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. 030Walk me through the economic terms of a Series A term sheet.Term sheetsIntermediatetechnicalEarly-stage VC

   Say this

   Four economic terms do almost all the work: valuation and the amount raised, the liquidation preference, the option pool, and anti-dilution. Everything else in the economic section is either market-standard or a rounding error, and the control terms sit separately.

   Then walk it

   1. Valuation and amount. Pre-money valuation plus the new money equals post-money, and the investor's ownership is new money over post-money. Get straight which one is being quoted, because a $20m pre and a $20m post on a $5m cheque are 20 percent and 25 percent respectively.
   2. Liquidation preference. Standard is 1x non-participating: on an exit, the investor takes the greater of their money back or their pro-rata share of the equity. Anything above 1x, or participating, is structure and prices the deal differently from what the headline valuation suggests.
   3. The option pool. Usually 10 to 15 percent, set aside for future hires, and critically it comes out of the pre-money — so the founders fund it. This is the single most commonly misunderstood term on the sheet and it moves the effective price more than a valuation haggle usually does.
   4. Anti-dilution. Broad-based weighted average is market. Full ratchet is aggressive and rare outside distressed rounds. It only bites on a down round, which is exactly when it hurts most.
   5. Then pro rata rights, which are economically the most valuable thing an early investor gets: the right to keep your percentage in later rounds. In a power-law portfolio, the ability to put more money into the one winner is where a large share of fund returns actually comes from.
   6. And the control side, so you show you know the difference: board composition, protective provisions, drag-along, and information rights. Those are not economics, but a founder who trades a point of valuation for a lost board seat has made a much worse deal than they think.

   Where candidates lose it

   Listing terms without saying which ones matter. Interviewers want a hierarchy. And missing that the option pool comes out of the pre-money — get that wrong and your ownership maths is wrong, which is the whole reason the question gets asked.

   Expect next

   • Which of those terms would you give up to win a competitive deal?
   • What is the option pool shuffle?
   • What is the difference between 1x participating and 1x non-participating?
2. 031What is a liquidation preference, and why is 1x non-participating the norm?Term sheetsIntermediatetechnicalEarly-stage VCGrowth equity

   Say this

   It is the preferred shareholder's claim on exit proceeds ahead of common. One times non-participating means the investor chooses: take the money back, or convert and take their percentage. It is the norm because it protects downside without taxing the upside, which keeps the founders' incentives clean.

   Then walk it

   1. Mechanically, on a sale the preferred stack gets paid first up to the preference amount, and whatever is left goes to common. Non-participating means it is an either-or, not a both.
   2. Worked example. Invest $10m for 20 percent at a $50m post-money, 1x non-participating. Exit at $30m: take the preference, $10m, rather than 20 percent of $30m which is $6m. Exit at $200m: convert and take $40m. The crossover is at $50m, which is exactly the post-money.
   3. So the preference is a floor, and above the post-money valuation it is irrelevant. That is why it does not distort behaviour: in the outcomes venture actually cares about, the investor is just an equity holder.
   4. Participating preferred is different: the investor takes the $10m and then 20 percent of the remaining $190m. On a $200m exit that is $48m instead of $40m. It is called double dipping and it is standard in private equity, unusual in clean venture rounds.
   5. Why the market settled here: founders and employees hold common, and a heavy preference stack means the common is worth nothing in mid-sized outcomes, which destroys the incentive to sell for $80m rather than gamble. Investors learned that misaligned exits cost more than the preference earns.
   6. Where you still see more than 1x: down rounds, structured late-stage deals, and 2021-vintage crossover rounds where investors bought a high headline valuation and took 2x or 3x senior preference to protect themselves. Always ask for the full preference stack before you believe a valuation.

   Where candidates lose it

   Describing the preference and not running the arithmetic. The follow-up is always a numerical exit-waterfall question, so have the crossover logic ready: below the post-money take the preference, above it convert. And know that the preference stack, not the headline valuation, tells you what a late-stage round really cost.

   Expect next

   • Run me the waterfall on a $60m exit with $20m of 2x participating preferred.
   • What is a participation cap?
   • Is the preference stack senior or pari passu across rounds, and why does it matter?
3. 034Why do pro rata rights matter so much to an early-stage fund?Term sheetsIntermediatetechnicalEarly-stage VCSeed funds

   Say this

   Because in a power-law portfolio the money is made by putting more into the one company that is working, and pro rata is the contractual right to do that. It is the cheapest option you will ever own: the right, not the obligation, to buy more of a company you already know better than any new investor.

   Then walk it

   1. What it is: the right to maintain your ownership percentage by participating in future rounds at the new price. Not a discount — you pay the new round price. The value is access, not price.
   2. Why it is so valuable: after two years on the cap table you have information no incoming investor has. You know whether the metrics are real and whether the founder tells you bad news early. Exercising pro rata on your best company is the highest-information investment decision available to you.
   3. The maths of a seed fund depends on it. A $50m seed fund writing $1m cheques into fifty companies gets diluted to nothing by Series C unless it follows on. Reserving half the fund for follow-ons into the top five names is how the return actually gets built.
   4. It becomes contested precisely when it matters. In a hot round the new lead wants the whole allocation and will pressure the company to cut earlier investors. A hard pro rata right, ideally with a super pro rata provision at seed, is the only defence.
   5. The catch is capital: the right is worthless if you have not reserved for it. Funds that deployed 100 percent into initial cheques end up selling their pro rata to an SPV or letting it lapse, which is a real and recurring way seed funds underperform.
   6. One honest limitation: pro rata can also be a trap. The psychological pull to follow on into a company you already own, because you know it and you are anchored on your entry price, is strong. The discipline is to re-underwrite it as a fresh investment at the new price, and pass if you would not buy in cold.

   Where candidates lose it

   Describing pro rata as a right to buy at the old price. It is not — you pay the new price. And treating it as a minor administrative term. In the follow-up the interviewer will ask how much of the fund you would reserve for it, so have a number and a reason.

   Expect next

   • How much of a $100m fund would you reserve for follow-ons?
   • When would you deliberately not exercise your pro rata?
   • What is a super pro rata right and when would you ask for one?
4. 038Valuation cap or discount — which one binds, and when would you prefer a convertible note over a SAFE?Term sheetsIntermediatetechnicalEarly-stage VCSeed funds

   Say this

   The cap binds whenever the next round prices above the cap divided by one minus the discount, which in practice means the cap binds in any round that goes well. You take whichever gives you more shares. A note instead of a SAFE when you want a maturity date, interest, or creditor standing.

   Then walk it

   1. Worked comparison. $10m cap, 20 percent discount, next round prices at $40m post-money. The cap gives you shares as if you bought at $10m. The discount gives you $32m. The cap wins by a wide margin, and it usually does.
   2. The crossover: the discount only wins if the round prices below the cap divided by 0.8, so with a $10m cap the discount only matters below $12.5m. Since most seed investors set caps well below what they expect the Series A to be, the discount is near-decorative.
   3. So in diligence, read the cap and treat the discount as a footnote. And if a SAFE has no cap at all, the investor is taking whatever the next round prices at, which is a genuinely bad deal masquerading as founder-friendly.
   4. Why choose a note. A note is debt: it accrues interest, typically 5 to 8 percent, and it has a maturity date, usually 18 to 24 months. That maturity is leverage — if no priced round happens, you can demand repayment or renegotiate from a position of strength.
   5. So the rule of thumb: SAFE when you trust the founder and the company is clearly on a path to a priced round; note when the company might drift, when you want creditor seniority in a wind-down, or when local law makes SAFEs awkward.
   6. That last point matters in India. SAFEs are a US construct and the Indian equivalent is usually a compulsorily convertible preference share or a CCD, structured to satisfy FEMA pricing rules for a non-resident investor. So a fund investing into an Indian-domiciled company generally cannot just paper a standard SAFE, which is one of several reasons companies flip to Delaware.

   Where candidates lose it

   Saying you take the lower of the two, or reasoning about price instead of share count. You take whichever yields more shares, which is the lower effective valuation. And not knowing that a note has a maturity date while a SAFE does not — that is the only structural difference that ever changes an outcome.

   Expect next

   • What happens at a note's maturity if no round has happened?
   • Why can't you use a standard SAFE in India?
   • Would you invest on an uncapped SAFE?
5. 040Explain drag-along and tag-along rights, and who each one protects.Term sheetsIntermediatetechnicalGrowth equityIndian venture capital

   Say this

   Drag-along lets a defined majority force everyone else to sell on the same terms, which protects the deal from being blocked by a small holdout. Tag-along lets a minority join a sale a larger holder has negotiated, which protects them from being left behind in a company controlled by a new owner.

   Then walk it

   1. Drag-along: if holders of, say, a majority of preferred plus the board approve a sale, all other shareholders must sell. Without it, an acquirer who needs 100 percent of the shares can be held hostage by a former employee with 0.3 percent.
   2. The negotiation on drag is the threshold and the carve-outs. Founders push for a high threshold and a minimum price, so they cannot be dragged into a cheap sale that pays the preference and leaves common with nothing. That protection is reasonable and usually granted.
   3. Tag-along, sometimes co-sale: if a major shareholder sells, minority holders can participate pro rata on the same terms. It stops the founder or a large fund quietly selling control while leaving small holders as minorities under a stranger.
   4. So the asymmetry is simple: drag protects the majority's ability to transact, tag protects the minority's ability to exit. Most term sheets contain both, aimed at different risks.
   5. In practice the term that gets used far more often is drag, and the moment it matters is a mediocre exit. A $70m sale with a $60m preference stack means the common gets almost nothing, and the only reason it closes at all is that drag prevents the founders from refusing.
   6. One India-specific note: Indian shareholders' agreements carry both, and enforceability against a non-signatory has been litigated, so the articles of association have to reflect the SHA. A drag right that exists only in the SHA and not in the articles is a much weaker right, and that is a standard diligence check on an Indian cap table.

   Where candidates lose it

   Getting them the wrong way round, which happens constantly under pressure. Anchor it: drag drags you along, tag lets you tag along. And know why founders negotiate a minimum price into the drag, because that is the point where the term stops being boilerplate and starts deciding whether anyone on the team gets paid.

   Expect next

   • What threshold would you want on a drag-along?
   • Why would a founder want a minimum price in the drag?
   • What is a right of first refusal and how does it interact with these?

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.