18 hard cap table questions in VC interviews (with answers)

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Today’s deep dive: How to answer difficult cap table questions you may be asked in VC interviews

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How to answer difficult cap table questions you may be asked in VC interviews

If you’ve gotten to later stages of VC interviews, you may have encountered more difficult technical questions.

If you haven’t yet reached those stages, you may not have received these questions yet, in which case, you are prepping early. Congrats!

Cap table-related questions are just one of the few technical areas you could be quized on in VC interviews.

They test your understanding of:

1. Equity dynamics

2. Dilution

3. The implications of fundraising on ownership and control

Below are 18 hypothetical, challenging questions you might face. Though they may not be exact to what you’ll get, the concepts/mechanics of each will be the same.

Before we start, here are helpful guide to read before this one: 1) Understanding VC term sheets 2) VC exit model analysis 3) Understanding SAFEs.

Understanding Dilution and Ownership

1. If a company raises $10M at a $40M pre-money valuation, how much equity is being sold?

   • The company is selling 20% equity ($10M / $50M post-money valuation).

   • Founders’ ownership decreases proportionally based on their initial stake.

2. A company with 10M shares issues 2M new shares in a Series A round. What is the new ownership percentage of the existing shareholders?

   • Existing shareholders now own 10M / 12M = ~83.3% of the company post-funding.

3. How would you explain post-money ownership to a founder unfamiliar with cap table mechanics?

   • Post-money ownership is the percentage of the company an investor owns after their investment is included in the valuation (e.g., if an investor puts in $5M at a $20M post-money valuation, they own 25%).

Fundraising Impact

4. A founder owns 50% of their company pre-Series A but wants to raise $5M on a $15M pre-money valuation. How do you explain the trade-offs of dilution and ownership?

   • The founder’s stake will drop to 37.5% post-money ($5M / $20M post-money = 25% dilution).

   • Trade-off: More capital for growth vs. reduced ownership and control.

5. How would you assess the impact of multiple rounds of funding on a founder’s ability to retain a significant stake?

   • Each round dilutes ownership, and if a founder raises too much too soon, they may end up with <10% at exit.

   • Strategic fundraising and maintaining control over valuation help mitigate excessive dilution.

6. If a VC proposes to lead a round and asks for 20% equity, how would you calculate the amount of funding they’re providing based on the pre-money valuation?

   • If the pre-money valuation is $30M, 20% equity means the VC is investing $7.5M ($30M × 20% / (1 - 20%)).

Option Pool Questions

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