CH 12- Bootstrapping for Resources

As recent studies have shown, projects with spelling mistakes are how much less likely to be successful than projects without? a. 13% b. 27% c. 50% d. 75%

a. 13%

What percentage of startup businesses start without any formal investment? a. 98% b. 75% c. 50% d. 24%

a. 98%

Which of the following needs can be addressed primarily through crowdsourcing? a. A company wants to procure a library of freely downloadable photographs for its photo app. b. A company wants to increase profits by raising subscription fees to its video streaming app. c. A company wants to reduce waste in its manufacturing process by working with a single vendor. d. A company wants to raise funding to support expansion of its product lines.

a. a company wants to procure a library of freely downloadable photographs for its photo app

How does Kickstarter get its money? a. by charging a percentage of the funds obtained from each successful project b. by charging members a modest fee for posting their request c. by using crowdfunding themselves d. by listing themselves as a nonprofit and getting grants

a. by charging a percentage of the funds obtained from each successful project

The process of raising capital for a new venture from a large audience, usually through the Internet, is called ____________. a. crowdfunding b. penny pinching c. crowdsourcing d. bootstrapping

a. crowdfunding

Wikihouse freely provides user-submitted blueprints for anyone who wishes to build an affordable custom-built house with 3-D printing. This is an example of ______ because ______. a. crowdsourcing; it uses the expertise of the crowd to greatly reduce the cost of design and construction b. crowdfunding; it uses the Internet to quickly generate a large user base for Wikihouse c. bootstrapping; it allows amateur designers an opportunity to disrupt the construction business d. Wikifunding; it uses the open-source Wikipedia platform to generate new solutions and opportunities

a. crowdsourcing; it uses expertise of the crowd o greatly reduce the cost of design and construction

Crowdsourcing is a boostrapping method that saves money while obtaining valuable ______ resources. In addition to getting the information necessary to develop their products faster, what other benefit is there for the sponsor of crowdsourcing for medical treatment? a. information b. financial c. technological d. social media

a. information

Greg is using a fundraiser site and is offering 10 shares of stock to those who contribute a minimum of $100 to his product. What model of crowdfunding is Greg using? a. investor b. patronage c. reward d. lending

a. investor

How does equity crowdfunding differ from other types of crowdfunding? a. Investors are given the opportunity to become company shareholders. b. Funds are raised from a community of angel and venture capitalists. c. Funds are provided by the government. d. Financial institutions are allowed to raise funds on these sites.

a. investors are given the opportunity to become company shareholders

What is the characteristic of the patronage model of crowdfunders? a. investors provide financial support with no expectation of direct return b. investors are given prizes for their financial support, such as product samples or experiences c. equity is exchanged for the contribution d. funds are treated as loans

a. investors provide financial support with no expectation of direct return

According to the textbook, which is the most established crowdfunding site? a. Kickstarter b. Quirky c. Indiegogo d. Rockethub

a. kickstarter

When someone states, "I don't have money to start a business," what fact might one consider? a. Most businesses start without any formal investment. b. This is a valid reason for not starting a business. c. Formal investment will be needed to make a successful company. d. People who have no money cannot start a business.

a. most businesses start without any formal investment

Financial support given by backers without any expectation of a direct return for their donations is characteristic of the _____________ of crowdfunding.? a. patronage model b. lending model c. reward model d. investor model

a. patronage model

What must be offered by someone who uses Kickstarter for a fundraising project? a. They must create something to share with others. b. They must offer to return the exact amount of the contributed funds within a given period of time. c. They must offer to give a portion of their funds to a charity. d. A moneyback guarantee if a backer decides to rescind his or her contribution.

a. they must create something to share with others

What is the advantage of angel investor funding? a. You may gain advice and guidance. b. You will not have to pay for the investment. c. You will not be expected to use your own money toward your business. d. The funding is easy to attain.

a. you may gain advice and guidance

Why is it important to talk to others who have used crowdfunding? a. You will get a better idea of what to do and what to avoid in your campaign. b. You can engage them in your own campaign. c. You can gain valuable information about their product or service. d. They may want to buy your business.

a. you will get a better idea of what to do and what to avoid in your campaign

In reference to crowdfunding, a backer is best described as: a. a person who will pay back a loan if you fail to do so b. a person who contributes support in a crowdfunding venture c. a financial institution that lends money to a startup d. the financial institution that manages the transfer of money

b. a person who contributes support in a crowdfunding venture

Crowdfunding and crowdsourcing would both be considered which of the following strategies? a. formal fundraising b. bootstrapping c. angel funding d. none of these

b. bootstrapping

What is the name given to the process of building a business with very little funding? a. seed startup b. bootstrapping c. zero funding d. skeleton funding

b. bootstrapping

What project falls outside of Kickstarter's rules? a. technology products b. charities c. food and restaurant businesses d. retail stores

b. charities

What should a startup focus on when thinking about funding? a. Focus on following your balance sheet. b. Focus on the money on hand. c. Remember how much money you will make when the business is successful. d. Build a strong financial forecast

b. focus on the money on hand

What is the characteristic of the reward model of crowdfunders? a. investors provide financial support with no expectation of direct return b. investors are given prizes for their financial support, such as product samples or experiences c. equity is exchanged for the contribution d. funds are treated as loans

b. investors are given prizes for their financial support, such as product samples or experiences

The most established crowdfunding site is ____________. a. Indiegogo b. Kickstarter c. Crowdrise d. Tilt

b. kickstarter

In 2012, President Obama signed the JOBS Act, which ______________ in the U.S. a. legalized crowdfunding b. legalized equity crowdfunding c. outlawed equity crowdfunding d. legalized crowdsourcing

b. legalized equity crowdfunding

PatientsLikeMe is a social network for people living with a wide variety of diseases and medical conditions. Which of the following is an example of how PatientsLikeMe uses crowdsourcing in its business model? a. pharmaceutical companies provide financial backing for the site's network resources to reduce infrastructure costs b. members enter detailed medical information themselves to reduce labor costs associated with aggregating data c. founders host monthly social events for all full-time employees to promote a sense of community across the company d. a small group of members are paid to participate in market research projects in order to adjust the site in response to members' needs

b. members enter detailed medical information about themselves to reduce labor costs associated with aggregating data

Which of the following could not be offered in a Kickstarter campaign? a. free product or product sample b. participation in a cash award raffle c. presale delivery of the product or service d. free tickets to a play

b. participation in a cash award raffle

Gerry tries out his pitch with people who have not heard of his product before. What element of conducting a campaign is Gerry observing? a. set the right fundraising goal b. practice the pitch c. seek and accept advice d. get the campaign started

b. practice the pitch

Which of the following is NOT one of the basic rules of the crowdfunding site Kickstarter? a. Projects must create something to share with others. b. Projects must launch products within two months. c. Projects must be honest and clearly presented. d. Projects cannot fund-raise for charity.

b. projects must launch products within two months

Lorraine offers to give people a percentage of the profits earned from her theater production as a reward for donating $100 to the production's equipment. Kickstarter did not approve her campaign because: a. it was a theater production and not a product b. she wanted to offer a financial reward c. she was asking too much of an investment, given the reward d. she was asking too little of an investment, given the reward

b. she wanted to offer a financial reward

According to the text, small companies and individuals may choose to manufacture prototypes in China because Chinese factories can manufacture in ______ batches at ______ costs. a. multiple; moderate b. small; low c. frequent; high d. large; low

b. small; low

What made equity crowdfunding possible? a. the success of other crowdfunding sites b. the JOBS Act, signed by President Obama c. changes in Dow Jones d. advances in the software of crowdfunding sites

b. the JOBS act, signed my president Obama

What happens if the funds raised on Kickstarter exceed those specified at the start of the project? a. The excess money is contributed to a general fund. b. The owner of the project can keep the excess funds. c. No one is allowed to contribute once the goal has been attained. d. The excess must be returned to the last contributors.

b. the owner of the project can keep the excess funds

Of the following, what best describes the value of crowdfunding? a. Projects are easy to conduct. b. There are various options to funds other than giving a part of the company away. c. It is relatively risk free. d. It is the easiest way to get worldwide recognition.

b. there are various options to funds other than giving a part of the company away

Users of the popular GPS app Waze periodically report driving conditions while on the road, allowing all users to benefit from live traffic updates. Waze is an example of crowdsourcing because: a. users have free access to the same traffic information. b. users freely contribute traffic information for use by the app. c. the app has a very large and loyal user base. d. the app asks for donations at the end of each drive.

b. users freely contribute traffic information for use by the app

According to the text, in the crowdfunding model, the ______ is everything. a. formal proposal b. video pitch c. written description d. sales pitch

b. video pitch

What is the typical profile of the crowdfunding backer? a. retirees who enjoy the more direct form of investment b. young 24- to 35-year-olds who have an income over $100,000 a year c. 40- to 60-year-olds with incomes over $250,000

b. young 24 to 35 year olds who have an income over 100,000 a year

In addition to raising funds in a given period of time, what else is required in a Kickstarter project? a. The project must be available on a global basis since contributors can come from anywhere. b. Participants must subject themselves to a background check. c. A specific fundraising goal must be set and met within the time period allowed. d. They must create a video demonstrating or talking about their project.

c. a specific fundraising goal must be set and met within the time period allowed

Sharing medical information so as to help in the development of pharmaceuticals and medical devices that can be used to improve medical treatment is an example of: a. networking b. crowdfunding c. crowdsourcing d. angel investing

c. crowdsourcing

Using the Internet to attract, aggregate, and manage ostensibly inexpensive or even free labor from enthusiastic customers and like-minded people is called _____________. a. crowdfunding b. penny pinching c. crowdsourcing d. bootstrapping

c. crowdsourcing

The biggest problem experienced by successful crowdfunders includes: a. underestimating the costs associated with manufacturing their products b. manufacturing too many products without enough consumer demand c. delays and setbacks in product delivery, and failure to deliver the promised rewards d. manufacturing products that fail to meet consumer expectations for quality and reliability

c. delays and setbacks in product delivery and failure to deliver the promised rewards

What is the characteristic of the investor model of crowdfunders? a. investors provide financial support with no expectation of direct return b. investors are given prizes for their financial support, such as product samples or experiences c. equity is exchanged for the contribution d. funds are treated as loans

c. equity is exchanged for the contribution

What are the "3 Fs"? a. The three major sources of formal funding. b. A slang term meaning angel investors. c. Family, friends, and fools. d. Free financial funding.

c. family, friends, and fools

Unlike Kickstarter, Crowdfunder and Circle Up ________________. a. allow funding requests under $1000 b. allow funding requests over $5 million c. give backers the opportunity to become shareholders in a company d. do not allow companies to offer equity as a reward

c. give backers the opportunity to become shareholders in a company

Crowdfunding is a resource for _________. a. talent b. intellectual property c. money d. labor

c. money

Which of the following is an advantage of bootstrapping? a. You can expand your business faster. b. You will avoid risk. c. Outside investors are more likely to fund you if you have bootstrapped. d. All of these.

c. outside investors are more likely to fund you if you have bootstrapped

Seth starts his company with computers that he found on craigslist.com and some office furniture from the basement of his parents' home. This strategy would be considered which of the following? a. startup b. sweat equity c. penny pinching d. zero-based funding

c. penny pinching

Using whatever resources you have to save money while you are getting your business started is referred to as which of the following? a. seed money b. guerilla startup c. penny pinching d. skeletal startup

c. penny pinching

What is the most effective reward to offer to Kickstarter contributors? a. a cash award b. awards-in-kind that offer equivalent value for the cash contributed c. promising contributors that they will be the first to receive the product, along with a contribution award d. offering to list the person as a founding contributor on all product and service literature

c. promising contributors that they will be the first to receive the product, along with a contribution award

Crowdfunding can help you save money on marketing because it: a. provides customer service automation b. provides your customers with a free sample of your product c. provides you with an idea of the level of interest in your product d. provides all of these

c. provides you with an idea of the level of interest in your product

Crowdfunding can best be described as: a. obtaining funds from a group of professional investors b. obtaining funds from a small audience, who together form "the crowd" c. raising capital from a large audience, usually through the Internet d. a high-risk strategy to raise startup money

c. raising capital from a large audience, usually through the internet

Crowdfunding entrepreneurs should set a funding target that is: a. aggressive to signal confidence in the product or service for potential investors. b. low and easy to outperform in order to generate buzz around the product or service. c. realistic enough to attract backers but high enough to cover costs. d. as high as possible to generate as much initial cash as possible to infuse into the business.

c. realistic enough to attract backers but high enough to cover costs.

Kevin is about to launch a crowdfunding campaign and posts a request on his Facebook page, asking people to share their experiences on crowdfunding sites. What element of conducting a campaign is Kevin observing? a. set the right fundraising goal b. practice the pitch c. seek and accept advice d. get the campaign started

c. seek and accept advice

If you cannot convey your product or service idea to your audience of prospective financial backers in a few short sentences, you should: a. provide everyone with a detailed business plan document. b. abandon your product or service idea. c. spend time getting a clearer sense of the essence of your product. d. remind your audience that they are missing out on a unique opportunity.

c. spend time getting a clearer sense of the essence of your product.

One of the problems with the Coolest Cooler on Kickstarter was that: a. the USB charger caused electric shocks to several customers b. shipping was too expensive for more customers c. supporters lost faith over delayed production d. they crowdfunded on multiple sites, betraying community guidelines

c. supporters lost faith over delayed production

Jose starts a small restaurant. On weekends, he works with his cousin to construct the tables, chairs, and counters that will go into the restaurant. What is the name given to the result of these efforts? a. labor equity b. owner labor c. sweat equity d. family ownership

c. sweat equity

The huge amount of effort an entrepreneur puts in to get a business up and running is known as ___________. a. penny pinching b. bootstrapping c. sweat equity d. affordable loss

c. sweat equity

What should be done with the product concept in order to conduct a successful campaign? a. Provide schematic designs or service examples so that the product is clear. b. Offer samples of the product so that the investor can have a hands-on experience with the product. c. Test and refine the idea so that the product is clear and the investor knows what problem the product solves. d. Test the product with a survey or beta test prior to the campaign.

c. test and refine the idea so that the product is clear and the investor knows what problem the product solves

A company launching 100% through boostrapping would use this source of funding: a. angel investor b. venture capital funds c. the use of personal funds d. a bank loan

c. the use of personal funds

Which of the following describes the primary benefit crowdsourcing provided Local Motors? When building a new sports car, the company focused on designing essential parts like the engine and chassis that require expertise, while Local Motors had its community of hobbyists, designers, and engineers compete to design secondary exterior parts. a. They rapidly increased the number of employees working for the company. b. They raised money quickly to fund their development. c. They saved labor costs while improving efficiency. d. They were able to employ 3D design software

c. they saved labor costs while improving efficiency

What businesses can use crowdfunding? a. mostly photographers and filmmakers b. mostly high-tech startups c. mostly retail and real estate d. all of these

d. all of these

SuLin is setting up a small construction shop and uses his personal credit card to purchase the company's basic equipment. This process is referred to as which of the following: a. venture capital b. credit c. external funding d. bootstrapping

d. bootstrapping

According to the 2012 American Dream Composite Index, ______________ tend to be between the ages of 24 and 35, are more likely to be men, and to have an income of over $100,000 per year. a. bootstrappers b. crowdsourcing participants c. angel investors d. crowdfunding backers

d. crowdfunding backers

Wikipedia encouraging its users to edit and update its free online encyclopedia is an example of: a. patronage b. equity c. crowdfunding d. crowdsourcing

d. crowdsourcing

Crowdfunding that gives backers the opportunity to become shareholders in a company is called ______. a. crowdsourcing b. shared entrepreneurship c. professional fund management d. equity crowdfunding

d. equity crowdfunding

How much money can be raised through crowdfunding? a. only small amounts, under $1,000 b. small amounts, generally under $5,000 c. as much money as can be raised through family and friends d. from small amounts to amounts in the millions of dollars

d. from small amounts to amounts in the millions of dollars

What is the characteristic of the lending model of crowdfunders? a. investors provide financial support with no expectation of direct return b. investors are given prizes for their financial support, such as product samples or experiences c. equity is exchanged for the contribution d. funds are treated as loans

d. funds are treated as loans

Giving backers an equity stake in the business in return for their funding is characteristic of the _____________ of crowdfunding. a. patronage model b. lending model c. reward model d. investor model

d. investor model

Crowdsourcing is a resource for _________. a. money b. investors c. physical capital d. labor and talent

d. labor and talent

What happens in Kickstarter if the funds are not raised in the given amount of time? a. The project is automatically extended for another 30 days. b. The project owner can keep the money raised up to the end of the period. c. The project owner can transfer funds earned to a project of his or her choice. d. The money is not earned and no money will be received.

d. the money is not earned and no money will be received

Crowdsourcing refers to which of the following? a. attending every possible networking event to make valuable business connections b. increasing value or ownership interest created by someone as a result of hard work c. reimbursing all of your advisers and consultants with equity d. using the Internet to attain free or reduced labor from people interested in your product or cause

d. using the internet to attain free or reduced labor from people interested in your product or cause