Win at VC interviews: The Complete Guide

  • Why Do You Want a Job in VC?
  • What Are Recent Developments?
  • What’s the Most Interesting IPO?
  • What Columns/Blogs Do You Read?
  • Where Do You See Yourself in Five Years?
  • How Would You Evaluate a Firm?
  • Tell Me About Your Experience.
  • What Industries Are of Interest?

Venture Capital (VC) Interview Prep

3) Technical Investment Questions

You’ll also get questions digging into your technical understanding of the VC investment process. There’s no clever hack to preparing for these.

This is where varied experience in venture-backed startups can really help – you’ll have been surrounded with these concepts already.

If you don’t have a lot of that, you need to do your research and get comfortable with the technicalities.

VC Firms

  • What are the key stages to a VC investment from beginning to end?
  • How does a VC firm raise money? How do they track their performance?
  • How would you source startups if joined tomorrow?
  • Metrics

  • Do you think investors value revenue or profit more?
  • How would you assess a startup?
  • What metrics would you look at and why are these important?
  • What would you look for in a startups financial statements?
  • Deal Economics

  • What is pre-money and post-money?
  • How do startups get valuations?
  • What is a convertible note and a SAFE note?
  • What terms would a VC firm negotiate with a founder?
  • Startup Strategy

  • What different business models could [example startup] apply?
  • What kind of engineers should a startup hire? Experienced or young? Cheap or expensive? Local or international?
  • How much time do you think [example startup] spent on patent protection between Seed and Series B?
  • How can a company test market demand for a new product with low budget?
  • How can a startup dominate a segment when there’s 3 other companies doing the same thing?
  • What VC interviewers are looking for

    Picture this:

    Patricia is a VC Principal and has a busy day. She’s meeting world-class CEOs, digging deep into financial models, going to countless networking coffees, and assessing hundreds of pitch decks.

    She’s also been asked to interview 20 job applicants for a junior position.

    But, she already knows that at least 75% of the interviewees just aren’t going to make the cut.

    They’re not going to show passion or deep understanding. There’s going to be a lot of uninspiring, boring, and repetitive conversations.

    However, she would love to see a candidate who is positive and engaged.

    Someone engaged in the future of technology, the latest innovations, and the markets where these might flourish. Someone who is opinionated, brings ideas to the table and can help keep the firm at the cutting edge.

    Patricia will be asking herself:

    You want to make your interviewer feel something when they interact with you: Leave them a sense of excitement that they might get to work with you.

    To achieve that, you need to know what questions are coming and how to leave them impressed.

    Venture Capital Technical Interview Questions and Answers

    venture capital interview questions

    Take a look at our Uber valuation to see how you might value a high-growth/startup company.

    What’s the difference between pre-money and post-money valuations?

    The “pre-money valuation” is a startup’s Equity Value before it issues new shares to the VC firm, and the “post-money valuation” is the startup’s Equity Value after that happens.

    Equity Value increases when new shares are issued because Total Assets increases due to the cash, and this increase in cash was attributable to the shareholders.

    Enterprise Value does not change when this happens because this is just a financing activity.

    So, if the company’s pre-money valuation is $10 million before it raises $5 million in equity from a VC firm, its post-money valuation is $15 million, and the VC firm owns 1/3 of it.

    What are the trade-offs of a traditional equity financing vs. convertible notes?

    Using convertible notes makes it easier to close deals because it lets the company and investors defer the company’s valuation (and, therefore, dilution) until a later date.

    However, they also make it confusing to establish everyone’s ownership percentages because the company needs a priced equity round to do that – which can often result in surprises.

    Equity financing is more straightforward because the company’s valuation must be specified, but it can be more difficult to close since both parties must agree on this valuation.

    For more, see Fred Wilson’s thoughts on the issue (he’s not a fan of convertibles).

    What are some of the key metrics and ratios for SaaS companies?

    a16z has a good summary of SaaS metrics here.

    The two most important ones are probably LTV (Lifetime Value) and CAC (Customer Acquisition Cost) and the resulting LTV / CAC ratio.

    CAC must include the full costs of acquiring an “average” customer (but it often doesn’t), and the LTV must reflect that customers eventually cancel and that each customer has an average lifespan.

    Sometimes, it’s better to be conservative and use a 12-month or 24-month LTV rather than making far-in-the-future assumptions about the lifespan.

    How would you value a company with negative cash flows for the foreseeable future?

    Either use alternative methods, such as multiples based on Daily Active Users or Monthly Active Users, or project the company until its cash flows turn positive in the distant future (common for biotech firms where the patient count and pricing are known quantities).

    Suppose that our firm invests $10 million for a 20% stake in a startup. This startup later runs into huge competitive challenges and sells itself for only $30 million.

    However, we do not lose money in the deal, but instead earn back our initial $10 million investment. How is this possible?

    Most likely, the firm invested with a liquidation preference, which means that they receive back some multiple of their investment (often 1x) before other groups, who often hold common shares instead of preferred shares, get paid.

    This term reduces the risk of VCs losing money in cases where the company is not a complete failure, but disappoints in some way and has to sell for a lower-than-expected price.

    What is a cap table? How do you use it?

    A “cap table,” or capitalization table, shows all the equity investors in a startup and the type and number of shares, options, and warrants they own, along with any special terms (e.g., liquidation preferences).

    It includes the founders, employees, and outside investors, and sometimes it includes lenders and other groups as well.

    Companies use the cap table to calculate dilution from funding rounds, employee stock options, and issuances of new securities, and to calculate the proceeds to everyone in an exit.

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