

Role in team
Lead Designer, Information Architecture, User Research, Wireframing and Prototyping, Usability testing

Platform
Desktop web

Delivery
January 2023

We have developed an innovative fund management product specifically designed for private equity firms. Our top-tier solution simplifies document management and clarifies important terms for limited partners. Traditionally, managing a fund's lifecycle, especially post-fundraising activities, has been difficult and often required legal counsel from third parties to organize the many documents generated during fundraising. Insight Business is revolutionizing fund management by providing a well-organized repository for all fund-related documents, fundamentally altering how obligations to limited partners are handled.

One of the intricate aspects of fund management is dealing with the Most Favored Nation (MFN) clause elections. This process involves a group of investors deciding their trade policy, mainly the terms to which they are entitled. This often requires matching the benefits that other limited partners receive through membership privileges or unilateral declarations. The traditional method of creating and managing these forms is time-consuming and fraught with complexities, especially for small legal teams or firms that need more resources than larger entities. Recognizing this, we identified a significant pain point for our clients: the daunting task of efficiently creating and managing MFN forms.

The Challenge

Ideation

Aware of the steep learning curve associated with this new product, our product manager and I embarked on a journey of discovery. Our goal was not only to grasp the intricacies of the space but also to identify different users and the specific challenges they faced. This understanding was crucial for tailoring Ontra to meet and exceed our clients' needs effectively.

We spent two weeks shadowing a small law firm to understand the real-world application and challenges of creating MFN forms. This firm, comprising two to three lawyers, had recently closed a fundraising using Ontra. Their firsthand experience and insights were invaluable, giving us a clear picture of entities' obstacles in managing fund documents and obligations.

Discovery and Innovation:

What We Learned from Discovery Research:

  • MFN form goes through a rigorous review stage, during which different members of an organization sign off on the final form.

  • Typically, the limited partners could have more than one signor of the form, who would be required to have all signatures to execute the form.

  • Due to a last-minute negotiated term of a limited partner, new terms could be added to the existing form that has been sent.

Approach

We leverage the insights gained from our discovery research and our internal team, which has experience creating MFN forms. We identify the different users who will be using our solution:

  • Ontra's Lawyer contractor was assigned to the organization.

  • The legal and compliance team of the organization

  • Limited Partners (Investors) that will be electing and signing MFN Forms 

  • CFO and other deals team monitoring and managing the form

Our process intentionally uses the Jobs-to-be-done (JTBD) framework. This framework allows the team to be focused and lean when understanding the job (fundamental task or problem that customers are trying to solve), The Motivation (underlying motivations or goals that drive customers to get the job done), and the Context (Recognizing circumstances and situations in which customers are trying to accomplish the job).

We know there are many activities involved in creating and sending MFN forms. The best way to focus the team efforts more concisely is to separate the three critical jobs our users face. We identify three crucial jobs that our different users need.

Solution

We handle this process with Ontra lawyers and the fund management legal team. At this stage, we collect obligations from various side letters and combine them into one form with appropriate thresholds. Ontra's automated scanning and categorization simplifies this process. Lawyers now have more time to ensure the proper obligations are included based on the applied thresholds.

CREATION OF MFN FORMS

The process starts with this view. Users can select a fund to create a new MFN form or update an existing form.

After selecting the funds you want to target, the list of available limited partners will be displayed. You can then choose the partners according to the form you want to create.

You can input the contact information of your chosen limited partner and determine whether you want to include on the form any obligations for which they are not qualified. This is generally done to ensure transparency.

We faced technical challenges as we loaded over 500 obligations simultaneously, so we decided to set some parameters regarding the number of obligations that could be loaded to prevent long wait times.

ELECTING TERMS AND SENDING FORMS

The finalized Digital MFN form is created and sent to Limited Partners (LPs) for review and signature. Instead of mailing the form, it will be sent electronically to the appropriate Limited partners.

Limited Partners typically work directly with the fund organization, so they must be aware of Ontra's work behind the scenes as a third-party legal platform. We needed to introduce our company and establish trust with the client, so our email had to be informative and build confidence.

We placed a high priority on security due to the sensitive nature of the information contained within the MFN forms. As a result, we decided to use DocuSign to securely display the form electronically and enable the Limited Partners to sign and return it efficiently.

MANAGING THE ELECTED TERMS OF LIMITED PARTNERS

Once the Limited Partners (LPs) have returned their signed Digital MFN forms, the lawyers will be responsible for reviewing and documenting the obligations chosen by the LPs. This stage requires careful attention to detail and provides legal professionals with significant flexibility. It's essential for lawyers to have the ability to resend, edit, or even retract a form if needed to make dynamic adjustments that ensure all documentation accurately reflects the agreements and choices made by the LPs.

We successfully launched the Digital MFN process with our co-development partners. This process involved creating unique digital MFN forms for ten different funds, each with a list of limited partners.

Key Outcomes:

  • Efficiency Gains: Eight out of 10 co-development partners were able to create a digital MFN form within two weeks, a significant improvement over the typical two-month period required when done manually by lawyers.

  • Challenges and Solutions for Limited Partners: Initially, limited partners faced difficulties due to uncertainties about the final signatory within their organizations. This often necessitated the regeneration and resending of forms. To resolve this issue, we implemented a feature allowing LP representatives to set up a forwarding cadence directly. This update is set to launch in Q3.

  • Enhanced Monitoring for Lawyers: The new system enables lawyers to effectively monitor signed Digital MFN forms, simplifying administrative tasks and freeing up time for more critical activities such as cross-analysis and strategic planning for fund management.

Impact

Enhanced AI Integration: To improve lawyers' efficiency and user experience, we are integrating generative AI into our services. This will streamline the creation of MFN forms by allowing the AI to propose appropriate matches between funds, obligations, and limited partners and determine the most effective way to display them. I am working closely with our data scientists and machine learning engineers to build a system that not only generates these proposals but also enables lawyers to review and approve them quickly, thus significantly expediting the process.


Launching the Limited Partner Portal: This secure platform will empower LPs to manage their obligations efficiently and directly through Ontra. By offering a streamlined and safe solution for handling these obligations, we aim to elevate our service offering and encourage LPs to engage further with Ontra's comprehensive suite of services to address their broader business requirements.

Future Developments: