MHR 322 EXAM#2

Identify LTV based on the following information for a co-working space: price/month: $500 cost/month to the coworking management company: $100 average tenant use: 25 units $10,000 $15,000 $12,500 Can't be determined

$10,000

the basic formula for Cost of Customer Acquisition (or Customer Acquisition Cost) is:

(Cost of sales and marketing to acquire new customers) / (number of new customers acquired)

You run a tshirt printing store. you estimate the cost of a single blank shirt + ink to be $12, and your selling price will be $18. the cost in time and materials to set up the printer for a new design is $60. what is your break-even quantity on a specific design? 10 shirts 5 shirts 3.33 shirts $6

10 shirts

All of the following are considered additional or secondary roles in the decision-making unit EXCEPT: purchasing department champion influencers people (or organizations) with veto-power

Champion

which part of the business model canvas describes the different groups of people or organizations an enterprise aims to reach and serve? markets key resources channels customer segments

customer segments

the core process for Lean Startup is Build, Learn, Measure true false

false

price is important in the functioning of an economy because it: helps venture capitalists raise investment capital is the main driver of stock value helps transmit information regarding supply and demand across the entire market is used to determine the taxes we owe to the government

helps transmit information regarding supply and demand across the entire market

in the video on "Debunking the Myths of Entrepreneurship," Eric Ries argues that what distinguishes successful ventures is: mostly a matter of luck having enough capital to survive at least one bad product launch pivoting from bad ideas to opportunities that have good product-market fit having the right idea at the right time and the right team to implement it

pivoting from bad ideas to opportunities that have good product-market fit

in the decision-making unit, the most important role in determining whether your product sells is: purchasing power primary economic buyer end-user influencer

primary economic buyer

according to the Mullins article on customer cash, companies that charge customers a predictable monthly fee in advance are using a: deposit model subscription model scarcity model value pricing model

subscription model

calculate CoCA based on the following information for a co-working space: total sales & marketing budget: $1,000 sales & marketing associated with bringing in new customers: $500 number of new customers acquired: 5 $5000 $200 $100 $2500

$100

you have invented a new treatment for sick cows that will save farmers $1000/treatment. the cost of producing each treatment is $20. assume you are following a 'value-based pricing' strategy. which of the following is your best pricing option for maximizing your profits? $1100 $19.99 $300 $30

$300

Use the following information: a new startup called DanO.com has launched a website where you can subscribe on a monthly basis to receive inspirational quotes and cartoons on the topic of entrepreneurship via email. The business has the following attributes: monthly subscription $15 cost of sending email is $5 average customer subscribes for 10 months and then drops the service placing 1000 google ads will cost $200 5% who see the ad go to the website to request more info customers that request more info receive a personal sales call that costs $20/call 60% of those who receive a call become a customer what is the cost of customer acquisition at DanO.com $50 $40 $24 $1200

$40

in the Daymond John interview, he talked about the importance of using influencers when starting FUBU. The influencers that had the most impact in the early days of his business were: rappers people magazine fashion bloggers NFL athletes

Rappers

you have launched a small business that builds an innovative type of widget from readily available components. you've already got some sales and even a small profit. you need money to expand your operations, mostly to pay for a few pieces of manufacturing equipment. which of the following is your best financing option? venture capital angel investment bank loan IPO

bank loan

in the video on "debunking the myths of entrepreneurship," Eric Ries argues that the goal of entrepreneurship is to: build an organization that will outlive the founders bring innovations to market as quickly as possible create value to reward the people who generate innovations advance society to the benefit of all people

build an organization that will outlive the founders

which of the following tools would be the most useful for identifying key assumptions about your business idea that should be tested? lifetime value calculation 3-D printer business model canvas/lean canvas entity selection (LLC, C-Corp) table

business model canvas/lean canvas

which part of the business model canvas describes how a company communicates with and reaches its customer segments to deliver a value proposition? key activities channels value proposition revenue streams

channels

which part of the business model canvas describes the types of relationships a company establishes with specific customer segments? channels customer relationships revenue streams value proposition

customer relationships

in the video on "Building the Minimum Viable Product," Eric Ries argues that the worst fate for any product launch is: a few customers like it but then no one else buys it customers give you no feedback at all customers hate it the product does not actually work

customers give you no feedback at all

assume you have completed a CoCA/LV analysis for your startup company. you have found that your cost of customer acquisition is greater than the lifetime value of a customer. based on this finding what should you focus on? decreasing the cost of customer acquisition increasing the cost of customer acquisition increasing the number of customers you acquire decreasing the lifetime value of customer

decreasing the cost of customer acquisition

mapping the process to acquire a paying customer usually requires all of the following steps EXCEPT: estimating how long it will take to generate a lead for a potential customer estimating the time and effort required to make the actual sale identifying which members of the decision-making unit you will need to access estimating the per unit cost of acquiring a new customer

estimating the per unit cost of acquiring a new customer

a debt investor cannot lose the entire value of the investment true false

false

a debt investor is generally willing to take a risk on an early-stage startup company if the company's innovation or technology appears to have good long-term potential true false

false

according to the art of startups by Bhide, most new ventures in the U.S. raise money from venture capital firms true false

false

banks are the primary source of initial investment dollars for startup companies in the software industry true false

false

calculating total addressable market for follow-on markets is essential relatively early in the venturing process because you need to be prepared to pivot if your beachhead market does not develop as expected true false

false

the persona for your product is also the primary economic buyer true false

false

according to the art of startups by Bhide, most startups should build a team by: focusing on identifying candidates who are passionate about the venture's underlying tech offering large cash and stock option packages to attract the best talent finding less-experienced people who want to build skills and capabilities hiring top-quality executives with extensive prior experience

finding less-experienced people who want to build skills and capabilities

if your business fails, what happens to the money invested by angels or venture capital firms (equity investments)? first you pay off the founders. then pay off the investors. then pay off the debtholders first you pay off the stockholders. if there's anything left, it might get paid out to the debt-holders or suppliers first you pay off any loans or trade payables (suppliers). if there's anything left, it might get paid out to the stockholders if the company can't pay them back, then the founders pay them back with personal funds

first you pay off any loans or trade payables (suppliers). if there's anything left, it might get paid out to the stockholders

which business model relies on the customer providing their credit card or billing information in advance and then being charged for small purchases, usually for digital goods with no physical value? operating and maintenance microtransactions advertising reselling the data collected franchise

microtransactions

which part of the business model canvas describes the cash a company generates from each customer segment? value proposition revenue streams products and services customer relationships

revenue streams

when developing your Product Plan, you seek to: serve a different persona with a different set of product or service features identify the closest geographical markets to keep you COCA low leverage online sales whenever possible systematize the process of generating new product or service features so that you can "lock in" low advertising costs in advance

serve a different persona with a different set of product or service features

which of the following would be the best way to test assumptions about a potential new restaurant in downtown Madison? invest $25,000 to set up a food cart next to Grainger conduct an extensive online survey of Madison residents to understand their preferences for eating at restaurants set up a table on Library Mall or on the Capitol Square, give away small free samples, and see if you can convince people to buy larger portions get a bank loan to open the restaurant on State Street

set up a table on Library Mall or on the Capitol Square, give away small free samples, and see if you can convince people to buy larger portions

when testing assumptions, even if "the dogs eat the dog food" you will still have to show that: the LTV is lower than the COCA you can produce the dog food at an affordable price someone will actually pay for the dog food the dog food is safe to eat

someone will actually pay for the dog food

all of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT: improve the quality of your leads (people who might be interested) speed through the sales funnel choose your business model with COCA in mind since some business models have higher costs and slower sales cycles target the customer segments with the longest sales cycles so you have the most time to close deals

target the customer segments with the longest sales cycles so you have the most time to close deals

in her video bootstrapping, Rebecca Lynn points out that when venture capitalists give you investment capital, they are expecting: that once they make the investment, they'll get out of your way unless you ask for help that your technology will prove out to be better than anything else out there that you'll pay the money back when you can that will scale the business incredibly fast

that will scale the business incredibly fast

the primary economic buyer is: the decision maker who will sign off on spending money the person who will actually use the product the person or department who handles the logistics of the purchase the person with depth of experience who can influence the rest of the decision-making unit

the decision maker who will sign off on spending money

in her talk on why business models matter, Ann Miura-Ko of Floodgate Ventures says that she likes to see a business model for a new venture because it shows: the key assumptions and hypotheses about why the venture could succeed whether the team is capable of implementing the business whether the venture's underlying technology will work or not whether a venture capital firm should invest in the venture or not

the key assumptions and hypotheses about why the venture could succeed

in the Commanding Heights video the Polish egg market was an example of: the lack of price controls caused the prices to initially climb and then decline the continuation of price controls allowed for a steady supply the lack of price controls caused the prices to initially climb and then stay at the high level the lack of price controls had no impact on the market

the lack of price controls caused the prices to initially climb and then decline

In the decision-making unit, an influencer is: the person with the depth of experience whose opinion can affect the rest of the decision-making unit an individual or organization with the ability to reject a purchase for any reason the person or department who handles the logistics of the purchase the person who wants the customer to purchase the product

the person with depth of experience whose opinion can affect the rest of the decision-making unit

all of the following are conditions for a Minimum viable Business product EXCEPT: the product is sufficient to start the customer feedback loop the customer gets value out of the product the customer pays for the product the product generates profit for the venture

the product generates profit for the venture

which of the following is a key principle of the "prototype mindset?" prototypes are only as good as the ideas behind them more prototypes are always better the prototype must appear real prototype now, build later

the prototype must appear real

all of the following are key factors when designing a business model EXCEPT: how much value your product provides to customer what the customer will be willing to do the incentives for your distribution channel what your competition is doing the strategy or core you will implement

the strategy or core you will implement

a key real-world lesson of the stories told about the electric car company "Better Place" in your readings is: there are limits of innovation and it is difficult to get consumers to embrace new technologies no matter how good the innovation is, the venture will still fail if it doesn't have the right team to drive implementation when the innovation is compelling enough, consumers will embrace new tech getting consumers to embrace new innovation requires having the right tech at the right time in the right place

there are limits of innovation and it is difficult to get consumers to embrace new technologies

In the video "to raise money or not part 2," the speaker points out that one of the key factors that helped them raise venture capital was: they got funding from an angel investor who was well connected in industry and with the VC firms they already had a fully functional software product that was being deployed at dozens of major customers they had a really well-written business plan with solid financial forecasts they had a highly qualified team of founders with extensive prior work experience in the space

they got funding from an angel investor who was well connected in industry and with the VC firms

calculating cost of customer acquisition also includes the cost of trying to sell to customers who ultimately choose not to buy the product or service true false

true

calculating the total addressable market size for follow-on markets helps you stay aware of the long-term potential of your business true false

true

generally speaking equity investors are willing to take higher risks than debt investors true false

true

mapping the process to acquire a paying customer can help you identify hidden obstacles that inhibit your ability to sell your product true false

true

the business model is a framework by which you capture value from customers based on the product or service you sell true false

true

valuation of an early stage company is usually at least as much art as science true false

true

venture capital firms are primarily driven by the financial returns; angel investors may have a personal interest in a specific technology or venture in addition to wanting a financial return: true false

true

when a company uses equity financing, it gives up partial ownership of the company in exchange for investor capital true false

true

when identifying key assumptions about your venture, you should carefully review your "next 10 customers" list true false

true

in her video on bootstrapping, Heidi Roizen comments that bootstrapping used to be the standard way to finance growth, but more entrepreneurs began relying on outside capital when: more entrepreneurs decided they were willing to give up more ownership of their companies sooner venture capital became cheap (because there was more of it) online platforms made it possible to access venture capital much more easily more ventures wanted to scale globally more quickly

venture capital became cheap (because there was more of it)

in "build, measure, learn" Eric Ries suggests that the core question behind lean thinking is: what new product will capture the largest share of the market? how much money will we need to bring our innovation to market? what research can we do in advance to identify a successful innovation? which of our efforts create value and which are wasteful?

which of our efforts create value and which are wasteful?