Entrepreneurship Final

Early-stage financing

A stage of financing which involves larger funds provided for companies that have a team in place and a product or service tested or piloted, but has little or no revenue

Not-for-Profit Entities

A tax status granted to companies performing functions deemed by congress to be socially desirable that exempts them from income tax and, in some cases, allows them to receive tax deductible donations

According to research, a heterogeneous group will have greater problem-solving and creative options but have greater challenges in communications. True False

True

In an income statement, taxes are the last expense item before net income. True False

True

People living in factor-driven economies perceive the most entrepreneurial opportunities. True False

True

Studies have shown that the lack of diversity in homogeneous teams can stifle creativity and information processing. True False

True

The operating profit represents the amount left over from revenue once all costs and operating expenses are subtracted. True False

True

General Partnership

Two or more people who have made a decision to co-manage and share in the profits and losses of a business

A company's pre-money valuation is $500,000 and the post-money valuation is $600,000. How much did the angel invest? a. $50,000 b. $5,000 c. $100,000 d. it cannot be determined

c. 100,000

Sole Proprietorship

A person who owns a business and has full exposure to its liabilities

Three main advantages to networks:

1. Private information 2. access to diverse skillsets 3. power

Three Dimensions of Social Capital

1. Structural (components of your network and level of formalness) 2. Relational (what these contacts represent) 3. Cognitive (the degree of shared norms, visions, values, interpretations, and beliefs)

S Corporation

A certain type of corporation which is eligible for, and elects special taxation status

Limited Liability Company (LLC)

A form of business structure that combines the taxation advantages of a partnership with the limited liability benefits of corporation without being subject to the eligibility requirements of an S corp

Copyright

A form of protection provided to the creators of original works in the areas of literature, drama, art, music, film, and other intellectual areas

Patent

A grant of exclusive property rights on inventions through the U.S. and other governments (new or novel way of doing something)

Trademark

Any word, name, symbol, or device used in business to identify and promote a product. Its counterpart for service industries is the service mark

Trade Secret

Confidential information that provides companies with a competitive edge and is not in the public domain, such as formulas, patterns, compilations, programs, devices, methods, techniques, or processes.

Because of their personalities, entrepreneurs do not experience the emotional pain of failure. True False

False

Because they are investors, angel investors and venture capitalists do not usually have an exit plan. True False

False

Deviance is an attribute of grit. True False

False

In general, reducing operating costs is the most effective way of yielding long-term gains. True False

False

In the context of grit, excellence is the commitment to long-term goals through purposeful deliberate practice. True False

False

People today are more likely to interact with others to build their social capital due to more time spent at the workplace, commuting to work, and using devices like personal computers and smartphones. True False

False

Professional angels

Individuals who are doctors, lawyers, dentists, accountants, consultants, and the like, who use their savings and income to invest in entrepreneurial ventures

Enthusiast angel

Individuals who are independently wealthy retired or semi-retired entrepreneurs or executives who often invest their personal capital in startups as a hobby

Corporate angels

Individuals who are usually former business executives, often from big multinationals, looking to use their savings or current income to invest

Micromanagement angels

Individuals who have achieved success through their own companies and want to be involved in the ventures they invest in. (they will intervene if it does not meet expectations)

Entrepreneurial angels

Individuals who have already successfully started and operated their own businesses, which they may or may not still be running (most valuable to early ventures)

Characteristics of a Founding Team

Possess the right skills, take a hands-on approach, use positive problem solving, leave ego at the door, share similar goals-values-risk, care deeply

Linkages

The connections to people or groups regardless of their position in an organization, society, or other community

Bonds

The connections with family, friends, and others who have a similar cultural background or ethnicity

Bridges

The links that go further than simply sharing a sense of identity (making connections with distant friends with different backgrounds)

C corporation

The most common type of corporation, a separate legal and taxable entity created by the state government and owned by an unlimited number of shareholders

Seed-stage financing

a stage of financing in which small or modest amounts of capital are provided to entrepreneurs to prove a concept

Startup Financing

a stage of financing in which the money is provided to entrepreneurs to enable them to implement the idea by funding product research and development

An investor offers $150,000 for 30% of the company. What is the post-money valuation of the company? a. $500,000 b. it cannot be determined c. $50,000 d. $350,000

a. 500,000

How much do investment bankers earn for handling an IPO? a. 7% of all the money earned from the IPO b. a flat fee of $7 million c. 7% of the value of the company d. a flat fee of $1 million

a. 7% of all the money earned from the IPO

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 the expansion of its product lines.

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

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 conversational stance does a good networker take? a. actively listens, leaning forward and mirroring the speaker's gestures b. tends to join the larger group where more people can hear his or her message c. will listen at first, then turn the conversation to his or her entrepreneurial goal d. generally takes the lead in the conversation

a. actively listens, leaning forward and mirroring the speaker's gestures

An entrepreneur has conducted crowdfunding to raise enough money for patents and building the founding team. He is now looking for funds to form a prototype and pitch the product to new investors. Which of the following is the most likely source of funds? a. angel investor b. venture capitalist groups c. venture capitalist d. family and friends

a. angel investor

Which of the following actions is suggested for finding a mentor? a. consider who in your personal network knows you best b. send out a letter to influential people asking if they will be your mentor c. look for directories of mentors in one of the major networking organizations d. let people know at networking events that you are looking for a mentor

a. consider who in your personal network knows you best

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

IPOs, mergers and acquisitions, and buybacks are all types of ________ strategies. a. exit b. investment c. growth d. retrenchment

a. exit

In the context of experimentation, what is another way to think about the word failure? a. intentional iteration b. bad failures c. controlled research d. unnecessary mistakes

a. intentional iteration

What is the ultimate reason for trading equity for financial support? a. it is more likely that the entrepreneur will build a more valuable company b. preparing for the questions asked in pitching and due diligence will ultimately improve the company c. there will be more people interested in the company's success d. it is usually a deal/no deal option

a. it is more likely that the entrepreneur will build a more valuable company

Steve has just started as a telemarketing assistant in a large company. During a holiday party, he has an extended conversation with the vice president of operations, during which they discover a common interest in antique maritime artifacts. They talk at length. What is the characteristic of this new relationship? a. linkage b. bridge c. bond d. familial

a. linkage

Marcus tells his best friend about issues he is having with his new startup. He is about to close the business because he has been rejected for funding twice. His friend reminds Marcus that he often gives up just before the big win. He reminds him of similar situations and how trying a little longer would have paid off or did pay off. What advantage to social networking can Marcus benefit from in this situation? a. personal feedback b. confirmation c. career support d. acceptance

a. personal feedback

Rory and Katie manufactured a smartphone-related product marketed for personal safety. Unsure about the best market segment to target, they developed a product for older adults and the general public but they decided to also market it for children.. Which of the following is the most likely cause for failure here? a. uncertainty b. deviance c. lack of ability d. inattention

a. uncertainty

Which of these questions will not provide information for the revenue model? a. How much will my customers be willing to pay? b. How will my service add value for my customer? c. How much revenue can be generated from sales? d. How many customers do I need?

b. How will my service add value for my customer?

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.

Which of the following would represent a successful networking venture? a. a good conversation that resulted in a sale b. a good conversation with someone in which you exchanged information c. inclusion in the formal membership of the group d. a large stack of business cards and business contact information

b. a good conversation with someone in which you exchanged information

Which of the following best describes the characteristics associated with a great founding team? a. financial backing, large social networks, business-related skillsets b. ability to cope with pressure, social and technical skills, ability to overcome complex obstacles c. wealth, technical skills, intelligence, ability to cope with pressure d. ability to cope with pressure, social skill, financial stability

b. ability to cope with pressure, social and technical skills, ability to overcome complex obstacles

According to the text, which of the following is a good coping strategy when facing the fear of failure? a. separate your personal feelings from facts b. all of these c. reframe specific goals so they are more achievable d. allow yourself to feel the fear

b. all of these

Amy C. Edmondson, professor of leadership and management at Harvard Business School, describes a spectrum for failure that runs from blameworthy to praiseworthy. According to Edmondson, a praiseworthy reason for failure is ______. a. deviance—defying ethical and legal boundaries b. exploratory experimentation—conducting market tests to get early feedback c. uncertainty—taking unreasonable actions due to lack of clarity d. inattention—getting sidetracked from the core business

b. exploratory experimentation—conducting market tests to get early feedback

Entrepreneurial angels ____________________. a. are usually former business executives looking to use their savings or current income to invest b. have already successfully started and operated their own businesses c. have achieved success through their own companies and typically demand directorship or a position on the board of advisors d. are independently wealthy and retired or semiretired, looking to invest their personal capital in startups as a hobby

b. have already successfully started and operated their own businesses

Which of the following is NOT a significant part of reading a room? a. determining where most of the activity is taking place b. identifying where the most influential person in the room is located c. noticing if the room is crowded or empty d. determining which groups express body language that indicates your inclusion would be welcomed

b. identifying where the most influential person in the room is located ?

Which of the following would NOT be true of a heterogeneous team compared to homogeneous groups? a. there is often a higher degree of creativity b. there is a higher level of cognitive comprehensiveness c. there is a greater mix of characteristics that aid decision making d. the group's set of possible solutions and ideas helps the team see things in different ways

b. there is a higher level of cognitive comprehensiveness

What is the role of the devil's advocate? a. to interject conflict into the team b. to ask the right questions and challenge assumptions c. to prevent the team from being too positive d. to guide the team to the correct answer or solution to a problem

b. to ask the right questions and challenge assumptions

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.

An entrepreneur is asking for $1 million for 30% of his company. What is the entrepreneur's post-money valuation? a. it cannot be determined b. $300,000 c. $3.33 million d. $2 million

c. $3.33 million

What two questions does the text recommend be asked when considering founding team members? a. How well will they support my vision of the company? How many people have similar skills? b. How loyal will they be to me? What conflicts would they have in joining the team? c. Can I build the company without them? Can I find someone else just like them? d. How strong is their loyalty to the company? How loyal will they be to me?

c. Can I build the company without them? Can I find someone else just like them?

At meetings, Peter is very direct with his statements. Because the group is familiar with Peter's Myers-Briggs scores, his directness does not cause conflicts. Why is the conflict avoided? a. They know that Peter is getting help with his directness. b. People have become used to Peter's direct style. c. People recognize his directness as a personality style and know that it is not personal. d. Others like hearing direct comments and opinions.

c. People recognize his directness as a personality style and know that it is not personal.

When building a new sports car, the company Local Motors focused on designing or outsourcing essential parts like the engine and chassis that require expertise, while its community of hobbyists, designers, and engineers competed to design secondary exterior parts.Which of the following describes the primary benefit crowdsourcing provided Local Motors? 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.

According to Stanford psychologist Carol Dweck, people with _____________ tend to believe that intelligence and talent is something we're born with, and they avoid failure at all costs. a. a growth mindset b. an entrepreneurial mindset c. a fixed mindset d. grit

c. a fixed mindset

What conversational stance does a good networker take? a. generally takes the lead in the conversation b. tends to join the larger group where more people can hear his or her message c. actively listens, leaning forward and mirroring the speaker's gestures d. will listen at first, then turn the conversation to his or her entrepreneurial goal

c. actively listens, leaning forward and mirroring the speaker's gestures

Carol sells a downloadable product that uses bar codes to conduct comparison shopping. Carol's product is an example of: a. a franchising revenue model b. a tangible revenue model c. an intangible sale d. a licensing revenue model

c. an intangible sale

A(n) ______ is a type of investor who uses his or her own money to provide funds to young startup private businesses run by entrepreneurs who are neither friends nor family. a. bridge investor b. seed investor c. angel investor d. equity investor

c. angel investor

When deciding to hire someone for her new startup, Laura states, "We will have to train him, but he has the right attitude and spirit about this company." What social capital dimension is Laura referring to? a. structural b. dimensional c. cognitive d. relational

c. cognitive (look into this more)

Karen has formulated a line of green cleaning products, which she has tested with local commercial entities with great results. She is now ready to seek money to place the product in stores. What stage of financing is Karen interested in? a. startup financing b. continuity financing c. early-stage financing d. seed-stage financing

c. early-stage financing

In the context of stakeholders, self-selection ties in with the idea of ___________. a. sales b. impression management c. enrollment d. attitude

c. enrollment

Convertible debt can turn into ______ when money is received from a venture capitalist. a. venture capital funds b. a convertible note c. equity d. conventional debt

c. equity

An entrepreneur who conducts market tests to get early feedback and acquire important learning and information is demonstrating ______. a. uncertainty b. inattention c. exploratory experimentation d. lack of ability

c. exploratory experimentation

What type of investment vehicle do venture capitalists use? a. investment bonds b. angel account c. limited partnership d. bank loan

c. limited partnership

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

c. money

What characteristics may impede an individual from building networks while still a student? a. lack of good role models b. limited knowledge c. poor impression management and lack of confidence d. lack of access to mentors

c. poor impression management and lack of confidence

Nour operated a successful massage and health spa in a lucrative resort location. She handled all reservations herself and if a customer called to make an appointment when she wasn't in the spa, she asked her employees to leave her a note. The notes sometimes went missing, resulting in angry customers. Which startup failure type is most likely represented in this scenario? a. deviance b. inattention c. process inadequacy d. uncertainty

c. process inadequacy

Another term for an income statement is: a. balance sheet b. income tax statement c. profit and loss statement d. credit report

c. profit and loss statement

A local hardware store offers flashlights at "3 for a dollar." This action would indicate which of the following strategies? a. skimming b. value-based pricing c. psychological pricing d. fair pricing

c. psychological pricing

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

Hard work an entrepreneur personally 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

An entrepreneur who takes unreasonable actions due to a lack of clarity about future events most likely suffers from ______. a. inattention b. deviance c. uncertainty d. lack of ability

c. uncertainty

Describe a successful entrepreneur's typical reaction to failures, particularly small ones. a. They try to make failures happen to increase the overall creative tension. b. They get out of the business as early as possible in order to cut their losses. c. They have very few failures because they do everything to avoid them. d. They see failures as opportunities to build on what they learned or capture new opportunities.

d. They see failures as opportunities to build on what they learned or capture new opportunities.

______ is caused by crossing an ethical boundary, leading to mismanagement of the venture. a. Lack of ability b. Inattention c. Uncertainty d. Deviance

d. deviance

Which of the following is one of the best ways to form a range of diverse connections with self-selected stakeholders? a. pitch your product to a large number of people b. join groups of other entrepreneurs c. join the chamber of commerce d. engage in shared activities that attract people from different experiences and backgrounds

d. engage in shared activities that attract people from different experiences and backgrounds ???

The razor-and-razor-blade revenue model: a. includes tangible and intangible sales b. involves the sale of a high-cost product with easy-to-replace parts c. includes additional products as an add-on to the sale d. involves offering an item at no or low-cost to encourage the sale of expensive complementary or disposable products later

d. involves offering an item at no or low-cost to encourage the sale of expensive complementary or disposable products later

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

d. labor and talent

A hardware store offers highly discounted sale items to attract people into the store. This is an example of which kind of pricing strategy? a. customer-led pricing b. introductory offer c. bundled pricing d. loss leader

d. loss leader

Mehmet's café sells coffee for only $.50, which is less than it costs, but Mehmet hopes customers will come for the coffee and end up buying sandwiches and pastries. What sort of pricing strategy is Mehmet pursuing? a. psychological pricing b. introductory offer c. customer-led pricing d. loss leader

d. loss leader

Essential to the idea of intelligent failure is that this sort of failure _______________. a. has already been tried by the competition b. is intentional c. is made only by smart people d. provides valuable new knowledge

d. provides valuable new knowledge

Which of the following spawned the growth of a whole new generation of venture capitalist companies? a. general business growth b. the improving economy of second- and third-world countries c. the 10-year cycle of venture capitalists d. the rise of smartphones and tablets

d. the rise of smartphones and tablets

Which of the following would NOT be true of a homogeneous team compared to heterogeneous groups? a. there are fewer misunderstandings because of the way things are communicated b. members may be more likely to feel included c. they may have less creativity d. they do not have conflicts, due to common values and backgrounds

d. they do not have conflicts, due to common values and backgrounds

Venture capitalists work within investment portfolios. What does this mean? a. they have a list of investors on behalf of whom they invest b. details are kept for ready access about all company information c. the capitalists invest in more than one company at a time d. they have a defined list of the types of businesses they would like to invest in

d. they have a defined list of the types of businesses they would like to invest in

Which of the following is a professional investor who generally invests in early-stage and emerging companies because of perceived long-term growth potential? a. angel investor b. friend c. crowdfunder d. venture capitalist

d. venture capitalist