Broken Sub Docs

The problem with sub docs

To the average investor, subscription documents (or sub docs) are difficult. To someone with dyslexia like Passthrough's co-founder Ben Doran, they are impenetrable. Sub docs exist to mitigate risk for fund managers and to obtain legally compliant documents to admit investors into their fund. Investing into private funds is a strange, esoteric process that only a small part of the world is familiar with and exactly no one enjoys.

Investors have to decipher pages of legal jargon simply to answer questions about who they are. Fund formation teams design sub docs to be all-inclusive, meaning they capture relevant information about any investor type, and expect investors to ignore irrelevant sections. For those that invest into funds regularly, every investment is a chore because each sub doc is unique to a given legal firm (and sometimes a specific partner) and then tailored to the fund’s legal requirements.

Based on our research and experience, sub docs have four major design challenges.

1. Sub docs have too much information all at once, making completion more difficult than the underlying questions suggest it should be.
2. Questions and sections are highly referential to other questions and sections, forcing investors to rely upon their memory and increase the chance of making mistakes.
3. Sub docs are rigid. They use a one-size-fits-all approach which places the burden of identifying relevant information and questions on the investors.
4. PDF files are designed for print and not optimized for on-screen viewing, making the task of filling out a sub doc more difficult due to their non-responsive, fixed layout.

Passthrough’s competitors rebuilt the sub doc experience by translating PDFs to web forms on a computer screen. We optimize the experience and ease of use with studies and best practices. We know what a frictionless, investor-first experience should look like so that anyone, regardless of sophistication or familiarity, can fill out a sub doc in under 20 minutes using Passthrough. 

One simple question at a time (and only once)

When investors receive a sub doc, the amount of text is mentally taxing. When we randomly sampled our clients’ sub docs, we found the typical sub doc is 56 pages long, has about 22,000 words, and asks 105 questions (excluding questions that are asked repeatedly throughout the document).

To reduce mental burden, we adopted an approach informed by Hick's Law. Hick’s Law was formulated by two psychologists who studied the relationship between the number of stimuli and the user’s reaction time – the more information and visual elements presented to a user, the more mental resources are required to process it. The traditional sub doc violates it with stimuli-packed pages (text!) with irrelevant materials and questions.

TurboTax faced a similar challenge with tax forms. They broke down complex documents into bite-sized steps so that anyone could feel confident filling out their taxes. We adopted their successful approach. Investors using Passthrough are presented with a structured and linear workflow that progresses one question at a time. We present investors the right amount of tasks and information within each step. We also make sure to never ask the same question twice. If the sub doc has repeating requirements, Passthrough takes care of it behind the scenes. 

We provide a user experience that values efficiency and simplicity. As a result, 40%+ of investors on Passthrough fill out and sign a sub doc in one sitting. 

A return to focus instead of a memory game

Besides testing reading comprehension, sub docs force you to play memory games. For example, “I answer "yes" to 4(c)(ii) which means 5(a)(i) isn't applicable but 6(b)(iv) is.” You become paralyzed, scrolling up and down to find definitions in appendixes, answers in previous sections, and other things that may apply, all while making sure you check the right boxes. It’s impossible not to lose something.

According to Miller’s Law, a concept introduced by a cognitive psychologist at Harvard University, the human mind can store 7 (±2) objects in short-term memory. When you reach channel capacity, confusion often leads to an incorrect judgment. Instead of facing a wall of text where everything looks the same, we chunk content into smaller pieces. Sub docs in Passthrough are scannable, digestible, and actionable. Investors answer questions without superhuman memory retention.

Among the sub docs we’ve processed, 80% are completed correctly the first time with no changes required from the investor.

"I’m a silicon valley exec and invest in about a dozen VC firms. I have been very frustrated with the process, to the point of wanting to build your exact product. Kudos for building an exceptional solution for a real pain point." - Passthrough customer

A familiar mental pathway and a smarter sub doc

Passthrough’s design leverages a common design pattern called a “wizard” or “guided workflow” that’s already familiar to most of us. 

Windows 98 used it to set up your internet connection; TurboTax uses it to file your taxes; Warby Parker uses it to send you glasses. Investors can apply the same mental model to sub docs and focus on the content instead of the tool. We also solve a related challenge by using custom logic so investors are never presented with irrelevant questions, eliminating confusion and frustration. All custom logic is implemented, reviewed, and tested by our team to ensure the workflows are airtight and customized to the fund’s requirements. Investors can also upload documents securely in the same workflow with Passthrough as their single touchpoint. 

When investors complete their subscription documents on Passthrough, we ask them about their experience and present a happy or sad face. 96% of users that respond select the happy face. The rest… well, we can’t convince everyone to like sub docs.

The un-usability of PDF files

Imagine getting an email as an investor from the fund to use your legal name in section 4(c)(ii) on page 1, section 6(a)(ii) on page 3, and section 11(a) on page 23 of a PDF file you just spent hours filling out. Any revision turns into a labor-intensive headache. 

PDF files are non-responsive, print-ready documents and not meant to be consumed on screen. 

1. Users are stuck deciding on the right level of zoom to view more of the page or a readable font size. 
2. The bi-directional navigation in PDFs creates low discoverability and findability of information. 
3. PDF files provide subpar viewing and editing experience for investors. 
4. On the receiving end, funds rely on emails to request changes with crystal clear references to locations of the changes and investors are then tasked to search and edit their PDF file.
5. When you trade multiple versions, it’s difficult to track changes.

Compared to PDF files, Passthrough’s design reduces interaction cost. Interaction cost is the total mental and physical effort it takes for a user to navigate and interact during the experience, a key consideration in why something feels user-friendly and intuitive. 

With Passthrough, investors fill out a sub doc and make changes from their desktop or on their phone while they’re at the beach. If they have a question about it, they can communicate through Passthrough and both parties know exactly where the issue is because you have the same level of information. 

Invest in your investor onboarding experience

You've spent months getting investors to commit to your fund, why introduce friction at the final hurdle with a 56-page long PDF? We've made the sub doc process better for funds and all types of investors, from the biggest institutionals to retail investors making their first entry to the private markets. With the proper user experience, you can turn investor onboarding from a painful process to a “surprisingly fun product to use” as one fund manager said to us. 

There's a better way to onboard investors. Talk to our team for a demo today to see how your investor experience can be elevated.

‍