Are balance sheets or profit and loss statements necessary to produce for early stage startups with no revenue?
Investors absolutely need to know the specific financial status of a company before they invest, because they are going to be part owners of the business. How much would you be willing pay someone to take over their bank account if you had no idea how much was in it?
So yes, it is absolutely standard practice for investors to require both existing financials that document the current state of the company into which they are investing, as well as projected financial statements giving them some idea of what you believe you will be able to make, and what you believe it will cost, if they invest.
Of course, if you are a brand new start up which has spent nothing, received no income or investments, and has no assets, then your statements will be very simple. On the other hand, there might then be a question as to how much the company is actually worth…
*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *
Written by David S. Rose
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