I recently received a fantastic comment asking thoughtful questions about startup financial projections, forecasts, MVPs, and how founders use numbers before their product is in the market. I replied directly on YouTube, but the exchange was so rich, that I wanted to bring it here and unpack it a bit more for the LearnProductMarketFit audience.
About the Video
In Fall 2024, I created a series of reaction videos to HBO’s TV show Silicon Valley’s Season 1 to share startup lessons. In this YouTube short from Season 1, Episode 2, Jared and Richard pull an all-nighter to deliver a business plan to their investor Peter Gregory. When Jared details all that he’s been able to accomplish, I couldn’t help but shout “NO” – this is not how you do it.
Watch the video then scroll down for the conversation.
Smart Question from a Viewer: Do financial projections mean anything?
Just stumbled on your channel searching Silicon Valley clips, and I’ll say that’s some great advice. Took me at least a week to lay out my startups costs and forecasts, and that was just the start.
I do have one question though, as a person conducting a lot of this myself: at what point does this really make sense and starts bringing in real insights? The moment you go to market it’s just chaos. All of your “analysis” and “projections”go down the drain. My hypothesis is that VCs use it to judge how well you as a founder and team reason, but there seems to be no real utility before you launch your MVP. What do you think?– @aldayel98
Financial Projections: Their Value to Preseed Startups
1. “At what point does this really make sense and start bringing in real insights?”
Forecasting is useful at the beginning as a reasoning exercise — not as a crystal ball. It helps you evaluate:
- Whether this is a business you want to run.
- If the idea has potential to scale or exit.
- Which revenue streams are most viable.
For example:
The amount I can earn from YouTube ads is far lower than what I make from speaking or workshops, but ad revenue is passive. Forecasting helps me decide which efforts to prioritize — not because I expect exact numbers to be accurate, but because it clarifies tradeoffs and effort-to-impact ratios.
Forecasts also matter when you’re deciding whether to fundraise. If you expect a six-month operational deficit before revenue picks up, that deficit becomes the amount you need to raise.
2. “All of your ‘analysis’ and ‘projections’ go down the drain.”
Yes — and that’s okay.
No forecast survives first contact with reality. You can set revenue goals, but you don’t control every variable. What you can do is reforecast regularly and treat your projections as living documents that evolve as you learn.
3. “VCs use it to judge how well you and your team reason.”
Absolutely.
I’ve done due diligence on behalf of investors for nearly 10 years, and I always look at the numbers through a strategic lens.
Your forecasts should reflect:
- Your go-to-market strategy
- Your hiring plan
- Your customer pipeline
These numbers tell a story. Even if they’re off by a mile, I want to see your logic and how well your team aligns with the assumptions behind the business model.
4. “There seems to be no real utility before you launch your MVP.”
See point #1 — the utility is less about prediction, and more about preparation.
Financial Projections & Product-Market Fit
Financial projections play an important role in aligning your product with your audience: You get to test the realism of your audience and pricing assumptions.
If you’re aiming for $500K in revenue, forecasting forces you to ask:
- How many customers do I need?
- At what price point?
- Is this audience big enough and reachable?
- Is that outcome possible with the product I’m building?
This analysis is core to what we do at LearnProductMarketFit.com – to ensure you’re designing a product for a specific audience that will actually pay for it.
There is enormous utility in forecasting before you launch your MVP if you view forecasting as a lens on your market.
Before building your product, forecasting gives you insight into whether your:
- Pricing is viable
- Market is big enough
- Goals are realist
You’re not just validating the product – you’re validating whether the business makes sense.
