Suppose you’re trying to land a job in venture capital or have an upcoming interview. In that case, you’ve probably searched “venture capital interview questions” and may have encountered some questions from Indeed or Investopedia. While those pieces may be a good start, I was shocked at how generic the information was. Having worked with top VCs from Bloomberg Beta, Floodgate, Village Global, and more, I know those questions won’t prepare you for a venture capital interview. The purpose of this post is to guide aspiring VCs on how to prepare to ace their interviews rather than give you all the answers.
VCs may ask these questions to understand how you think about investing:
1. What’s an angel investment you have strong conviction in becoming a $10 billion+ company?
The VC wants to hear about what factors make for a compelling investment. For inspiration, check out the following:
- Bessemer Venture Partners shares investment memos from companies they’ve backed.
- Contrary Capital created Contrary Research, where they write structured memos on promising startups like Pave, BeReal, and Databricks.
- Packy McCormick’s newsletter, Not Boring, deep dives into exciting startups like Replit, Hadrian, and Capital.
2. What do you index on when evaluating a founder?
A VC may index on a founder’s ability to build, speed of progress, prior experience, references, outlier skill, or something else (for more details, read this). It’s essential to explain why you index so heavily on one or multiple factors when evaluating the quality of the founder. Try to tie your reasoning to a promising startup you think highly of or a previous investment you made that is doing well.
3. Which markets are most exciting to you?
Similar to evaluating a founder, investors also need to be able to assess a market. What makes a market exciting? You could mention its size, its expected growth, the talent entering the market (i.e., talent from Stripe, repeat founders, etc., are leaving to start companies in AI), or the infrastructure in place to support startups in the market (OpenAI, Microsoft, etc. for AI).
4. What are promising ways you see startups build moats today?
James Currier from NFX wrote a short piece on moats, or defensibility, highlighting traditional moats like network effects, scale, brand, and embedding, driven by a startup’s speed, capital, relationships, content, patents, and more. Moats are essential because they show whether a startup can achieve its potential scale and endure like Microsoft, Apple, Google, and others. As Peter Thiel said, “Competition is for losers.”
5. What metrics and benchmarks would you use to evaluate a SaaS startup?
Depending on the stage they invest at, a VC firm may ask you to use data to evaluate a startup investment in a specific industry. David Sacks and Ethan Ruby from Craft Ventures wrote a piece on The SaaS Metrics That Matter that I highly recommend checking out to show you how VCs think about benchmarks and metrics.
6. What’s your view on pricing? Are you pro being price-sensitive or pro investing regardless of the terms in promising startups?
Some top VC firms are price sensitive, like Floodgate, while others, like Founders Fund, are not. Sensitivity to valuation prices mainly depends on the fund composition and your conviction on the size of outcomes from winning bets in your portfolio. To practice, model out a $100 million fund with expected results and see how returns change based on different valuation entry points. From this, you can build a strategy based on anticipated sensitivity to price and expected outcomes from the portfolio.
7. What’s a startup we should invest in?
This checks for understanding of the VC firms thesis and again helps the VC learn more about how you think about startups and investing. You may also approach this question by picking a startup in their portfolio that is doing well and recommending doubling down on it. While not sexy, securing pro-rata in startups already in your portfolio can often be more important than a new investment which carries more risk.
8. What have you learned from investments you’ve passed on?
Every VC passes on investments that end up becoming winners. Check out Bessemer Venture Partners’ Anti-Portfolio, highlighting some companies they passed on. For example, they passed on Airbnb based on price, Paypal due to team and regulatory concerns, and Tesla because of the unit economics. What’s essential is for VCs to revisit their decisions to close the feedback loop and learn what they missed so that they can consider it for future deals. Hindsight is always 20/20.
9. What’s your investment thesis, and how has it evolved since you started investing?
While some VC firms do not have explicitly stated investment theses, they all have existing beliefs regarding what makes for a compelling investment. A strong answer incorporates market data in addition to personal data points. For example, you made three angel investments following your original thesis and three angel investments following your evolved thesis. Then, you can tie those investments into your answer based on how they are trending.
VCs may ask these questions to understand how you think about their VC firm:
10. How do you balance investments where they may impact the brand?
This is an interesting question because it forces a candidate to balance investment returns on a single deal with the downstream effects it may have on your firm’s ability to access future deals. For example, polarizing investments in political technology or defense tech can cause media backlash. There’s a famous story of Josh Wolfe, Partner at Lux Capital, making the press for fighting with his Partners who advised against investing in Anduril, a defense tech company.
11. What’s our firm’s reputation in the industry?
The VC learns how much homework you’ve done on the firm by asking this question. The best way to answer it is to come prepared with testimonials from people who have worked with them. What do portfolio founders say about them? What about co-investors? Including actual feedback about their reputation in the industry can make for the foundation of a compelling answer.
12. How would you improve our reputation as a firm in the industry?
There are several ways to improve a VC firm’s reputation. Here are some examples:
- Logo hunting can improve a VC firm’s reputation with founders, co-investors, and LPs. Eric Tarczynski, the founder of Contrary, shared that one of his biggest regrets wasn’t logo hunting early because logos are a proxy for access and credibility.
- Recruiting well-known investors or advisors to its roster.
- Creating informative and helpful content such as First Round Review, Contrary Research, or Paul Graham Essays.
- Executing initiatives outside investing such as the Kleiner Perkins Fellows Program, Accel Scholars, First Round Angel Track, or Signal NFX.
- Marketing your outcomes – if you got into the Uber, Airbnb, and Facebook of the world, you should be lining up podcasts, interviews with reporters, and finding ways to keep those founders involved with your brand. Y Combinator does a great job of this by getting Brian Chesky, the founder of Airbnb, to talk to every batch.
13. How do you see VC platform teams evolving?
Most platform teams help with customer introductions, recruiting, and fundraising. Are there new ways to better support portfolio companies with these things? Are there areas (i.e., design, storytelling, etc.) in which VCs should help portfolio companies in the future? The best answer would include actual feedback from portfolio founders of that VC firm on the type and level of support they desire with specific aspects of their businesses. Then, you could take it a step further and talk about the skillsets you would look for when recruiting platform team members and walk through some homerun candidate examples.
14. What are your thoughts on solo GPs, and what do you think traditional VCs can learn from them?
Unlike traditional VC firms, solo GPs or emerging managers don’t have the typical support Partners receive from their analysts, associates, platform teams, and more. Therefore, they must do it all – raise money from LPs, source investments, manage their back office, support portfolio companies, and more. As a result, solo GP firms are lean and efficient. Read about some of the best emerging managers and pick out strategies that traditional VC firms can use. For example, Hustle Fund sells merchandise, hosts an annual summer camp for investors, and runs Hustle Squad to bring in revenue to support its operations so they don’t have to rely on traditional management fees like traditional VC firms to staff up its team.
VCs may ask these questions to understand your reputation:
15. Who are some founders that think highly of you?
Not all references are built equal. For example, a successful venture-backed founder carries more weight than a founder with no track record. So make sure to pick high-signal founders who can vouch for you. The old business saying is, “It’s not about what you know; it’s about who you know.” This could not be more true in venture.
16. How do you help founders?
Are you proactive or reactive when helping founders? In what ways are you capable of helping founders? What asks do founders make to you over asking other investors they know?
17. Who are some investors that think highly of you?
Similar to founder references, not all investor references are built equally. For example, a tier-one investor is a better reference than an angel investor who the VC firm isn’t familiar with.
18. How do you work with your co-investors?
You may have a Rolodex of co-investors. How do you pick which deals to share with a co-investor? How do you prioritize certain co-investors over others? How do you find new co-investors and reciprocate deal flow? There are a lot of dynamics worth sharing when discussing co-investors, as some of these relationships may carry over to the VC firm.
19. How do you help investors?
Like founders, you can help investors in many ways besides sharing deal flow. What are other investors asking of you? What information do you share with them?
VCs may ask these questions to see how you source investments:
20. How would you build a repeatable system to source investments?
The best sourcing systems in VC are data-driven, repeatable, heavily automated, and have a personal touch. For example, CircleUp built Helio, which collects billions of data points from different sources to identify breakout consumer-package goods companies to invest in. While CircleUp is an in-house solution that took a lot of resources to build, you may opt for an approach that uses off-the-shelf tools to get a system up and running as you refine it over time. For example, you could combine OpenAI, Clearbit, Zapier, Airtable, and other tools to construct the foundation for a sourcing system within hours.
21. What metrics would you track to understand whether the sourcing system is working?
A VC sourcing system is like a sales funnel, but unlike a sales team, you must be more careful when blasting emails since your firm’s reputation could be on the line. Like any funnel, basic metrics you may track might include emails sent, open rates, response rates, initial meetings, and investments. With your funnel, you should set target benchmarks and discuss which metrics are the most important to optimize. For example, you may opt to optimize for response rates because that shows the emails are personalized enough to get responses from busy founders. Or maybe all you care about is the conversion from initial meetings to investments because that shows you are qualifying leads upfront well and not wasting precious Partner time on poor investment opportunities.
22. What tools would you use to build a sourcing system?
I mentioned earlier some tools that I would use, but here are some more:
- OpenAI – to craft personalized emails
- Zapier – to automate steps of the process and send emails
- Airtable – to track the status of deals in your pipeline
- Slack – to communicate with teammates on deals
- Clearbit – to ingest company data points and attach them to their record in Airtable
- Harmonic.ai – to find new startups
- Upwork – to find cheap labor to outsource manual and repetitive tasks which can’t be automated
For inspiration on connecting all these tools to build a streamlined sourcing system, you can read this post by Weekend Fund, which shares the tech stack they use to manage their investment process.
23. Where are the best founders coming from? Will that continue in the future?
It’s essential to incorporate data points on where the best companies and founders are coming from when starting your answer. For example, in this geographical distribution from Two Sigma Ventures, you can see that the United States still has over 50% of the world’s startup unicorns, but China and India are catching up. From this, you can review the founder profiles of each startup unicorn. For example, maybe the best startup founders studied Computer Science at Stanford, attended Y Combinator, or made it into the Thiel Fellowship. Hopefully, your deep dive uncovers some trends you can use to form a hypothesis on where the best founders will come from.
24. How does your strategy change when sourcing investments in the United States vs. Europe or Latin America?
The startup ecosystems around the world are very different. So when sourcing investments, one way your strategy may change is to involve the expertise of people comfortable with the market. This may mean recruiting and incorporating advisors in your sourcing process at points where they can help you find, review, and evaluate the startups coming from a region.
VCs may ask these questions to understand your perspective on the industry and world:
25. What is the biggest problem with venture capital and tech?
This question uncovers whether the candidate is value aligned with the role. While venture capital and tech have flaws, VC firms don’t want to hire someone who is too pessimistic about the industry’s outlook. It’s surprising how many people in tech and venture capital don’t want to be in tech and venture capital. A standard answer to this question is to focus on diversity, such as female founders getting less than 2% of the venture capital annually. While this is a significant issue, it’s also a generic answer. I was asked this question in an interview once. I talked about monopolies preventing market competition – companies like Facebook, Microsoft, Amazon, etc. own all the infrastructure, social media, and more which makes it hard for new startups to compete because even if they break out, they’ll likely be acquired rather than having the chance to surmount the well-funded incumbents.
26. Who’s a founder that you would portray differently if you were in charge of a tech media company?
One of the biggest gripes of the tech industry is how the media portrays them. I’m generalizing, but the media and America do not like people in tech. Several tech founders have been torn down by the press, including Mark Zuckerberg (Facebook), Adam Neumann (WeWork), Travis Kalanick (Uber), and more. Research some of these founders who have been put in the spotlight and create your narrative using facts on how you would portray them.
27. Which investors do you look up to?
You learn in venture by working with other investors. That’s why analysts, associates, and principals always shadow Partners and collaborate on work together. Investors are unique in what they look for when investing, how they build their brands, what they think about markets, and more. Study the investors you admire and share what makes them stand out and how you plan to incorporate your learnings to build your investing style.
28. What tech-related content do you read?
VCs must stay current on the latest trends, startups, and happenings. There’s tons of great tech-related content out there. Some of my favorites are Digital Native by Rex Woodbury from Index Ventures and 3 Things by Elaine Zelby from SignalFire.
29. What is one thing you believe to be true that most others would disagree with?
VCs don’t want to hire sheep who follow others blindly. Instead, they want people with strong opinions loosely held. You can keep this answer focused on a work-related topic or not. For example, a work-related answer may be something like you believe there are a lot of practical use cases for crypto. That’s contrary to what most think. A non-work related topic may be something like you don’t believe affirmative action in Universities helps its intended audience.
30. What’s something that you were very wrong about?
VC is a humbling experience because it’s inevitable that you’ll be wrong more often than not. It’s kinda like baseball, where the best hitters hit .300. VCs must be correct once. VC firms prefer hiring people committed to learning from their mistakes and evolving as investors. Like other questions in this section, you can approach this from a work-related topic or go the unconventional route.
31. How do you see venture capital evolving in 5 years?
Venture capital is changing. Some trends I’m following are the rise of Solo GPs, top startups being more geographically dispersed worldwide, VCs renouncing their VC status in favor of being registered investment advisors, VCs slashing their fund sizes to optimize for better returns, and more. To get started, read The State of U.S. Early-Stage Venture & Startups: 2022 by AngelList or State of Private Markets: Q4 and 2022 in review by Carta.
32. If you were raising capital for a fund, which LPs would you target, and are there any LPs you would be hesitant to take money from?
VC firms must balance their need to raise capital with who they take money from. Some LP sources include high-net-worth individuals, family offices, pension funds, university endowments, trusts, and more. An example of an LP dilemma a VC may face could be taking money from certain sovereign wealth funds. This relationship could cause backlash from founders, other investors, and the media. A solid answer to this question includes a model of total fund allocations by LP source, an outline of the strongest introductions to decision-makers, and a roadmap of the fundraising process (i.e., who to talk to first.)
33. Do you think VC firms with generalist investors working across stages and industries outperform those with specialist investors?
Some top VC firms like Founders Fund believe having generalist investors that work across industries and stages gives them a competitive edge over other VCs like Sequoia Capital and Andreessen Horowitz with specialist investors. Consider the pros and cons of both approaches and form an opinion on which strategy will lead to better returns. For example, specialist VCs may be faster and more efficient when identifying and reviewing deals within their expertise, which can lead to getting in hot rounds before they close. On the other hand, generalist VCs may have a higher volume of top startups to pick from because they are not restricted to one industry and, therefore, are less susceptible to a bad market or down year in terms of performance. So instead of having one path to achieve exponential returns, they have multiple paths.