Entrepreneurs often ask me why investors expect financial projections for a new startup even before the product is built and while the market is still being defined. I tell them that the projection process and results are most important for you the founder, to evaluate if there really is a business that can be built from the idea. You shouldn’t invest in an undefined business.
Investors can’t really evaluate any new business, but they can assess the logic behind your numbers, and compare that logic to their experience and rational business norms. Most have developed their own financial “rules of thumb” that will help them decide if your startup is fundable, in conjunction with their assessments of your team and your basic business concept.
