MHR 322 Mod 5-7 Quiz ?s

Identify LTV based on the following information for a co-working space: ◦Price / month: $500 ◦Cost / month to the co-working management company: $100 ◦Average tenant use: 25 months $15,000 $12,500 $10,000 It can't be determined from the information provided

$10,000

Calculate Cost of Customer Acquisition (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 $200 $100 $5000 $2500

$100

A seed round of investment from professional investors is mostly likely to be: NOTE: The answer may be different by region and time so can be debated. For this question, I am using Raising Startup Capital as the source. At least $10 million $2 million - $10 million $10,000 - $50,000 $250,000 - $2 million

$250,000 - $2 million

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? $30 $300 $1100 $19.99

$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 sells for $15/customer/month ◦ Cost of sending out the email is $5/customer/month ◦ The average customer subscribes for 10 months and then drops the service ◦ Placing 1,000 Google ads will cost $200. ◦ 5% who see the ad go to the website to request more info. ◦ Customers that request more information 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 $1200 $40 $24

$40

The basic formula for Cost of Customer Acquisition (or Customer Acquisition Cost) is: - (Total cost of all the company's sales and marketing) / (total number of company's customers) - (Cost of sales and marketing to acquire new customers) / (number of new customers acquired) - (Cost of sales and marketing to acquire new customers) X (number of new customers acquired) - (Total cost of all the company's sales and marketing) / (number of new customers acquired)

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

You run a t-shirt 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? $6 5 shirts 10 shirts 3.33 shirts

10 shirts

When considering raising capital for a company, the "Syndicate" refers to: - A shadowy entity related to the Hoofer Sailing Club that always seems to determine the winner of Commodore's Cup. - A group of people or institutions who participate in the investment together. - The group of managing partners at a venture capital firm that ultimately select the start-up companies to invest in. - A group of decision-makers at a financial institution (like a bank or mutual fund) that determine which investments to make.

A group of people or institutions who participate in the investment together.

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

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? - Value proposition - Key activities - Channels - Revenue streams

Channels

Which part of the Business Model Canvas describes all costs incurred to operate a business model? - Cost structures - Products and services - Key resources - Key activities

Cost structures

Testing key assumptions about your venture requires: - Setting up a focus group of industry experts - Reviewing your market data to ensure it is still relevant - Designing and performing experiments - Pitching your first 10 customers to see how many buy the product

Designing and performing experiments

If your MVBP (minimum viable business product) appears to be successful, then the next step is to: - Expand sales of the MVBP to as many additional market segments as possible. - Reduce COCA (cost of customer acquisition) to ensure that the MVBP becomes the dominant product in the market segment. - Develop a Product Plan that identifies which features should be added to the next iteration of your product and targeted at the next market segment. - Focus on dominating the current target market with the MVBP until your venture achieves profitability.

Develop a Product Plan that identifies which features should be added to the next iteration of your product and targeted at the next market segment.

In the video "Principles of Lean," Steve Blank argues that a business plan is good for: - Established companies with successful products that are developing new products - Any company, including startups - Serving as a paperweight; no one should use them - Startups that are facing especially high risks or uncertain markets

Established companies with successful products that are developing new products

According to The Art of Startups by Bhide, most new ventures in the U.S. raise money from venture capital firms. True False

False

An asset-based business loan requires that the company identify a specific asset that the company will utilize to generate funds in the event that the company cannot make interest or principal payments on the loan. 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

Generally speaking, angels tend to invest in early stage companies after a venture capital firm has made an investment. True False

False

Giving away your product or service for free can be a viable business model as long as you sort out how to monetize it later. True False

False

In The Use of Knowledge in Society paper, Hayek argued that Centralized planning was a superior economic system because it allowed government experts with data to determine the price and production levels instead of leaving those decisions to a large number of individuals and businesses. True False

False

One of the major advantages of crowdfunding is that it allows the entrepreneur to work directly with a producer or distributor instead of having to pitch their idea to potential customers. True False

False

The persona for your product is also the primary economic buyer. True False

False

Venture capital firms are generally investing their own money True False

False

When you are trying to sell a new product or service, you usually only have to convince one key person to make the sale. True False

False

To develop an effective map for the process of acquiring a paying customer, it is important to: - Figure out whether the various decision-making units have the budgeting authority to make purchases - Figure out exactly who will make the final purchasing decision - Figure out how much it will cost, in total, to acquire a customer - Figure out whether the target customer fits your persona or not

Figure out whether the various decision-making units have the budgeting authority to make purchases

If your business fails, what happens to the money invested by angels or venture capital firms (equity investments)? - First you pay off the stockholders. If there's anything left, it might get paid out to 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 the founders. Then pay off the investors. Then pay off the debtholders.

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

All of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT: - Focus on one customer at a time until you close that customer - Automate as much as possible - Decrease the cost of new leads (people who might be interested) - Use direct sales judiciously because it is expensive

Focus on one customer at a time until you close that customer

A seed funding round likely indicates the venture: - Has no product and no revenue - Is trying to rapidly scale production - Most likely got investment capital from a bank - Has just an idea in the mind of the founders

Has no product and no revenue

The primary tradeoff in determining how much money to raise is: - How much time it will take to pay the money back versus how much ownership you give up. - Having the money you need to succeed despite potential mistakes along the way versus how much ownership you give up. - Having the money you need to succeed despite potential mistakes along the way versus the time it will take to pay the money back. - How much of the capital you raise should be equity versus debt.

Having the money you need to succeed despite potential mistakes along the way versus how much ownership you give up.

Lifetime value is important because it tells you: - The value of a product over its useful lifetime, which tells you how long to wait before generating a new product - How much your life is worth as an entrepreneur, which tells you whether to get a real job or not - How much total profit (value) you can expect from a particular customer, which tells you how much you can spend to acquire that customer

How much total profit (value) you can expect from a particular customer, which tells you how much you can spend to acquire that customer

In "A Broken Place," the article about Better Place and entrepreneur Shai Agassi, a key lesson about building a viable business model for a new venture is that: - It is very difficult to get consumers to change their behavior - If you are bringing a new technology to market you will need a lot of outside capital. - If you don't have a good distribution strategy, your business model probably won't work. - The most critical element of bringing a new technology to market is a charismatic founder who can tell a compelling story.

It is very difficult to get consumers to change their behavior

Which part of the Business Model Canvas describes the network of suppliers and partners that make the business model work? - Key partnerships - Revenue streams - Channels - Key activities

Key partnerships

In Geoffrey Moore's "Crossing the Chasm" framework, the customers who only purchase after a product has been established for a long time (possibly so long that you've already sold your company) are: - Late majority - Technological enthusiasts - Early majority - Laggards (skeptics) - Early adopters

Laggards (skeptics)

Customers may be resistant to purchasing a new or unfamiliar product. Steps that you can take to overcome this resistance include: - Positioning the product close to competitor products - Make sure the quality of the product is signaled by an attractively low price - Make it compatible with existing customer behavior - Ensure that advertising and documentation clearly demonstrate how a customer would adjust behavior to best use the innovation

Make it compatible with existing customer behavior

Which business model relies on the customer providing their credit card or billing information in advance and then being charged for small purchases, usually of digital goods with no physical value? - Reselling the data collected - Advertising - Franchise - Microtransactions - Operating and maintenance

Microtransactions

All of the following are primary roles in the decision-making unit EXCEPT: - Purchasing agent - Primary economic buyer - End-user - Champion

Purchasing Agent

When testing assumptions, even if "the dogs eat the dog food" you will still have to show that: - The LTV (lifetime value) is lower than the COCA (cost of customer acquisition). - The dog food is safe to eat. - You can produce the dog food at an affordable price. - Someone will actually pay for the dog food.

Someone will actually pay for the dog food.

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 with depth of experience who can influence the rest of the decision-making unit - The person or department who handles the logistics of the purchase

The decision maker who will sign off on spending money

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

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

According to "Fake it til you make it," the biggest problem with building a fully functional product / service rather than a (90%) facade is: - The longer you spend working on a prototype or a real product, the more attached you'll become, and the less likely you'll be to accept negative test results. - Fully functional products / services are really expensive to develop, and you might not have enough money to do marketing and advertising. - Potential customers can clearly tell the difference between a facade and the real productand won't be willing to give you feedback.

The longer you spend working on a prototype or a real product, the more attached you'll become, and the less likely you'll be to accept negative test results.

The "virality coefficient" is: - The number of people who hear about your product via traditional advertising. - A measure of whether your online ads get reposted across social media. - The magnitude of the positive word of mouth your product generates. - A qualitative measure of whether your product tends to make people ill.

The number of people who hear about your product via traditional advertising.

In the decision-making unit, an influencer is: - 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 with depth of experience whose opinion can affect the rest of the decision-making unit - 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

Which of the following is a key principle of the "prototype mindset''? - Prototypes are only as good as the ideas behind them - The prototype must appear real - Prototype now, build later - More prototypes are always better

The prototype must appear real

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

The strategy or core you will implement

The lifetime value of a customer (LTV) is: - The value a customer receives from using your product during the customer's lifetime - The total revenue associated with a customer - The total profit associated with a customer - The value a customer receives from using your product during the product lifetime

The total profit associated with a customer

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

There are limits of innovation and it is difficult to get consumers to embrace new technology.

According to the Mullins article on customer cash, the matchmaker model is attractive because it requires little or no inventory and the cost of goods sold is extremely low. True False

True

An equity investor shares in the upside if the company is successful. 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, angels tend to invest less than venture capital firms. True False

True

Identifying key assumptions for your venture requires reviewing each step of the Disciplined Entrepreneurship framework to see what conclusions you made based on your market research. True False

True

In the Lean Startup framework, the products a start-up builds are really just experiments. 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

Mapping your sales process strategy requires matching specific sales activities at each stage (short term, medium term, and long term) with the specific type of customer (or segment) you expect to reach with that activity. True False

True

The cost of customer acquisition (COCA) analysis begins with mapping the process to acquire a paying customer. True False

True

The difference between the lean startup "MVP" (minimum viable product) and Disciplined Entrepreneurships "MVBP" (minimum viable business product) is that the MVP only requires a product that tests specific assumptions about the venture. True False

True

Valuation of an early stage company is usually at least as much art as science. True False

True

Venture capital firms only invest in ventures that have the potential to generate very high returns. True False

True

When identifying key assumptions about your venture, you should carefully review your "next 10 customers" list. True False

True

Which part of the Business Model Canvas describes the bundle of products and services that create value for a specific customer segment? - Value proposition - Products and services - Revenue streams - Key partnership

Value proposition

Convertible debt is best described as: - an investment that includes both a loan component and an equity component. - an investment that changes over time as the needs of the company or the investor change. - an investment that starts out as a loan but is expected to be converted to equity at some point in the future. - an investment that starts out as equity but is expected to be converted to a loan at some point in the future.

an investment that starts out as a loan but is expected to be converted to equity at some point in the future.

According to the Art of Startups by Bhide, savvy bootstrappers will build relationships with potential banking partners: - only after it has exhausted all other potential sources of capital, such as angel investors and venture capital firms. - by sending promotional materials about the venture to every local bank. - before the venture is actually creditworthy enough to justify a bank loan.

before the venture is actually creditworthy enough to justify a bank loan.

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

build an organization that will outlive the founders.

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

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

According to the Art of Startups by Bhide, successful bootstrappers should grow the venture: - faster than competitors to ensure that it continuously increases market share. - only as fast as they can afford and control. - based on a complex formula that matches interest rates to the venture's accounts receivables ratio. - as fast as possible to attract outside capital investors.

only as fast as they can afford and control.

If a company that does not have assets that can be claimed if the venture fails, a bank or financial institution is likely to provide debt financing only if: - the company is led by a team of experienced executives. - the company expects to grow extremely quickly - the company has an extremely exciting and/or disruptive technology - the company has had stable cash flow for a while and conservative expectations.

the company has had stable cash flow for a while and conservative expectations.

In the video "To Raise Money or Not Part 1," the speaker identifies a significant advantage of bootstrapping as: - the opportunity to take salary and have relatively normal work lives even in the early stage of the venture. - keeping control of the company limited to the founding team and key managers. - the flexibility to try lots of projects, seeing what worked, building and launching products quickly, and improving based on feedback. - getting access to industry experts and people who really understand the customers.

the flexibility to try lots of projects, seeing what worked, building and launching products quickly, and improving based on feedback.

In the video "To Raise Money or Not Part 1," the speaker notes that one of the reasons they bootstrapped was because: - their product was actually making money almost from day one. - venture capitalists are greedy and unscrupulous. - they didn't want to give up control of the company - they didn't plan to grow the company very quickly

their product was actually making money almost from day one.

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: - online platforms made it possible to access venture capital much more easily - 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). - more ventures wanted to scale globally more quickly

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

According to the 'Fake It- Chapter 13' reading from "Sprint," it's not a good idea to invest a lot of time in untested product development because: - you'll become attached to the product and unable to take negative test results to heart. - it is too expensive to maintain long-term product development processes. - competitors will beat you to the market. - People at your company will get bored if they don't have something new to work on.

you'll become attached to the product and unable to take negative test results to heart.