o you’re interviewing for a job at a venture capital firm. It’s exciting! But also semi-intimidating. You don’t really know what to expect. And of course you want to make a good impression.
But fear not! We’re here to help you better prepare. And that’s the key: preparation, preparation, preparation!
So How Should You Prepare? Well, by reading this post to start!
This post will show you how to prepare for your venture capital job interview and nail the questions they throw at you.
We’ve coached hundreds of people on how to nail the VC interview. So fortunately for you, we have a pretty good idea of what works and what doesn't.
While we’re not going to focus on the typical interview questions you might get like: Tell us about yourself. What are your strengths and weaknesses? Where do you see yourself in five years? (Although it’s important to be prepared for these), we'll focus more on the industry and firm specific questions you might face.
So, in rough order of importance, here are the six most common venture capital interview questions and how to answer them.
1. Why this role, at this firm?
An obvious one, but don’t underestimate its importance. This very well could be one of the first questions you’re asked and will set the tone for the remainder of the interview.
What excites you about working in VC? Is it the pleasure of investing in startups and enjoying connecting with intriguing people? The excitement of focusing on new concepts and pursuing the next Apple? Is it working with a diverse range of startups? Relate your response to your chosen career and also why now might be the right time for you.
Ponder why working in VC is different than working for a portfolio company, and why those differences are intriguing to you. Perhaps it’s because you like advising and adding value to portfolio companies and getting a bird’s-eye view of the industry rather than focusing on one idea for years.
And of course, you also should tie it back to why you want to work at that particular firm. Is it the types of companies or sectors they invest in? Their culture or structure? There’s really no wrong answer here but you need to be specific, and make it sound authentic!
2. What sectors/startups are of interest to you right now and why?
There isn't really a wrong answer here either. The interviewer wants to evaluate your investment knowledge and your ability to research the market to reach realistic conclusions. As such, you need to do some research on markets and companies and come prepared with at least 2 to 3 solid ideas here. It’s also helpful to provide some thoughts on how you think the market will develop in the coming years.
Think a particular sector or startup is undervalued and poised for explosive growth? Bonus points here if you can form a sound argument that goes against the widespread consensus.
And if you’re going to talk about a specific startup (which you should), be prepared to cover the problem the company is solving, team overview, traction, competitors, as well as why you have a personal interest in them.
3. Walk us through how you would screen potential opportunities.
If you want to be a VC, you need to be able to spot the next unicorn right?
For this, you’ll want to run through the typical initial screening questions like the problem/solution they’re working on, how big they think the market will be (and how they came up with that), etc.
Then dive deeper.
How did the team meet, what are their backstories, how do they intend to build a durable competitive advantage?
Show the interviewer how thorough you would be during the due diligence process. Run through what info you would request from the company that goes beyond what’s shown in their pitch deck.
Discuss how you would request data on users, customers, sign-up rates, cancellation rates, and financial performance. Talk about what kinds of information you would want to know about the founding team, their business model and projects, and who else is on their cap table and why.
Read up on the sectors you’ve prepared to talk about, and see what you can glean about the firm’s approach as well. Can you spot any patterns in their portfolio companies when it comes to things like traction, market, future funding requirements, or technology? What seems to be the key factors for them?
4. What do you think of our portfolio? Which investments do you like? Which would you have passed on?
Don’t let this question scare you. It’s totally okay to be honest here. Try not to worry so much about offending anyone. And keep in mind, part of being a VC is having the willingness to have some uncomfortable conversations. Again, they really just want to see how you analyze a company and a market.
Choose a few of their portco’s and develop an opinion on them. It’s best to focus on 2 or so companies and prepare detailed thoughts on them rather than trying to cover each and every one.
What differentiates them? Who are their competitors? How fast is their market growing? What are some potential setbacks you anticipate? Go as deep as you can on this one. This is a great opportunity to impress your interviews with how much research you have done on their firm.
They might also ask you which of their investments you would have passed on. This is another great opportunity to develop a contrarian point of view. Don’t like their tech? Think they’re doing a poor job with marketing and branding? Think the market they’re in will grow slower than expected?
Maybe you’re interviewing with a firm that has an interest in AI but you believe artificial intelligence in the medical field is not a great sector because the technology just isn’t there yet, and legal/regulatory barriers will hinder adoption.
5. What VC resources do you read/subscribe to?
If you have a keen interest in working as a VC, hopefully you subscribe to some blogs and newsletters related to the industry. This is your chance to share those with your interviewer and show them how plugged in you are to the VC world.
It’s great if you have an interest in a specific sector or market and read content related to that. But it’s also important to show that you get your information from a variety of sources because you want to be a well-rounded VC.
If you’re looking for some new resources, we have plenty we can recommend.
If you haven’t read them yet, some books we recommend are The Secrets of Sand Hill Road by Scott Kupor, Breaking into VC by Bradley Miles, and Venture Deals by Brad Feld. These are great VC books.
6. What are the trade-offs between traditional equity financing and convertible notes?
We had to throw at least one technical question in here, didn't we? The truth is, they could throw any number of questions at you that test your technical skills and knowledge so be prepared. This one, however, is the one we see most often.
Do you know the important distinctions between traditional equity financing and convertible notes? If not, do some further reading.
In a nutshell, you should know that a convertible note is short-term debt that eventually converts into equity. They operate as loans and are typically issued in conjunction with future financing rounds.
When an investor loans money to a startup under a convertible note, instead of receiving the principal sum back with the accrued interest, the investor gets shares of preferred stock as part of the startup’s initial preferred stock financing.
Also, know that convertible notes can 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, on the other hand, allows the investor to receive shares in the company at the time of their investment and as such, the company’s valuation must be specified.
Try to remember the VC interview is just a conversation. If you take the time to practice, familiarize yourself with the firm, and you have a good understanding of how the industry works, you will come across as not only knowledgeable in the industry but also personable and well-prepared. That’s a winning combination.
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