How important is it for an early stage VC Fund to understand the financial forecasts of a startup they are looking to invest in$?$

Question $1$Answer

a$.$

Crucial $-$ all VCs use Discounted Cash Flow Models to help to determine the Net Present Value of a startup like other investors who need to value companies or assets across industries.

b$.$

Very important $-$ without knowing the financial forecasts with accuracy, the VC fund cannot value the startup.

c$.$

Relatively important $-$ in the early stages, it is harder to ascertain with certainty what the financial forecasts will be$.$ What is important is understanding the runway or cash burn rate to achieve growth milestones.

d$.$

Important $-$ financial forecasts become important at Seed stage when you have revenue to be able to forecast and ascertain a valuation. From Seed stage it becomes easy to determine financial forecasts to base the investment decision on$.$