When an entrepreneur is posed with this question by a potential investor, how do you answer it? What is the investor looking for? Does it mean that they do not believe my projections? Are they testing me for my resolve? How reliable are my numbers?

The real problem with this question, of course, is that it is not clear and can be interpreted in these and many other ways. While it is usually not a good policy to answer a question with a question (it can make it seem that you are dodging the question), you might be better off asking a follow-on question to help clarify their intent.

How about something like: “Are you interested in our plans if we are not able to reach our funding goal OR do you need more information on how we are going to use these resources to meet our milestones?”  You need to be prepared to respond to either or both.

This might also your chance to explain any alternative plans that you may have to impress upon the investor your focus on capital efficiency and the specific objectives that you are trying to reach with your additional capital.

On the other hand, as an investor, I might also be interesting in fleshing out if that amount is the full amount that you believe will be needed to drive to break-even. If not, I would need to know how much in follow-on money would be needed and if the amount you are asking for will take you to break-even — is there a smaller amount that could take you to an important milestone that might enable you to raise the remaining amount more easily?

What I am trying to do is to assess the remaining risk in your venture and if you understand that risk. Have thought thru your goals, your plan to get there (with any contingencies), your ask and how it will be used?

In the end, I need to know how our money will make a difference in your success.