300+ TOP Venture Capital Interview Questions – Answers

1. Why Do You Want A Job In Venture Capital?

Prepare for this question well as is likely to be the opening question of every interview you have. Good reasons include the love of the technology / science, excitement for investing in companies, enjoying communicating with interesting people, the thrill of looking at new ideas and chasing the next Google, etc.

2. How Are The Ipo Markets At The Moment?

Talk about whether the IPO markets are doing well or not, whether you think there is a bubble, etc. The state of IPO markets is critical to venture capital firms because this is one of the most common way for them to realise their investments, so you need to be able to demonstrate whether the markets are doing well (lots of high profile IPOs, high valuations) or not (stocks going down, IPOs postponed, etc).

3. What Are The Top Three Vc Firms In The Industry? Who Are Our Competitors?

• Helion Venture Partners :
  Investing in technology-powered and consumer service businesses, Helion Ventures Partners is a $605 Mn Indian-focused, an early to mid-stage venture fund participating in future rounds of financing in syndication with other venture partners.

Investment Structure:
Invests between $2 Mn to $10 Mn in each company with less than $10 Mn in revenues.

Industries:
Outsourcing, Mobile, Internet, Retail Services, Healthcare, Education and Financial Services.

Startups Funded:
Yepme, MakemyTrip, NetAmbit, Komli, TAXI For Sure, PubMatic. 

• Accel Partners: 
  Accel Partners founded in 1983 has global presence in Palo Alto, London , New York, China and India. Typical multi-stage investments in internet technology companies are made by Accel partners.

Investment Structure:
Invests between $0.5 Mn and $50 Mn in its portfolio companies.

Industries:
Internet and Consumer Services, Infrastructure, Cloud -Enabled Services, Mobile and Software.

Startups Funded:
Flipkart, BabyOye, Freshdesk, Book My Show, Zansaar, Probe, Myntra, CommonFloor.

• Blume Ventures:
  Venture capital firm, Blume Venture Advisor funds early-stage seed, startups, pre-series A, series B and late stage investments. Blume backs startups with both funding as well as active mentoring and support.

Investment Structure:
Provides seed funding investments between $0.05 Mn – $0.3 Mn in seed stage. Also, provides follow-on investments to portfolio companies ranging from $.5Mn to $1.5Mn.

Industries:
Mobile Applications, Telecommunications Equipment, Data Infrastructure, Internet and Software Sectors, Consumer Internet, Media, Research and Development

Startups Funded:
Carbon Clean Solutions, EKI Communications, Audio Compass, Exotel, Printo.

• Sequoia Capital India;
  Sequoia Capital India specializes in investments in startup seed, early, mid, late, expansion, public and growth stage companies.

Investment Structure:
SCI invests between $100,000 and $1 Mn in seed stage, between $1 Mn and $10 Mn in early stage and between $10 Mn and $100 Mn in growth stage companies.

Industries:
Consumer, Energy, Financial, Healthcare, Outsourcing, Technology

4. Why Not Go Into Private Equity?

Private equity and venture capital are two very different worlds. Good answers include: you prefer to invest in early stage companies, do not like the use of leverage by private equity, feel that there is more potential in venture capital, etc.

5. What Is Venture Capital?

capital invested in a project in which there is a substantial element of risk, typically a new or expanding business.

6. What Are The Features Of Venture Capital Investments?

• High Risk
• Lack of Liquidity
• Long term horizon
• Equity participation and capital gains
• Venture capital investments are made in innovative projects
• Suppliers of venture capital participate in the management of the company

7. What Are The Methods Of Venture Capital Financing?

• Equity
• participating debentures
• conditional loan

8. What Are The Venture Capital For Funding Process?

Venture Capital Process:

The venture capital funding process typically involves four phases in the company’s development:

• Idea generation
• Start-up
• Ramp up
• Exit

Step 1: Idea generation and submission of the Business Plan

The initial step in approaching a Venture Capital is to submit a business plan. The plan should include the below points:

• There should be an executive summary of the business proposal
• Description of the opportunity and the market potential and size
• Review on the existing and expected competitive scenario
• Detailed financial projections
• Details of the management of the company

There is detailed analysis done of the submitted plan, by the Venture Capital to decide whether to take up the project or no.

Step 2: Introductory Meeting

Once the preliminary study is done by the VC and they find the project as per their preferences, there is a one-to-one meeting that is called for discussing the project in detail. After the meeting the VC finally decides whether or not to move forward to the due diligence stage of the process.

Step 3: Due Diligence

The due diligence phase varies depending upon the nature of the business proposal. This process involves solving of queries related to customer references, product and business strategy evaluations, management interviews, and other such exchanges of information during this time period.

Step 4: Term Sheets and Funding

If the due diligence phase is satisfactory, the VC offers a term sheet, which is a non-binding document explaining the basic terms and conditions of the investment agreement. The term sheet is generally negotiable and must be agreed upon by all parties, after which on completion of legal documents and legal due diligence, funds are made available.

9. What Are The Types Of Venture Capital Funding?

The various types of venture capital are classified as per their applications at various stages of a business. The three principal types of venture capital are early stage financing, expansion financing and acquisition/buyout financing.

The venture capital funding procedure gets complete in six stages of financing corresponding to the periods of a company’s development

Seed money:
Low level financing for proving and fructifying a new idea

Start-up:
New firms needing funds for expenses related with marketingand product development

First-Round:
Manufacturing and early sales funding

Second-Round:
Operational capital given for early stage companies which are selling products, but not returning a profit

Third-Round:
Also known as Mezzanine financing, this is the money for expanding a newly beneficial company

Fourth-Round:
Also calledbridge financing, 4th round is proposed for financing the “going public” process

10. What Are The Advantages Of Venture Capital?

• They bring wealth and expertise to the company
• Large sum of equity finance can be provided
• The business does not stand the obligation to repay the money
• In addition to capital, it provides valuable information, resources, technical assistance to make a business successful

11. What Are The Disadvantages Of Venture Capital?

• As the investors become part owners, the autonomy and control of the founder is lost
• It is a lengthy and complex process
• It is an uncertain form of financing
• Benefit from such financing can be realized in long run only