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. 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?
2. 075DPI, TVPI and IRR — which do LPs actually care about?Fund economicsIntermediatetechnicalGrowth equity

   Say this

   DPI, in the end. TVPI and IRR are opinions about unrealised value; DPI is cash in the LP's account. In the last three years DPI has become the only number that matters in a re-up conversation, because the industry is sitting on a large stock of marks that have not converted into cash.

   Then walk it

   1. Definitions cleanly: DPI is distributions divided by paid-in capital — realised cash. RVPI is residual value over paid-in — the marks. TVPI is the sum of the two, total value over paid-in. IRR is the time-weighted annualised return on the cash flows.
   2. Why DPI wins: it cannot be marked. A 3.5x TVPI in year nine with a 0.4x DPI means the GP thinks the portfolio is worth a lot and the LP has seen almost none of it. LPs have been burned by exactly that in the 2019 to 2021 vintages.
   3. Why TVPI still matters: for a young fund there is nothing else. In years one to five, TVPI and the quality of the marks are the only information, which is why LPs scrutinise the valuation policy and whether marks are supported by third-party rounds.
   4. Why IRR is the most manipulable: it is sensitive to timing, so early small exits inflate it, and a credit facility that defers capital calls raises reported IRR without changing a single underlying outcome. A GP quoting only IRR is usually quoting their best-looking number.
   5. How they are read together: TVPI tells you the size of the prize, DPI tells you how much has actually arrived, and IRR tells you how fast. A good fund is something like 3x TVPI with 1.5x DPI by year eight. Top-quartile venture historically needs roughly 2.5 to 3x net TVPI, and the DPI expectation for that fund in year ten is above 1.5x.
   6. And the one the LPs quietly use to cut through all of it: public market equivalent, comparing the fund's cash flows to what the same money in an index would have done. Venture has to beat the index by a meaningful margin to justify a decade of illiquidity, and a lot of funds do not.

   Where candidates lose it

   Reciting the definitions and not ranking them. Every LP conversation since 2023 has been about DPI, and a candidate who does not know that has not been paying attention. Also name the manipulation: credit facilities inflating IRR, and marks supporting TVPI, are the two things sophisticated LPs adjust for.

   Expect next

   • What TVPI and DPI would you expect from a top-quartile fund at year eight?
   • How can a GP flatter their IRR without creating value?
   • What is a public market equivalent and why do LPs use it?
3. 076Walk me through how carry actually works on a two-and-twenty fund.Fund economicsIntermediatetechnicalGrowth equityVC fund operations

   Say this

   Two percent of committed capital a year pays the firm's costs, and twenty percent of the profits is the GP's share of the upside. On a $100m fund, the GP earns roughly $18m of fees over the life and then 20 percent of everything above the capital returned — so a 3x fund generates about $40m of carry.

   Then walk it

   1. Fees: 2 percent of $100m is $2m a year, usually stepping down after the investment period, so over ten years it totals $15m to $18m rather than $20m. Critically, that money reduces what can be invested — you deploy $82m to $85m, not $100m.
   2. Carry: 20 percent of profits after the LPs get their capital back. A $100m fund returning $300m has $200m of profit, so $40m of carry to the GP and $260m to the LPs. That $40m is the reason anybody does this job.
   3. The waterfall order in a typical venture fund: return all capital first, then split profits 80/20. Most venture funds use a whole-fund or European waterfall, so no carry is paid until the entire fund's capital is returned. A deal-by-deal American waterfall pays earlier and requires a clawback.
   4. Preferred return, or hurdle: common in buyout at 8 percent, much less common in venture. Venture LPs generally accept no hurdle because the return profile is lumpy and long, and a hurdle on a J-curve asset behaves oddly.
   5. The two things that change the picture in practice. One, the GP commit — usually 1 to 3 percent of the fund from the partners' own money, which is the alignment LPs look at first. Two, carry is split internally, and how it is split between senior and junior partners is the real economics of a career in the industry.
   6. And the honest arithmetic on why fund size matters more than performance for a GP's income: 2 percent of a $1bn fund is $20m a year of fee income regardless of results. That is the structural conflict in the industry, it is why funds grow, and an LP's main defence is the GP commit and a fee step-down.

   Where candidates lose it

   Saying 20 percent of returns instead of 20 percent of profits. The capital comes back first. And forgetting that fees reduce investable capital — a $100m fund invests about $83m, which changes every portfolio-construction number. If you can name the whole-fund versus deal-by-deal waterfall distinction, you are well ahead.

   Expect next

   • What is a clawback and when does it apply?
   • Why do venture funds usually have no preferred return?
   • What does fund size do to the GP's incentives?
4. 077What return does a fund need to be considered top quartile, and what does that require of the portfolio?Fund economicsHardtechnicalSeed fundsVC fund operations

   Say this

   Roughly 2.5 to 3x net TVPI for an early-stage fund, which means about 3.5x gross before fees and carry. On a $100m fund that is $350m of gross proceeds, and given the power law it has to come from one or two companies, which sets a specific requirement on ownership and exit scale.

   Then walk it

   1. Work the gross-to-net gap first, because most candidates skip it. To return 3x net you need roughly 3.5 to 3.8x gross: fees consume 15 to 18 percent of the fund and carry takes 20 percent of the profit above capital.
   2. So $100m committed needs about $350m back gross. Apply the power law: expect half the portfolio to return under 1x, so the top two or three names have to produce $280m to $300m of it.
   3. Which fixes the requirement. One company producing $200m means either a $2bn exit with 10 percent retained, or a $1bn exit with 20 percent retained. Both are demanding, and the second is usually harder to hold through three rounds of dilution than the first is to achieve.
   4. That is why fund size is the binding constraint on strategy. A $100m fund can get there on a single $2bn outcome. A $1bn fund needs the equivalent of five of them, and there are not many $2bn-plus outcomes in a decade, which is the structural reason large venture funds underperform small ones on multiple.
   5. The other lever is DPI timing, because top quartile is measured by vintage against peers and an LP is looking at IRR too. The same 3x delivered by year eight rather than year thirteen is a completely different ranking.
   6. And the caveat about the benchmark itself: quartile data is self-reported, survivorship-biased, and the dispersion in venture is extreme — the gap between top and median in venture is far wider than in buyout. Which is why LP capital concentrates so heavily in the same handful of firms, and why a new manager's pitch is so hard.

   Where candidates lose it

   Quoting a net multiple and never bridging to gross. Fees and carry are a 20 to 25 percent haul and ignoring them makes your portfolio arithmetic wrong. And failing to connect the fund-return requirement to fund size — that connection is the whole reason the question gets asked.

   Expect next

   • So what exit do you need from your single best company?
   • Why do larger venture funds tend to return lower multiples?
   • How much should the gross-to-net gap be?
5. 078Who are the LPs in a venture fund, and what does each type actually want?Fund economicsIntermediatetechnicalVC fund operationsIndian venture capital

   Say this

   University endowments, foundations, pension funds, sovereign wealth funds, insurers, funds of funds, family offices and high-net-worth individuals. They all want returns, but they differ enormously in liquidity tolerance, ticket size and patience, and that determines the kind of fund each will back.

   Then walk it

   1. Endowments and foundations are the classic venture LP: long horizon, high tolerance for illiquidity, and the ones most willing to back a first-time manager. They also care intensely about access to the top firms, which is why they defend existing relationships.
   2. Pensions and insurers write the biggest cheques but have regulatory constraints, need to write $50m-plus to make the diligence worthwhile, and therefore cannot back a $75m seed fund at all. That constraint alone explains a lot of why funds grow.
   3. Sovereign wealth funds have become dominant at the large end and increasingly co-invest directly, which makes them both an LP and a competitor. Funds of funds provide access for smaller institutions and add a layer of fees.
   4. Family offices and individuals are the flexible money — faster decisions, smaller cheques, more tolerant of an unusual strategy — and they are where most first-time managers actually raise. The trade-off is that they are less reliable across cycles and can default on a capital call.
   5. What they all want beyond return: DPI, because cash is what funds their spending commitments. An endowment with a 5 percent annual payout obligation cannot live on marks. This is why the DPI conversation has dominated fundraising since 2023.
   6. The India-specific structure is worth knowing: domestic funds are typically set up as SEBI-registered Category I or II Alternative Investment Funds, with a large share of capital from Indian family offices, corporates and increasingly domestic institutions, alongside offshore feeders. The rise of domestic LP capital is one of the genuine structural changes in Indian venture over the last five years, because it reduces the dependence on a single global risk cycle.

   Where candidates lose it

   Listing LP types without saying what each one wants or what constrains them. The insight is that cheque-size minimums and liquidity needs determine which funds they can back, which in turn drives fund sizes upward. And for an India-focused firm, knowing the AIF structure and the growth of domestic LP capital is the difference between reading about the market and following it.

   Expect next

   • Why can't a large pension fund back a $75m seed fund?
   • What is an AIF and which category would a venture fund use?
   • How would a first-time manager raise a fund today?

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.