Venture Capital interview preparation

Questions

100

Traced to a firm

31

Firms

12

Updated

September 2026

Asked at

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

Topic

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

Level

AnyCoreIntermediateHard

Type

AnyTechnicalFitCaseMarket viewBrainteaser

1. 007Bottom-up or top-down market sizing — which do you trust, and why?Market sizing and estimationCorephone / first roundGrowth equity

   Say this

   Bottom-up, always, and I use top-down only as a sanity check. Bottom-up is units times price, built from things you can count. Top-down is a big industry number times a percentage you made up, and that percentage is doing all the work.

   Then walk it

   1. Bottom-up: number of potential customers, times the share you can realistically win, times what each one pays. Every input is arguable on its own terms, which is the point — the interviewer can push on one number rather than the whole thing.
   2. Top-down: 'the global logistics market is $10 trillion and we only need 1 percent.' That sentence has appeared in every failed pitch deck ever written. The 1 percent is unjustified and usually off by a factor of ten.
   3. Worked example. Indian restaurant POS software: roughly 500,000 addressable organised restaurants, maybe 40 percent can pay for software, at ₹2,000 a month that is ₹4.8bn a year, call it $58m of Indian SaaS revenue. Now you can argue about penetration and price with real edges.
   4. And notice what bottom-up just told you: a $58m market cannot support a venture-scale outcome on software alone, which is exactly why every Indian restaurant-tech company ends up in payments or lending. Top-down would never have surfaced that.
   5. Use top-down to check the order of magnitude. If bottom-up gives you $58m and the top-down says $6bn, one of them is wrong and finding out which is the real work.
   6. The honest limitation: bottom-up systematically underestimates genuinely new categories, because it prices at today's price point. So for a category-creating company I build bottom-up at the new price, not the old one.

   Where candidates lose it

   Saying 'both, they're complementary' and stopping. That is true and empty. Commit to bottom-up, then show one worked build with real numbers. The follow-up is always 'size it for me now', so have a live example ready.

   Expect next

   • Size the Indian SaaS market for restaurants, out loud, right now.
   • When does bottom-up mislead you?
   • What is the difference between TAM, SAM and SOM?
2. 009What is the difference between TAM, SAM and SOM, and which one actually matters?Market sizing and estimationCorephone / first roundGrowth equity

   Say this

   TAM is everyone who could conceivably buy the category, SAM is the slice this product and business model can actually serve, and SOM is the share you can realistically win in your planning horizon. SAM is the one that matters for the investment decision.

   Then walk it

   1. TAM: total addressable market, the whole category with no constraints. Useful only for establishing that the ceiling is not the binding problem.
   2. SAM: serviceable addressable market. Constrained by geography, segment, regulation, language, price point and what your product does today. This is where the honest number lives.
   3. SOM: serviceable obtainable market, your realistic share given competition and your distribution. For a seed company this is the five-year revenue ceiling, and it should be big enough to return the fund.
   4. Worked example. Global payroll software might be a $30bn TAM. Payroll for Indian companies with 50 to 500 employees is maybe a $250m SAM. Winning 15 percent of that is a $38m revenue business — a real company, and possibly too small for a $500m fund. That comparison is the entire decision.
   5. So the question I actually answer is: does the SOM support an outcome that returns the fund at the ownership I can get? Everything else is framing.
   6. The limitation worth naming: these boundaries are soft and companies move between them. Every great company's SAM expanded — Amazon's was books. So I hold the SAM number loosely and ask whether the expansion path is credible rather than assumed.

   Where candidates lose it

   Getting the definitions right and then failing to say which one drives the decision. Definitions are a two-mark question; the judgement is in connecting SOM to fund returns at your likely ownership. And do not confuse SAM with 'the market we're targeting first' — that is the beachhead, which is smaller again.

   Expect next

   • What SOM do you need for this to return a $200m fund?
   • Give me a company whose SAM expanded dramatically.
   • How would you size this bottom-up?
3. 014What do you look for in a founding team?Founders and teamsCorephone / first roundEarly-stage VCSeed funds

   Say this

   Four things, in this order: earned insight into the specific problem, the ability to recruit people better than themselves, unusual speed of learning, and enough resilience to survive three years of it not working. At seed, the team is most of what you are underwriting.

   Then walk it

   1. Earned insight. Not domain experience as a line on a CV, but a specific, slightly contrarian belief about the market that came from doing the work. The test is whether they tell me something about the industry I did not know and could not have read.
   2. Recruiting ability. The first ten hires determine the company, and the only evidence that matters is who has already said yes to them. If a genuinely impressive engineer left a good job to join, that is a stronger signal than any reference.
   3. Rate of learning. I compare what they said three months ago to what they say now. Founders who update fast on evidence compound; founders who defend the original plan do not.
   4. Resilience, which is the one nobody can fake for long. Most companies spend a long stretch looking dead. I look for prior evidence of finishing something hard with no external pressure to do so.
   5. On co-founder dynamics: clear decision rights, complementary skills rather than duplicated ones, and a track record of disagreeing productively. I would rather see two people argue in front of me than perform agreement.
   6. The honest limitation: founder assessment is where investors are most overconfident. My pattern-matching is largely a bias toward people who remind me of people who already worked, which is how whole categories of founders get missed. So I weight evidence from the business over my read of the person wherever I can.

   Where candidates lose it

   Giving the generic list — passionate, smart, hard-working. Everyone the fund meets is those things. The differentiators are recruiting evidence, rate of learning, and earned insight, all of which are observable. And you must name the bias problem, because the honest answer to 'how do you judge founders' includes 'imperfectly'.

   Expect next

   • How do you tell conviction from delusion?
   • Would you back a solo founder?
   • What is the strongest founder signal you have ever seen?
4. 019Walk me through CAC, lifetime value and payback, and tell me how each one gets manipulated.Unit economics and cohortsCoretechnicalGrowth equity

   Say this

   CAC is all the money you spent to acquire a paying customer, divided by the customers you actually acquired. LTV is the gross profit that customer produces over their life, discounted. Payback is how many months of contribution margin it takes to earn the CAC back. Payback is the one I trust.

   Then walk it

   1. CAC properly done is fully loaded: paid media, sales and marketing salaries and commissions, tools, and any onboarding cost, divided by new paying customers in that period. Not just ad spend.
   2. LTV is gross-margin based, not revenue based: ARPU times gross margin, divided by monthly churn, discounted if the life is long. Using revenue instead of gross profit inflates it by whatever your cost of service is.
   3. Payback in months is CAC divided by monthly gross profit per customer. Best-in-class B2B SaaS is under 12 months, acceptable is 12 to 18, and above 24 months you are running a financing business rather than a software business.
   4. The three manipulations to look for. One, blended CAC that folds organic and word-of-mouth customers into the denominator while only counting paid spend in the numerator — always ask for paid CAC on paid customers. Two, LTV built on an early cohort's churn, which is always the best cohort. Three, a churn assumption of 1 percent monthly applied to a company that is eighteen months old and has never observed a five-year life.
   5. The practical rule I would state: LTV/CAC above 3 is the convention, but it is nearly meaningless without payback, because a 5x LTV/CAC with a 36-month payback will kill the company on cash before the ratio ever pays out.
   6. One real number to anchor it: at $12,000 CAC, $1,000 monthly revenue and 80 percent gross margin, payback is 15 months. If monthly churn is 2 percent, implied life is 50 months and LTV is $40,000, so LTV/CAC is 3.3x. Both numbers are fine; the fragile input is that 2 percent.

   Where candidates lose it

   Quoting LTV/CAC above 3 as if it settles the question, and using revenue instead of gross profit in LTV. Also: not asking over what period CAC was measured. Founders present a good quarter. Ask for twelve months and for paid-only CAC, and the ratio usually halves.

   Expect next

   • Why do you prefer payback to LTV/CAC?
   • What is a good payback period for consumer versus enterprise?
   • How would you calculate CAC for a marketplace?
5. 022Explain the rule of forty and when it stops being useful.Unit economics and cohortsCorephone / first roundGrowth equitySaaS-focused funds

   Say this

   Revenue growth rate plus profit margin should sum to at least forty. It is a trade-off rule: the market will fund growth or profit, but it wants to see that you are deliberately choosing, not accidentally failing at both. It stops being useful at small scale and when the margin definition gets fuzzy.

   Then walk it

   1. The arithmetic: 60 percent growth with a minus 20 percent margin scores 40. So does 10 percent growth with a 30 percent margin. Both pass; they are completely different companies and would be valued very differently.
   2. Which margin? Convention has settled on free cash flow margin, because EBITDA margin in software lets you hide stock compensation and capitalised software development. Ask which one the company is using — the gap is often 15 points.
   3. Why it works as a screen: it captures the real question of whether growth is being bought at a sustainable price, in one number a board can hold management to.
   4. Where it breaks. First, at small scale: a company going from $2m to $6m of revenue is growing 200 percent with a minus 150 percent margin, which scores 50 and means nothing. The rule is designed for $50m-plus businesses.
   5. Second, it treats a point of growth and a point of margin as equally valuable, and the market does not. At a given score, the market has historically paid a meaningful premium for the growth-heavy version, because growth compounds and margin does not.
   6. Third, it says nothing about durability. A company hitting 40 on a base with 85 percent net retention is on a treadmill, and a company hitting 35 with 125 percent retention is a far better asset. So I would use the rule to start the conversation and net retention to finish it.

   Where candidates lose it

   Reciting the rule without asking which margin. Companies quote EBITDA when it flatters them and free cash flow when that does. Also applying it to early-stage companies where it produces nonsense — knowing the scale at which the rule applies is half of understanding it.

   Expect next

   • Which margin definition would you insist on?
   • Would you rather have 50 percent growth at minus 10, or 20 percent growth at plus 20?
   • What does the rule miss entirely?
6. 028How do you calculate runway, and how much should a company hold?Unit economics and cohortsCorephone / first roundEarly-stage VC

   Say this

   Cash on hand divided by net monthly burn, where net burn is cash out less cash in. The working answer since 2022 has been eighteen to twenty-four months at close of a round, because that is what it takes to hit milestones and still raise from a position of choice rather than necessity.

   Then walk it

   1. Net burn, not gross burn. Gross burn is total cash out; net is after collections. A company with $1m of monthly costs and $400k of collections burns $600k, so $9m of cash is fifteen months, not nine.
   2. Use a forward burn, not a trailing one. If they are hiring against a plan, burn in month twelve will be materially higher than today. Investors who quote trailing burn always overstate runway.
   3. The eighteen-to-twenty-four-month convention exists because fundraising takes three to six months and you need to be raising on nine to twelve months of cash, not three. Below six months, the terms are set by your balance sheet rather than your business.
   4. So the real question is milestone runway, not calendar runway: is there enough cash to reach the metric that makes the next round obvious? Twenty-four months of cash that gets you to a number nobody will fund is worse than twelve that gets you to one they will.
   5. The default-alive test is the sharper version of this. At current growth in revenue and costs, does the company reach profitability before the cash runs out? If yes, it is default alive and has genuine optionality. If no, it is default dead and the next raise is not a choice.
   6. One caveat on the arithmetic: a company holding customer deposits or deferred revenue has cash it has already sold. Runway off the gross cash balance overstates it, and that is a real error in marketplace and prepay businesses.

   Where candidates lose it

   Using gross burn instead of net, or quoting cash balance divided by last month's burn when the plan doubles headcount next quarter. And giving only a calendar number — the follow-up is always 'runway to what milestone', so build that into the first answer.

   Expect next

   • What is default alive versus default dead?
   • At what point do you tell a founder to cut?
   • How much runway should they have when they start raising?
7. 036What is a SAFE, and how does it convert?Term sheetsCorephone / first roundEarly-stage VCSeed funds

   Say this

   A simple agreement for future equity. You give the company money now and get shares later, when a priced round happens, at either a valuation cap or a discount to that round — whichever is better for you. There is no interest, no maturity date and no debt.

   Then walk it

   1. The point of it is speed. No negotiation on valuation, no board consent mechanics, a short standard document. A seed cheque can close in a week instead of six.
   2. Conversion: at the next priced round, the SAFE turns into preferred shares. If there is a $10m cap and the round prices at $20m post-money, you convert as if you had bought at $10m, so your money buys twice the shares the new investors get for the same amount.
   3. The discount version converts at, say, 20 percent below the round price. If both a cap and a discount are present, you take whichever gives you more shares — usually the cap in a round that goes well.
   4. Not debt, which is the key distinction from a convertible note: no interest accrual, no maturity, so no default and no repayment right. If the company never raises again and does not get bought, a SAFE can simply be worth nothing with no event to force the issue.
   5. The mechanics people get wrong: post-money SAFEs, which became the standard form, fix the investor's percentage of the post-money company, so all the dilution from the SAFE falls on the founders rather than being shared with the new round's investors. Pre-money SAFEs shared it.
   6. And the stacking problem, which is the real-world failure mode: founders raise SAFEs at rising caps for two years, then the priced round arrives and the combined conversion is far more dilutive than anyone modelled. I have seen founders discover they gave away 35 percent before the Series A. Always model the conversion before signing the next one.

   Where candidates lose it

   Calling it convertible debt. It is not debt — no interest, no maturity — and saying so immediately marks you as having read about it rather than used it. Also not knowing the pre-money versus post-money distinction, which is the single most consequential detail in the document.

   Expect next

   • What is the difference between a pre-money and post-money SAFE?
   • When would you use a convertible note instead?
   • A founder has raised four million dollars of SAFEs at three different caps. What happens at the Series A?
8. 053What is an LBO?Early-stage valuationCorephone / first roundAdvent InternationalTechnology, Media and Telecom · Palo Alto · 2020

   Say this

   Buying a company using mostly borrowed money, where the target's own cash flows service the debt. You put in a slice of equity, pay down debt over the hold with the company's cash generation, then sell — and your return comes from deleveraging, EBITDA growth and any multiple expansion.

   Then walk it

   1. Structure: a typical deal is 40 to 60 percent equity today, the rest debt, secured against the target's assets and cash flows. The debt sits on the company, not the fund.
   2. The three return drivers, and you should always name all three. Deleveraging: every rupee of debt repaid converts directly into equity value at a constant enterprise value. EBITDA growth: revenue growth plus margin improvement. Multiple expansion: exiting at a higher multiple than you paid, which is the least controllable and the one you should never underwrite.
   3. Worked version. Buy at 10x $50m of EBITDA, so $500m, with $200m equity and $300m debt. Five years later EBITDA is $75m, debt is down to $150m. Exit at 10x is $750m, less $150m of debt, so $600m of equity on $200m in. That is 3x, roughly a 25 percent IRR, with no multiple expansion assumed at all.
   4. What makes a good LBO candidate: stable, predictable cash flows, low capital intensity, a defensible market position, hard assets or contracted revenue to lend against, and an identifiable operational improvement. Cyclical, capex-heavy or pre-profit businesses are bad candidates.
   5. Why a venture investor should know this: it is increasingly the exit path. Software companies at $50m of ARR with slowing growth and positive cash flow are now bought by software-focused buyout funds rather than IPO'ing, so the LBO maths sets the floor price for a lot of venture-backed companies. Vista and Thoma Bravo have taken dozens of them private.
   6. The obvious limitation: leverage magnifies both directions. The same structure that turns a 10 percent EBITDA gain into a 30 percent equity gain turns a modest miss into a covenant breach, and it is the reason buyout funds will not touch a business whose revenue can fall 30 percent in a quarter.

   Where candidates lose it

   Describing the debt and stopping. Name the three return drivers explicitly — deleveraging, EBITDA growth, multiple expansion — because that is what the question is checking. And in a venture or growth interview, connect it to the exit path for software companies, which is why they are asking a VC candidate about LBOs at all.

   Expect next

   • What makes a good LBO candidate?
   • Which of the three return drivers matters most?
   • Why does an early-stage investor need to understand this?

   Reported by candidates at Advent International (Technology, Media and Telecom, Palo Alto, 2020). Source: Wall Street Oasis.

9. 062What does a venture investor actually do on a board?Board and governanceCoretechnicalGrowth equityIndian venture capital

   Say this

   Three real jobs: hire and if necessary replace the CEO, approve the things that cannot be undone, and make sure the company does not run out of money by accident. Everything else — advice, introductions, recruiting help — is valuable but is not a board function, and confusing the two is how directors overstep.

   Then walk it

   1. The fiduciary duty runs to the company and all shareholders, not to the fund that appointed you. That distinction matters in practice, because the moment a sale price is being negotiated your fund's preference and the common's interests diverge, and a director who behaves as the fund's agent creates real legal exposure.
   2. The formal work: approve the budget, approve financings and option grants, approve a sale, and set CEO compensation. Roughly six meetings a year, plus a lot of between-meeting contact that is where the actual influence sits.
   3. The single most important decision a venture board makes is whether the CEO is the right CEO for the next stage. It is rare, it is painful, and boards are systematically too slow at it — the modal error is eighteen months of hoping.
   4. The cash-watch job: knowing the runway to the month, forcing the conversation about the next raise nine months before the cash runs out rather than three, and being honest about whether the fund will support a bridge. A board that lets a company drift into a two-month cash position has failed.
   5. Then the non-board value-add, which is most of what a founder actually wants: candidate introductions, customer introductions, pricing and go-to-market pattern recognition, and being the person the CEO can say 'I am out of my depth' to. That last one requires you to have never punished honesty in a board meeting.
   6. The discipline to state: the board does not run the company. A director who starts directing functional decisions destroys the CEO's authority with their own team, and the good ones ask questions in the meeting and give opinions outside it.

   Where candidates lose it

   Answering with the value-add list — introductions, advice, coaching — and never naming the fiduciary role or the CEO decision. Those are the board's actual powers. And missing that your duty is to all shareholders rather than to your fund, which is the question behind most board-conflict scenarios.

   Expect next

   • What happens when your fund's interests and the common shareholders' diverge?
   • How would you handle a CEO who needs replacing?
   • What is the difference between a board seat and an observer seat?
10. 074Explain the J-curve.Fund economicsCorephone / first roundGrowth equity

    Say this

    A fund's reported return is negative for the first few years, then turns up sharply. Fees and expenses are charged from day one while investments are held at cost, so the net return starts below zero and only recovers once the winners get marked up or exit.

    Then walk it

    1. Why the dip: management fees of around 2 percent a year come out of committed capital immediately. Meanwhile companies are held at cost until a new round reprices them, so there are costs and no gains. By year two or three a fund is commonly showing a net TVPI of 0.8 to 0.9.
    2. Why it turns: as portfolio companies raise at higher valuations, the fund marks them up, and TVPI climbs. Then exits convert marks into cash and DPI starts rising, usually several years behind TVPI.
    3. Typical shape for venture: trough around year two or three, crossing 1x somewhere between years four and six, and peak distributions in years seven to twelve. Venture's J-curve is deeper and longer than buyout's because there is no cash yield along the way.
    4. The practical consequence for an LP: early-year IRR is meaningless and comparing a year-three fund to a year-eight fund is nonsense. LPs use vintage-year benchmarking specifically because of this.
    5. The consequence for the GP, and this is the part worth volunteering: the J-curve is why raising the next fund is hard. You go back to market in year three or four with a portfolio that shows a negative net return, and the pitch has to be built on the underlying companies rather than the headline number.
    6. One honest caveat: the shape can be manufactured. Marking up a company aggressively on a small insider round, or using a NAV facility, flattens the curve without creating value. Which is why an LP looks at DPI rather than the shape of the line.

    Where candidates lose it

    Describing the shape without explaining the two mechanisms — fees charged upfront, holdings carried at cost. And missing the fundraising consequence, which is the reason a GP cares about the J-curve at all. If you can add that marks can be managed, you are ahead of most candidates.

    Expect next

    • How deep does the trough usually get?
    • How does a GP raise Fund II while sitting in the trough?
    • What is a NAV facility and how does it affect the curve?

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.