Venture Capital interview preparation

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100

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Updated

September 2026

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All firmsGeneral Atlantic9Insight Partners7Silver Lake6Vista Equity Partners4Bessemer Venture Partners3ACAccel2Advent International2Battery Ventures2Andreessen Horowitz1Coatue Management1Sequoia Capital1WPWarburg Pincus1

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All topicsSourcing and deal flow5Market sizing and estimation8Founders and teams5Unit economics and cohorts11Term sheets12Cap table and dilution7Early-stage valuation7Portfolio construction6Board and governance4Down rounds and secondaries4Exits and liquidity4Fund economics5Sector theses and markets6India venture market6Fit and motivation10

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1. 049Why is it difficult to value a first-year company?Early-stage valuationIntermediatefirst roundSequoia CapitalVenture Capital · San Francisco · 2021

   Say this

   Because every valuation technique needs either cash flows or comparable multiples, and a first-year company has neither. There is no history to extrapolate, the distribution of outcomes is bimodal rather than a range, and the discount rate that would compensate for the risk is so high that a DCF produces nonsense.

   Then walk it

   1. No cash flows to discount. A DCF on a company with $200k of revenue puts 98 percent of the value in a terminal value ten years out, which means you are not valuing anything — you are writing down a guess and discounting it.
   2. No usable comparables. The company may be the first of its kind, and where comparables exist, a revenue multiple on a base of $200k gives you a number that moves by millions if the revenue moves by a rounding error.
   3. The outcome distribution is the deeper problem. A mature company's value is a range around a central case. A seed company is mostly zero with a small chance of being enormous, and an expected value calculated across a bimodal distribution does not describe any world that will actually happen.
   4. Risk is unpriceable in the normal way. The implied discount rate on seed-stage capital is somewhere between 40 and 80 percent a year. Nobody can defend a specific number in that band, and the valuation output is entirely determined by which one you pick.
   5. So what actually sets the price is not valuation at all: it is the amount the company needs for eighteen to twenty-four months, divided by the dilution the founder will accept, cross-checked against what similar rounds are clearing at this quarter. Price follows round size, not the other way round.
   6. And the investor's genuine frame is the reverse question: forget what it is worth, what does it need to become for this cheque to return the fund? At a $5m post-money for 20 percent, a $200m fund needs an exit near $1bn. Whether that is plausible is the actual decision, and it is answerable in a way that 'what is it worth' is not.

   Where candidates lose it

   Answering only 'there's no financial history'. True and shallow. The strong answer names the bimodal outcome distribution, the indefensible discount rate, and then flips to how seed prices are actually set — by round size and market convention, not by valuation technique. Then close with the fund-return test.

   Expect next

   • So how do you actually set the price?
   • What is the venture method?
   • What would you need to believe for a $5m post-money to be a good deal?

   Reported by candidates at Sequoia Capital (Venture Capital, San Francisco, 2021). Source: Wall Street Oasis.

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.