#17 - All In One VC Interview Question Guide (How To Answers Them) & Why Financial Skills Don’t Matter In Early Stage Venture To Break Into VC ?

👋 Hey there! Welcome to Wednesday's edition of this week's Break Into VC Newsletter. We've got a packed issue focusing on everything you need to break into venture capital.

• This Week’s VC Math Questions

• Deep Dive On The Most Popular Venture Capital Interview Questions (And How to Answer Them). Access Compressive Guide PDF.

• Today’s Tips From VC Professional “Why financial skills don’t matter as much in early stage venture to break into VC - VC Partner”

• 20+ Venture Capital Job Opportunities.

• Upcoming Global Online and In Person VC Events

• Must Read Articles on Startups, Tech & Venture Capital

VC CRAFTERS HUB

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• 2700+ US Angel Investors & VC Firms Contact Database (Email + LinkedIn Link) (Access Here)

• All-In-One Guide To Venture Capital Interview Questions (And How to Answer Them) (Access Here)

• 400+ French Angel Investors & Venture Capital Firms Contact Database (Email + LinkedIn Link) (Access Here)

• 1000+ Euro Tech Angel Investors & VC Firms Database (Access Here)

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• Early Stage Startup Financial Model Template For Fundraising (Access Here)

• Building Cap Table As A Founder: Template to Download (Access Here)

THIS WEEK’S VC MATH QUESTION

Thing About It & Select Your Answer

Last Newsletter’s VC Maths Answers: (1) 25% (2) 56%

DEEP DIVE

The Most Popular Venture Capital Interview Questions (And How to Answer Them)

How Should You Prepare for VC Interview? Well, by reading this article to start!

This article will show you how to prepare for your venture capital job interview and nail the questions they throw at you.

While we’re not going to focus on the typical interview questions you might get like: Tell us about yourself. What are your strengths and weaknesses? Where do you see yourself in five years? (Although it’s important to be prepared for these), we'll focus more on the industry and firm specific questions you might face that are not discussed commonly.

So, in rough order of importance, here are the most common venture capital interview questions and how to answer them.

1. Why this role, at this firm?

An obvious one, but don’t underestimate its importance. This very well could be one of the first questions you’re asked and will set the tone for the remainder of the interview. 

What excites you about working in VC? Is it the pleasure of investing in startups and enjoying connecting with intriguing people? The excitement of focusing on new concepts and pursuing the next Apple? Is it working with a diverse range of startups? Relate your response to your chosen career and also why now might be the right time for you.

Ponder why working in VC is different than working for a portfolio company, and why those differences are intriguing to you. Perhaps it’s because you like advising and adding value to portfolio companies and getting a bird’s-eye view of the industry rather than focusing on one idea for years.

And of course, you also should tie it back to why you want to work at that particular firm. Is it the types of companies or sectors they invest in? Their culture or structure? There’s really no wrong answer here but you need to be specific, and make it sound authentic!

2. What sectors/startups are of interest to you right now and why?

There isn't really a wrong answer here either. The interviewer wants to evaluate your investment knowledge and your ability to research the market to reach realistic conclusions. As such, you need to do some research on markets and companies and come prepared with at least 2 to 3 solid ideas here. It’s also helpful to provide some thoughts on how you think the market will develop in the coming years.

Think a particular sector or startup is undervalued and poised for explosive growth? Bonus points here if you can form a sound argument that goes against the widespread consensus.

And if you’re going to talk about a specific startup (which you should), be prepared to cover the problem the company is solving, team overview, traction, competitors, as well as why you have a personal interest in them.

3. Walk us through how you would screen potential opportunities.

If you want to be a VC, you need to be able to spot the next unicorn right? 

For this, you’ll want to run through the typical initial screening questions like the problem/solution they’re working on, how big they think the market will be (and how they came up with that), etc. 

Then dive deeper. 

How did the team meet, what are their backstories, how do they intend to build a durable competitive advantage? 

Show the interviewer how thorough you would be during the due diligence process. Run through what info you would request from the company that goes beyond what’s shown in their pitch deck.

Discuss how you would request data on users, customers, sign-up rates, cancellation rates, and financial performance. Talk about what kinds of information you would want to know about the founding team, their business model and projects, and who else is on their cap table and why.

Read up on the sectors you’ve prepared to talk about, and see what you can glean about the firm’s approach as well. Can you spot any patterns in their portfolio companies when it comes to things like traction, market, future funding requirements, or technology? What seems to be the key factors for them?

4. What do you think of our portfolio? Which investments do you like? Which would you have passed on?

Don’t let this question scare you. It’s totally okay to be honest here. Try not to worry so much about offending anyone. And keep in mind, part of being a VC is having the willingness to have some uncomfortable conversations. Again, they really just want to see how you analyze a company and a market.

Choose a few of their portco’s and develop an opinion on them. It’s best to focus on 2 or so companies and prepare detailed thoughts on them rather than trying to cover each and every one. 

What differentiates them? Who are their competitors? How fast is their market growing? What are some potential setbacks you anticipate? Go as deep as you can on this one. This is a great opportunity to impress your interviews with how much research you have done on their firm.

They might also ask you which of their investments you would have passed on. This is another great opportunity to develop a contrarian point of view. Don’t like their tech? Think they’re doing a poor job with marketing and branding? Think the market they’re in will grow slower than expected?

Maybe you’re interviewing with a firm that has an interest in AI but you believe artificial intelligence in the medical field is not a great sector because the technology just isn’t there yet, and legal/regulatory barriers will hinder adoption.

5. What VC resources do you read/subscribe to?

If you have a keen interest in working as a VC, hopefully you subscribe to some blogs and newsletters related to the industry. This is your chance to share those with your interviewer and show them how plugged in you are to the VC world.

It’s great if you have an interest in a specific sector or market and read content related to that. But it’s also important to show that you get your information from a variety of sources because you want to be a well-rounded VC.

If you’re looking for some new resources, we have plenty we can recommend.

If you haven’t read them yet, some books we recommend are The Secrets of Sand Hill Road by Scott Kupor, Breaking into VC by Bradley Miles, and Venture Deals by Brad Feld. These are great VC books.

Try to remember the VC interview is just a conversation. If you take the time to practice, familiarize yourself with the firm, and you have a good understanding of how the industry works.

However, interview questions are not limited to these examples. You may encounter dozens of different questions that interviewers will ask. We have covered questions related to:

1. Roles, Related Skills and Reasons for Interest

2. Intro / About You / Why VC Questions

   Include 8 questions and answers.

3. Previous Professional

   Include 7 questions and answers.

4. Role/Responsibilities/Passion Questions

   Include 10 questions and answers.

5. Potential “Technical” Q’s

   Include 13 questions and answers.

6. Questions You Can Ask to VC

   5 questions you can ask to VC.

We have covered these question (how to answer them) in “Break Into VC” compressive guide. All these questions and answers are curated from leading VC Partners….

You can access our compressive interview guide here………… (Download the pdf)

TODAY’S TIPS FROM VC PROFESSIONAL

Financial skills don’t matter as much in early stage venture - VC Partner

Most aspiring Venture Capitalists (especially people from tech/non-finance backgrounds) have this question about whether it's necessary to have advanced financial skills to break into VC. Here's what a VC Partner advises:

“ Honestly, financial skills don’t matter as much in the early-stage venture.

Here's why -

There is much less finance or math in the analyst role at an early-stage VC fund than you think. Given the difficulty in estimating future revenue streams at the early stage, most VCs don't use DCF (Discounted cash flow) to value companies. So if you have studied Arts or Commerce and do not have exposure to how public market valuations are done, then rest assured that it is not a handicap. It can be learnt. In fact, you may find many of the best venture investors, especially abroad have a liberal arts background.

Beyond the sourcing or the finding, there is the minding or the value add that you need to provide to founders, helping them win. If the startup does well, then you are locked in with the founder for a 5-10 year journey.

A lot of the help you provide is becoming a trusted sparring partner to the founder, providing a non-judgemental space for him or her to express his or her half-formed thoughts, and then helping them think through that. In addition, there is mentoring and counselling on various aspects including connecting them to other people. The venture business is a relationship business. It is intensely people-centric. Soft skills matter hugely.

That said, there is a lot of financial and quantitative thinking needed though (Finance and financial thinking aren’t the same!). You do need to see the startup and its performance in terms of various financial and product metrics. You need to be comfortable with Excel – especially as you support your existing portfolio on building (or evaluating) revenue and financial models for their fundraising.

To do really well in venture though, you would do well to see it as one branch of private markets investing. An understanding of how our peers down the funnel including those in the public markets side value companies, helps immensely.

The best venture investors thus get finance and risk from a first principles level. In fact, first principles thinking overall is a great skill to have in venture capital. You are seeing patterns or opportunities anew, and there isn’t a lot to fall back on. This is where the ability to think afresh from first principles matters.

This is specifically true for early-stage ventures (Pre-seed to Series A). Beyond that, you do need to have a good grasp of finance.”

VC JOB OPPORTUNITIES

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• Investing Teams - Alumni Venture | USA - Apply Here

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• Partner 22, Content Marketing, Investor Relations - a16z | USA - Apply Here

• Venture Partner - Biotech - NLC | Netherland - Apply Here

• Ventures Analyst - Plug and play tech centre | Brazil - Apply Here

• Investment Partner - M12 | USA - Apply Here

• Marketin - Iconiq Growth | USA - Apply Here

• Impact Investment Associate - Massmutual catalyst fund | USA - Apply Here

• Pre-MBA Analysts - 12 Flags | India - Apply Here

• Marketing & Communication Internship - Velocity Venture | Singapore - Apply Here

• Partnerships Manager - Techstars | USA - Apply Here

• Investment Associate - Koch Disruptive Tech | USA - Apply Here

• Deal Sourcing Analyst - Censie Capital Partner | India - Apply Here

• Partner 22, Content Marketing, Investor Relations - a16z | USA - Apply Here

• Ventures Analyst - Plug and play tech centre | Brazil - Apply Here

• Investment Associate - Perot Jain | USA - Apply Here

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DON’T FORGET

How Can People From Tech Background Break Into VC? (Highly Recommend)

Check out SWE2VC article’s - it’s written by VC Professionals where he shared insights on how people from tech background can make career in VC.

Discover the most interesting pre-seed startups every Tuesday and Thursday.

Check out these startup deals from PreSeed Now, it’s written by leading VC Partner.

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VC CRAFTER’S PICKS

Wednesday’s Must Read Articles On VC, Startups & AI

• Understanding VC Portfolio Management and Construction.

• When should startups prioritize PMF Score over NPS?

• How to make sure users share your product - "Peer-validated Share Rate"?

• Paul Graham's Views on Competitor Analysis and a Framework for Performing It.

• Circle’s Founder, Sid Yadav’s Views on Startup Valuation

• Guy Kawasaki’s The Venture Capital Aptitude Test (VCAT).

Join our VC Crafter slack community to learn, network and craft your path to venture capital.

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