Make a sixty-second funding recommendation for a paid AI product.

Instruction: Recommend what to fund, use the customer and financial evidence, and state the tradeoff and principal uncertainty.

Context:

Fictional case: a quoting-software company has tested an AI add-on that checks draft quotes against each customer's approved catalog. Of 120 eligible existing customers invited, 60 bought it for $300 per month for two months and 54 renewed for month three at the same price. Measured variable costs, including model use, payment processing and support, average $90 per active customer per month. A launch to existing customers would add $3,000 per month of fixed operating and sales costs plus $18,000 of one-time launch work. The current team can support up to 80 active accounts. Required tests for this defined use have passed; customers approve all quotes. Two competitors sell general-purpose quote-drafting tools for $150 per month but do not offer the catalog checks in this case. No evidence establishes demand outside the existing customer base or a durable competitive moat. The CEO can authorize up to $20,000 of one-time spending now and asks whether to launch to existing customers, fund a $120,000 new-market campaign, or defer. Monthly costs come from operating revenue. Assume no other incremental costs for this exercise.

Updated

Example Answer

I recommend funding the $18,000 launch to existing customers, with an 80-account limit. I would defer the $120,000 new-market campaign. We have paid demand at our proposed price: 60 customers purchased and 54 renewed. That is enough to sell within the tested use case, although it does not establish a broad market.

At the current 54 accounts, $210 contribution per account produces $11,340 a month before the $3,000 fixed cost, leaving $8,340. If that cohort holds for three months, it covers the launch cost and leaves $7,020. The principal uncertainty is whether retention and support cost hold beyond this short cohort.

We should sell the catalog-checking benefit against the cheaper drafting tools, rather than cut the price before testing that difference. I need approval for the launch spend and for prioritizing existing customers over new-market acquisition. I would track paid renewals, contribution and customer-reported quote corrections, and bring a separate growth decision once those results justify more capacity.

Worked commercial exhibit

MeasureCalculationInterpretation
Paid renewal54 / 60 = 90%Renewal into month three for the original paid cohort; not long-term retention.
Contribution per account$300 − $90 = $210 per monthBefore fixed costs and one-time launch work.
Monthly result at 54 accounts54 × $210 − $3,000 = $8,340Conditional run rate at observed average variable cost.
Three-month result after launch cost3 × $8,340 − $18,000 = $7,020Scenario assuming 54 paying accounts throughout; not a forecast guarantee.
Operating break-evenceil($3,000 / $210) = 15 active accountsCovers monthly fixed costs only; excludes recovery of launch spend.
Capacity ceiling80 active accountsFurther sales require another capacity and cost decision.

What the interviewer is assessing

Essential: Recommends one funded action, identifies the $120,000 campaign as outside current authorization, and calculates $210 per-account contribution and $8,340 monthly surplus at 54 active accounts.

Stronger: Uses paid renewal as stronger evidence than interest; recognizes a selected existing-customer cohort, limited operating capacity and a competitor price reference without assuming identical products. A brief deferral is defensible if tied to a specific unresolved commercial assumption and its decision value.

Red flags: Treats 60/120 as population demand, promises a durable moat, treats revenue as profit, or claims that three months of forecast surplus has already been realized.

Follow-up

What price would you choose if the CEO wants to match competitors at $150?

Example response: “I would retain $300 for this launch while testing the value proposition in win/loss conversations. At $150 with unchanged $90 variable cost, contribution falls to $60 and monthly break-even rises to 50 active accounts; at 54 accounts the surplus would be only $240 before launch spending. A blanket discount would sacrifice the economics without evidence that price is the reason prospects decline.”

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