PS#001: 3-Step Guide to VC Interviews
My mentality. That was my first mistake.
Early on, my mind was set on saying the “right” answer in these interviews.
It was the wrong approach.
Sure, I wasn’t entirely off base. You don’t want to give the wrong answer.
But, was giving the right answers in a 30-minute interview really going to differentiate me from other candidates? What was stopping other candidates from providing the same answers? How would the investors decide between candidates if they did?
I just couldn’t get comfortable with those odds.
Even if I did everything right, it didn’t feel like there was a way to really differentiate myself from other candidates. Maybe if I made it to the case study, I could separate myself. But, if you’re like me, I was getting rejected before I even had this chance.
So, I thought about the goal of these interviews for the VC’s…
Venture capitalists are trying to understand how you think.
They set up hypothetical situations so they can extrapolate how you’d perform in a REAL situation. It’s at best a poor proxy for future performance. Personally, I had a tough time explaining I could do this job in a 30-minute interview.
That’s when I realized I didn’t have to…
Don’t tell them. Show them.
When you think about it, there’s just not much you can do to differentiate yourself in a 30-minute interview. At some point, most of the answers start to sound the same. If you continue to play by those rules, you’ll just end up looking like every other candidate.
BUT, if you shift your focus from telling them to showing them, you’ll quickly separate yourself from the pack.
I’m going to show you how to do exactly this in 3 steps.
1. Take control of the interview process.
When you take control of the interview process, you’re already differentiating yourself from the other candidates.
There are two ways to do this:
Reach out to firms before they even open a formal interview process.
Come to interviews with your own plan to show that you can do the job.
In the first approach, you’ve already got a leg up on the competition because there may not be anybody else! Even better, since there is no formal process, you can control each interaction with the firm to show them you’ve got what it takes.
In the second approach, you’ll be separating yourself from the other candidates who are following the same interview process, answering the same questions. Meanwhile, you’ll spend your time demonstrating real value.
For both of these approaches, I’ve built a full tactical plan in my free course: How to Land a VC Internship.
For now, let’s talk about the two pieces of the puzzle: (1) demonstrating the venture skill set, and (2) highlighting your unique value.
2. Demonstrate the venture skill set.
The point of the interview process is to see if you can do the job of a venture capitalist. If you can take that question off the table, you greatly increase your odds of landing the job.
So, what does the venture capital skill set entail?
Broadly speaking, for a pre-partner role in venture capital, it includes the following…
Sourcing
Evaluating
Diligencing
Investing
Let’s dive into each of these.
Sourcing: Demonstrate that you can source high quality investment leads.
This is critical. Without deal flow, nothing else matters. This is the first skill you need to show them. Here’s how you can do that:
Build out 2-3 investment theses that are relevant to the fund(s).
Each thesis should include 50-100 companies that would fit your thesis.
Bring a printed copy (a memo, presentation, etc.) of this work to the interview.
Be prepared to discuss the thesis, including why it’s relevant and why you think there are VC-type returns available in this space.
Evaluating: Demonstrate that you understand the process of filtering and identifying the opportunities to pursue for their specific fund.
Once you have deal flow, you then need to show them you know how to pick ‘em. The best way to do this is to dig into your list and make some recommendations.
Take your list of 50-100 companies and identify the top 10-20 startups you’d pursue based on the firm’s fund strategy.
Be able to clearly articulate why you’ve identified these startups as top potential investment targets and why they fit the fund’s investment strategy.
Reach out to these companies to establish a relationship and learn more about how they are performing. If the VC firm is interested and you’re able to provide an introduction to the startup, then you’ve really demonstrated the first two skills (sourcing + evaluation).
Quick tip: When reaching out to companies, always attempt to provide value first. This can be by sharing your thesis, making introductions, offering to help with a project, etc.
Diligencing: Demonstrate that you can lead diligence for a startup by recommending a plan for vetting each of the top 10-20 startups.
Trust, but verify. Diligence is about making sure that your excitement about a startup is not misguided. Show them that you can be thorough in your analysis.
Identify the key risks associated with each of the startups.
Design a plan for better understanding and pressure-testing these risks.
Highlight how you would plan to engage with the startup throughout the process.
Investing: Demonstrate that you can structure a hypothetical investment by walking through the key aspects of the investing process.
Price matters. Structure matters. Finding a great company is important, but the entry point of an investment is also important. This is how investors meet their return thresholds.
Lay out a set of assumptions based on the information you’ve collected.
Recommend a valuation, investment amount, and structure for the round.
Highlight whether you’d lead or follow and what other investors you might look to include in the round (this will all depend on the fund’s strategy).
Based on the investment details from above, calculate the potential return on investment.
For these last two (diligencing and investing), I’ve provided guides and templates that you can use in my course: How to be a VC Associate.
In many cases, you won’t have an opportunity to do all of this in one interview or conversation. Start by demonstrating your ability to source and evaluate potential startups, but be prepared to go further if the opportunity presents itself.
3. Highlight your unique value.
You have value that is unique to you and gives you a certain perspective on the world. This is your super power as an investor.
This value may come in the form of prior work experience, personal experience, interests or hobbies, network connections, or all of the above. The form doesn’t matter, but the substance does. Whatever it is that makes you, YOU.
Use this perspective to differentiate yourself as a candidate.
Create a narrative that outlines your unique perspective.
Weave this perspective into your resume and investment thesis.
Highlight how this perspective can offer value to the firm and fund strategy.
There are no right answers to these interviews.
It’s all about leveraging the interactions as a platform to take control, demonstrate the venture skill set, and highlight your unique perspective.
