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. 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?
2. 023Walk me through a cohort analysis and tell me what you are actually looking for.Unit economics and cohortsIntermediatetechnicalEarly-stage VCGrowth equity

   Say this

   Group customers by the month they joined, then track each group forward over time. You are looking for three things: whether the curve flattens, whether later cohorts sit above earlier ones, and whether revenue per cohort grows after the curve flattens.

   Then walk it

   1. Build it as a triangle. Rows are join months, columns are months since joining, cells are the share of the cohort still active or the revenue they generate. Then read down the columns to compare cohorts and across the rows to see decay.
   2. First thing I look for: does the retention curve asymptote? A curve that flattens at 40 percent means you have a real product for 40 percent of the people you acquire. A curve that keeps sliding toward zero means you have a leaky bucket and paid acquisition is just filling a hole.
   3. Second: cohort quality over time. Later cohorts should retain better, because the product improved and targeting sharpened. If your newest cohorts are worse, either you are scaling into a lower-quality channel or the early cohorts were friends and design partners.
   4. Third, and this is where the money is: dollar retention within a flattened cohort. If month-24 revenue from a cohort exceeds month-1 revenue despite losing customers, the survivors are expanding and the business compounds without new sales.
   5. A concrete read: a consumer app at 25 percent D30 that flattens at 18 percent by month 6 is a real product. The same app sliding to 3 percent by month 6 is a paid-marketing treadmill regardless of how good the top-line growth chart looks.
   6. The two traps in the data itself: small recent cohorts look artificially good because they have not had time to churn, and a company that changed its pricing or its target segment mid-way has cohorts that are not comparable. Always ask what changed between cohorts.

   Where candidates lose it

   Describing the mechanics of building the table and never saying what a good one looks like. The whole value is in the three reads: flattening, cohort-over-cohort improvement, and dollar expansion. Also accepting aggregate retention — an aggregate number can look stable while every individual cohort is deteriorating, because new cohorts keep refilling it.

   Expect next

   • What does a flattening curve tell you that an aggregate churn number cannot?
   • What D30 retention would you want for a consumer app?
   • How would you spot a leaky bucket from the cohort table?
3. 024Give me the formulas for net revenue retention, gross retention and churn, and tell me which can exceed one hundred percent.Unit economics and cohortsIntermediatetechnicalGrowth equitySaaS-focused funds

   Say this

   All three measure the same cohort a year later. Gross retention counts only what you kept and is capped at 100 percent. Net retention adds expansion and can exceed 100. Churn is what you lost over what you started with. Neither retention figure includes revenue from new customers.

   Then walk it

   1. Gross revenue retention: starting ARR of a cohort, less churn and downgrades, divided by starting ARR. Expansion excluded, so it can never break 100 percent.
   2. Net revenue retention: starting ARR, less churn and downgrades, plus upsell and expansion, divided by starting ARR. Above 100 means the existing base grows on its own.
   3. Gross churn is one minus gross retention. Logo churn counts customers, not dollars, and the two diverge sharply — losing thirty small accounts and keeping two big ones can mean 30 percent logo churn and 95 percent dollar retention.
   4. Benchmarks worth knowing cold: best-in-class enterprise SaaS runs gross retention above 90 and net above 120. Mid-market sits around 85 and 105 to 110. SMB runs materially lower on both because small customers go out of business.
   5. Why it decides valuation: net retention above 115 percent means the business compounds without selling anything new, which is precisely what justifies a high revenue multiple. It is the single most predictive number in a software diligence.
   6. The manipulation to watch for: companies quoting net dollar retention on a subset — 'customers over $100k ACV' — which is always the best slice. Ask for it on the whole book, and ask whether it is calculated on a cohort or on a rolling trailing-twelve-month basis, because those give different answers.

   Where candidates lose it

   Mixing new-customer revenue into the retention calculation. It is a cohort metric and including new business flatters it badly. And not knowing which one can exceed 100 percent — that single detail reveals immediately whether you have ever actually built the number.

   Expect next

   • What does 140 percent net retention with 30 percent logo churn tell you?
   • Which matters more for valuation, growth or net retention?
   • How would you calculate net retention for a usage-based pricing model?
4. 027What metrics would you look at when valuing a retail company?Unit economics and cohortsIntermediatetechnicalSilver LakeTechnology, Media and Telecom · San Francisco · 2022

   Say this

   Same-store sales growth, gross margin, sales per square foot, inventory turns, and the payback on a new store. Retail is a unit-level business, so I would value the existing store base on cash flow and the growth story on how many more units can earn their cost of capital.

   Then walk it

   1. Same-store or like-for-like sales growth is the single most important number, because it strips out the flattering effect of opening stores. A chain with 30 percent revenue growth and minus 2 percent same-store sales is buying growth with capital.
   2. Unit economics of a new store: build-out cost, time to maturity, steady-state four-wall EBITDA, and therefore payback. Good specialty retail pays back in 18 to 30 months. Beyond that, expansion destroys value.
   3. Working capital and inventory. Inventory turns, weeks of cover, and the markdown rate. Retail failures are almost always inventory failures first — the P&L looks fine while the balance sheet fills with unsold stock that later gets discounted through gross margin.
   4. Cost structure: occupancy as a share of sales, because it is fixed and it is what kills you when traffic falls, and labour. Then the operating leverage question — how much can sales fall before four-wall EBITDA goes negative.
   5. For an omnichannel or e-commerce-heavy retailer, add CAC and repeat rate, contribution margin after delivery and returns, and the return rate itself, which in apparel can run 30 percent and quietly destroys the reported gross margin.
   6. Valuation itself: EV/EBITDA against peers, adjusted for lease obligations, since capitalised leases are debt in substance and post-IFRS 16 they sit on the balance sheet. And a sanity check on EV per store against replacement cost, which sets the floor.

   Where candidates lose it

   Valuing it like a software company on a revenue multiple, or quoting only same-store sales without the new-store payback. And forgetting leases — a retailer with $2bn of lease obligations and a headline low EV/EBITDA is not cheap, and in a tech-focused fund this is exactly the trap the question is set to catch.

   Expect next

   • How do you treat operating leases in enterprise value?
   • What is a good payback period on a new store?
   • How does the answer change for a pure e-commerce retailer?

   Reported by candidates at Silver Lake (Technology, Media and Telecom, San Francisco, 2022). Source: Wall Street Oasis.

5. 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?
6. 029How do the unit economics of a marketplace differ from a SaaS business?Unit economics and cohortsIntermediatetechnicalConsumer VCIndian venture capital

   Say this

   A marketplace has two customers and revenue is take rate on gross merchandise value, so the numbers to watch are contribution margin per transaction, liquidity, and repeat rate on both sides. SaaS has one customer and recurring contracted revenue, so retention and payback do most of the work.

   Then walk it

   1. Start with the revenue definition, because this is where founders obscure things: GMV is not revenue. Net revenue is take rate times GMV, and a company quoting a $500m GMV run rate on a 4 percent take rate is a $20m revenue business.
   2. Contribution margin per order is the core metric, and it has to be after all variable cost: payment processing, delivery, support, refunds, and any incentive or discount funded by the company. Indian food delivery and quick commerce both spent years with negative contribution margin per order while reporting GMV growth.
   3. Liquidity is the marketplace-specific concept with no SaaS equivalent: what share of listings transact, and how fast. It is the real measure of product-market fit, and it can look fine nationally while being broken in every individual city.
   4. So you analyse marketplaces city by city or category by category, never in aggregate. The question is whether the oldest, most mature city is profitable at the unit level, because that city is the only evidence of what the others become.
   5. Retention works differently on both sides. Supply-side churn is often the harder problem and is under-reported — a marketplace losing 60 percent of its sellers a year is permanently re-acquiring supply. And disintermediation matters: once buyer and seller know each other, do they transact off-platform?
   6. The genuine advantage over SaaS is capital intensity and network effects: no cost of goods in the classic model, and each side makes the other more valuable. The genuine disadvantage is that revenue is transactional, not contracted, so it can fall 40 percent in a quarter in a way software revenue cannot.

   Where candidates lose it

   Accepting GMV as the growth metric. Every marketplace deck leads with it because it is the biggest number available. Ask for net revenue and contribution margin per order in the oldest city, and know the word liquidity — that is the vocabulary check.

   Expect next

   • How would you calculate CAC for a two-sided marketplace?
   • What is disintermediation risk and how do you test for it?
   • Which side would you subsidise and for how long?
7. 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?
8. 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?
9. 033Explain full ratchet versus broad-based weighted average anti-dilution.Term sheetsHardtechnicalEarly-stage VCGrowth equity

   Say this

   Both reprice an earlier investor's shares if a later round is cheaper. Full ratchet reprices them all the way down to the new price regardless of how small the new round is. Weighted average reprices partially, in proportion to how much cheap stock was actually issued. Weighted average is market; full ratchet is punitive.

   Then walk it

   1. Full ratchet: you paid $10 a share, the next round is at $5, so your conversion price becomes $5 and your share count doubles. It does not matter whether the new round raised $1m or $50m. One cheap share resets everything.
   2. Broad-based weighted average: the new conversion price is a blend of the old price and the new one, weighted by the number of shares outstanding versus the number newly issued. A small down round moves your price a little; a large one moves it a lot. That is the economically sensible version.
   3. 'Broad-based' refers to the denominator: it includes options and all convertible securities, which makes the adjustment smaller and is better for founders. 'Narrow-based' counts only outstanding preferred, which makes the ratchet bite harder.
   4. Why this matters so much: the entire cost of a full ratchet is borne by the common and by any investor without the protection. In a serious down round, a full ratchet can take founders from 45 percent to the low twenties in one financing, which usually means they stop caring and the new investor has bought a management problem.
   5. Where you see it: distressed rounds, bridge financings from a position of weakness, and some late-stage structured deals where the investor accepted a high headline valuation in exchange for hard protection. The 2021 crossover vintage is full of it.
   6. And the standard carve-outs that stop it firing on trivia: issuances under the option pool, shares for acquisitions, and shares issued on conversion of existing securities are excluded. Without those carve-outs, granting employee options would trigger anti-dilution, which nobody wants.

   Where candidates lose it

   Getting the direction of broad versus narrow wrong. Broad-based is founder-friendly because the larger share count dilutes the adjustment. Also treating anti-dilution as a general dilution protection — it is not. It fires only on a lower-priced issuance, and it does nothing about ordinary dilution from a priced-up round.

   Expect next

   • Would you ever ask for a full ratchet?
   • What are the standard carve-outs from anti-dilution?
   • Who actually bears the cost of the adjustment?
10. 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?

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.