Oct 08, 2026 by Offer

M&G Investments Interview Questions 2027: Financial Modelling for Pre-Revenue Companies

For pre-revenue companies, abandon historical extrapolation and build a driver-based model: forecast the path to revenue from operating drivers (users, conversion, pricing), build costs bottom-up, run scenarios instead of a single forecast, and value the company with venture-style methods rather than a standard DCF.

M&G Investments Investment Analyst Interview: What This Question Assesses

The interviewer is testing whether you know that standard DCF mechanics break down without revenue history — and what replaces them. They want comfort with uncertainty, scenario thinking, and the judgment to choose the right tool for an early-stage company rather than forcing a mature-company template onto invented numbers.

M&G Investments Investment Analyst Interview: How to Model Pre-Revenue Companies

Model drivers, not financials: Forecast the business drivers first — addressable market, customer acquisition, conversion, pricing, retention. Revenue is an output of these assumptions, not an input.
Build costs bottom-up: Costs are more predictable — headcount plans, tech spend, and go-to-market costs estimated from the hiring plan and startup benchmarks.
Use scenarios, not point forecasts: Build base, upside, and downside cases around the key uncertainties: adoption speed, pricing power, funding runway.
Pick the right valuation lens: A DCF on invented cash flows is false rigour. Prefer the venture capital method (target exit value discounted at a high hurdle rate), comparable transaction multiples from similar-stage deals, or milestone-based valuation tied to de-risking events.
Focus on the funding path: Burn rate, runway to the next milestone, and dilution from future raises matter more than terminal value. The model must show whether the company survives to its value-inflection points.

Sample line: "I'd build a driver-based model across scenarios and value it on a venture-style exit multiple rather than a DCF — and I'd make the cash runway and dilution path the centrepiece, since survival to the next milestone is the real valuation driver."

Common Mistakes

Running a precise DCF on made-up numbers: Ten years of invented cash flows discounted to two decimals is false precision. Name the problem and offer alternatives.
Ignoring runway and dilution: For early-stage companies, cash survival matters more than terminal value. Always address it.
Single-scenario forecasting: One forecast for a pre-revenue company shows you don't understand uncertainty. Always present ranges.

Candidates who handle this advanced question well signal genuine investment judgment — which is exactly what m&g investments investment analyst interviewers are screening for. This question is commonly reported by candidates.

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FAQ

What is the venture capital method? Estimate the company's value at a future exit using expected earnings and a market multiple, then discount back at a high target return reflecting early-stage risk.

What discount rate would a pre-revenue DCF use? A very high one — but the honest answer is that the DCF framework is poorly suited here, and you should say so while offering better alternatives.

What are the key risks to highlight? Execution risk, funding risk, adoption risk, and dilution from future rounds — the model should make these visible, not hide them.

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