Chapter 6

Most entrepreneurs are objective when they evaluate their new idea

False; Many entrepreneurs lack objectivity because engineers and technically trained people are particularly prone to falling in love with an idea for a product or service.

Most entrepreneurs are well schooled in the technology associated with their ventures

False; One common pitfall to new ventures is inadequate understanding of technical requirements because Failure to anticipate the technical difficulties related to developing or producing a product can sink a new venture.

Surprisingly, growth of sales is generally not considered a critical factor in assessing new ventures

False; The growth of sales through the start-up phase is another critical factor.

Solid analysis and evaluation of the feasibility of the product/service idea are critical tasks in starting a new business

True; A critical task in starting a new business is conducting a solid analysis of the feasibility of getting the product/service off the ground and entrepreneurs must put ideas through feasibility analyses to discover if their proposals contain any fatal flaws.

The basic suggested venture legitimation strategies include which of the following:

conformance manipulation creation

The type of venture that is expected to attract venture capital would most likely be a

high-growth venture

Which of the following as a factor contributing to new-venture failure?

product/market problems

Which of the following is critical to a product's success?

timing marketing approach objectivity

Poor financial understanding is characterized by which of the following?

inadequate understanding of costs and funding requirements

The decision of an entrepreneur to ignore the market is a safe one if he or she is sure that the idea will be a success

False; Assembling and analyzing relevant information about the marketability of a new venture are vital for judging its potential success.

Inflated owner ego, employee-related concerns, control factors and interpersonal problems are factors involved in which of the following causes for venture failure?

managerial problems

Many entrepreneurs lack _____ for their new venture.

objectivity

Three specific phases that a new venture goes through are

prestart-up, start-up, poststart-up

Using the failure prediction model discussed in the chapter, the risk of failure can be reduced by:

using less debt as initial financing and generating revenue in the initial stages

The entrepreneurial motivations of individuals relate to the entrepreneur, the environment, and the venture.

True; Although researchers agree that many reasons exist for starting a venture, the entrepreneurial motivations of individuals usually relate to the personal characteristics of the entrepreneur, the environment, and the venture itself.

New venture legitimacy is a major challenge for every entrepreneurial start-up.

True; New venture legitimacy is a major challenge for every entrepreneurial start-up because legitimacy is a resource that enables new ventures to overcome the "liability of newness," allowing for the acquisition of other resources such as financial capital, human resources, and strategic relationships.

Obtaining external financing is considered one of the major types of problems for a new venture during its first year

True; One of the classes of problems identified during the first year of operation is obtaining external financing.

An approach developed as a criteria selection list from which entrepreneurs can gain insights into the viability of their venture is the

feasibility criteria approach

Which of the following critical factors in the prestart-up and start-up phases considers whether the venture should be classified as lifestyle, small profitable or high-growth?

growth of sales

Venture classifications include which of the following types of venture?

high-growth ventures

A common pitfall in selecting a new venture is

poor financial understanding

The entrepreneurial motivations of individuals usually relate to which of the following factors?

the environment the entrepreneur the venture

There is a great abundance of reliable data concerning the start-up, performance, and failure of new ventures

False; In addition to the problems presented by the complexity of the factors in new-venture performance, it is difficult to obtain reliable data concerning start-up, performance, and failure.

Which of the following learning mechanisms are important for converting ideas into form in design methodology?

feedback prototyping qualitative research

Feasibility analyses include technical, market, financial, organizational, and competitive analyses

True; Feasibility analysis include technical or feasibility analysis of product or service, market or determination of market opportunities and risks, financial or analysis of financial feasibility and resources, organizational or analysis of organizational capabilities and personnel requirements, and competitive or analysis of the competition.