Finally secured VC interview, what do I study?

I am very grateful to all the advice I received from this forum. I have now secured a final stage interview with the VC arm of a big pharma company. My focus will be on medtech and analytics, early to late investments.

I need some advice on what I should be revising, need to make sure all bases are covered, as the interview will focus on technicals. Interviewer's background is in both sciences and M&A.

Many thanks guys!

 

Hi Jokosor, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:

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No promises, but thought I'd mention a few relevant users that work in the industry: Sixiang-Xu jamesmyname Rafa31

Fingers crossed that one of those helps you.

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

As a starting point, understand all the standard valuation methodologies and know you're accounting. the WSO guides area good place to begin, and I would treat it like you would a banking/PE interview given that they were explicit about the technical nature of the interview.

Beyond that, make sure to understand the specific metrics used in the industry, market trends in the industry. Additionally, be able to speak to some of the companies in their portfolio and prepare a few investment ideas as well.

 

OK thanks, wasn't sure which valuation methodology was relevant, but I guess I'll just revise them all. Completely forgot about the proposed investment idea, so many thanks for suggesting it!

 

Congrats!

I'm also prepping for VCs interview. I'm not sure if this gonna helps you, but here you go:

1) AskIvy is a good place to start. Make sure you come out with 3 company to invest in and refine your investment thesis. Use Crunchbase to dig deeper into the company and the founder.

2) Read CB Insights. Follow their healthcare analyst (@nikillinit) on Twitter. Read whatever shit that he tweeted.

3) As @orangemarker" mentioned, you need to master the cap table valuation here. What happened when you've 2x liquidation preference or anti-dilution, etc etc. Frankly, I'm still struggling in this (alongside with some founders that sold their business for hundreds of million dollars and receive nothing. Nada!). Cap table tend to get messy as funding stage move forward

4) AI in drug making and cancer research are hot now. Make sure you know why and the current M&A trends there. (To illustrate how hot it is, there this 3-month-old startup that got acquired for $1 Bil, yes Billion with the B)

"Investing, done properly, is the study of businesses"
 

Thanks this is amazing advice! Already had the interview and it now turns out there was a surprise additional stage. They gave me a number of startups they currently intend to invest into, and asked me to write a report on each one, highlighting the best startup. They all target the same market, so they're looking for the best in class. Do you have any advice on what to include? So far, they all roughly raised about GBP20-30mil.

 
Best Response

I guess I'm late to the party.

This is tough as my focus is on the seed and series A funds. These funds focus on the product market fit and how the company can start hitting the growth pedal.

It seems like your targets had passed that (although there are startups that managed to raise $20 mil in seed funding). This means you need to think how the company can:

  • Further grow their business (expand to different geographic, customer segments, upselling, cross-selling, etc) and

  • Build their moat (figure out their positive loop feedback. For instance, $AMZN's great customer experiences> more sales> more data> more personalize experiences> great customer experiences).

But, in general VCs due diligence, DD are divided into 3 (applicable if you're lead investors and no party round):

  • Screening DD
  • Business DD
  • Legal DD (usually done by the lawyer, not the analyst)

Tuck B School, Openview Ventures, and VC List, all have great primers on the topic. But, I would like to highlight some that are not on the list and the one that I got from some VCs podcasts (Harry Stebbings 20 Mins VC podcast is da best!).

Screening DD:

This is where you screen companies based on their sector, stage, geographic, ticket size, industry, etc. I guess you already pass this stage since your firm invests in all stage, the targets are in your industry, and all of them raised almost similar ticket size. But, just double check to make sure the targets fit your investment criteria.

Business DD:

Some VCs ask for the targets' previous round decks just to compare the founders' story, see how the business had grown since its last round, and whether founders achieve the milestones that they promised to their previous investors. I believe this is a brilliant practice. But, in this case, you can't really ask the founders for their previous deck. What you can do is to find out which accelerator they're from, and watch their demo day online. Most startups are the alum to YC, 500 startups, Techstar, Entrepreneur First, etc accelerators. Then, compare it with the info on the news articles.

Remember these targets need to continue their growth. So, you need to take a look at the team background, especially on the VP and SVP levels. By this stage, the founders only focus on the vision and hiring for the company. The VP and SVP are the ones who will drive the growth. Find out if you can trust these people. For forward-looking, go to the tech job search website like Angel.co and see what kind of people they're hiring, how many of them, and how much they pay. Top talents are expensive. But beware if the founders are "serial entrepreneurs". Sometimes, they post a bunch of job ads on these websites prior to fundraising just to show they're growing when the fact is they're running out of money.

When it comes to the moat, look at their partners and how sticky the products are. In your case, you can just look at the partners' logo on the targets' website. The caveat here is that it didn't really show how much the Whale client paid in exchange of the logo being placed on the targets website.

I believe the product stickiness is based on logic. For instance, will a dental clinic want to risk losing all their patient data by switching to a new SaaS company to save $2K per year? Not really. In this case, the older SaaS company can raise the price without losing its customers.

Hope this helps and please correct me if I'm wrong here. You need to take all of this with a pinch of salt, as I'm not a VC

"Investing, done properly, is the study of businesses"
 

Not in VC, but based on conversations with some experienced partners....take this with a grain of salt. Not sure how it specifically works in CVC but somethings to consider / address,

Evaluate their management teams, business model, the market, and their fit with the fund. Does the fund have the ability to help the companies? Where is the fund in it's investment cycle? i.e. what is the time for potential exit (2x / 5x), does it fit with your time horizon? Do the companies have an exit strategy? which company has the best ability to scale the business and how quickly? Does the fund and the founder share the same goals especially with an exit strategy? How much are you willing to invest or how much dry powder available? how much is it going to take to scale / commercialize?

Know their valuations and cap tables, Are the option pools already included?

 

I can't confirm or deny that cap table= cap structure. But, what I mean by cap table valuation is this kind of calculation.

You know things like uncapped vs capped notes, liquidation preferences, etc. Most growth startup will have these kinds of terms on their cap table and it's really hard to calculate as they raise more fund. Most VCs use e-shares software to automatically calculate it, but I'm pretty sure they will never give you that during the interview.

"Investing, done properly, is the study of businesses"
 

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