Looking to break into Venture Capital? The VC case interview stands in your way. In this article, we’ll share how to approach a VC case interview, what to expect, and how to prepare.
Venture Capital (in some ways) draws on skills prized in both investment banking and consulting. Related to IB, you will always have to navigate some component of financial modeling (e.g., reviewing cap tables; projecting out multi-year P&Ls).
However, Venture Capital‘s true value proposition draws from consulting skills. Namely, the VC case interview tests critical thinking and problem-solving skills. As such, you’ll need to hone both your “investment banking” and “consulting” toolkits to have a chance at breaking in.
What Is A VC interview?
The VC interview is a comprehensive process that tests three skills/qualities in the following ways:
Skill 1: Problem solving and investing “intuition” – tested through:
- Pitching companies: Typically, in an interview, you will be asked to pitch a few companies that you think can be a good fit for the firm. Here, interviewers are testing your underlying “business sense.” While the business acumen will develop over time, candidates should understand, at a high level, if an opportunity can be a $1M opportunity or a $1B opportunity. Are you looking at a niche market / category with limited customer stickiness, or the next Facebook?
- Conducting a case study: A case study (case interview) is similar to a pitch in a lot of ways. The interviewer will tell you about a company, and it will be your job to probe into the companies’ performance and evaluate if the company is a good investment. But unlike a pitch, the case studies are not a “controlled environment” – you will need to think on your feet quickly and translate the facts into an overall recommendation.
Skill 2: Cultural fit, interest in the firm, and interest in investing – tested through:
- Understanding your story & leadership qualities: Questions include, How do you handle adversity? What are your strengths and weaknesses? Can you walk us through an investment banking deal or consulting project you worked on?
- Understanding your passion for investing: Questions include, Whose investing style do you want to emulate?
- Understanding why you want to work at a specific firm.
- Understanding why you want to work in a specific sector – Dependent on whether you are applying to a generalist or a sector-specific role
Skill 3: Technical skills – tested through:
- Technical questions Capital tables, valuation, market trends, etc.
- Modeling tests – Less common in Venture Capital as opposed to private equity
What To Expect in a VC Case Study Interview?
In a VC case study interview, you will be given a specific prompt around whether you should invest in company X or not. You’ll need to perform the necessary due diligence to answer the question. Typically, in Venture Capital, it is important to understand the overall market size, white space, differentiators, and customer retention / cost of acquisition to see if company X can be the next “Facebook.”
Throughout the interview, you will be asked specific questions to assess how you break down a problem and perform analysis. For example, to test your analysis skills, you may be given a graph to interpret or need to perform mental math on the spot.
In addition, you will be given materials to analyze to assess whether company X would be a good investment. For example, you may need to break down customer retention data to assess customer LTV and estimate customer LTV versus the cost to acquire a customer. Finally, you may need to use mental math to approximate the size of the opportunity (e.g., to approximate market size).
Typical VC Interview Questions
On the other hand, the fit portion of a VC interview is entirely qualitative and focused on understanding how your skills, personality, and experience fit with the firm and why you want to work in VC. Typical VC fit interview questions include:
- Pitch me a company you think would be a good fit for our portfolio (pro-tip: you will need to know this company extremely deeply and clearly lay out which criteria make it a good fit)
- What trends in the VC market do you find most interesting?
- Why do you want to work in Venture Capital?
- Why do you want to work in Venture Capital versus Private Equity?
- Why do you want to work at our firm?
- What are your strengths and weaknesses?
How Can I Prepare for A VC Case Interview?
There are multiple steps to take to prepare for a VC case interview (including a VC Associate interview):
- Understanding and prepping VC fundamentals:
- Market size
- Customer lifetime value
- Customer acquisition costs
- Practicing case interviews and knowing areas to probe on to understand if an investment is a good opportunity:
- Competitive landscape
- Quality of technology
- Customer retention
- Preparing ~3 startups to pitch
- Understanding technical fundamentals (cap tables)
- Understanding in great detail the trends and market landscape for industries you are interested in (main players, disruptive players)
- Knowing your story and why you want to work in earlier-stage investing versus private equity
Interviews for Venture Capital are multi-faceted, testing your business and financial skills as well as your “fit” with a company. To succeed in a VC interview, it is important to not only demonstrate excellent technical skills and strong business intuition but to also exude a passion for early-stage investing. For 1:1 VC case interview coaching with an expert, click here.
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