MHR 322 (UW-Madison) Exam #1

All of the following are valid reasons that students (or any people) are interested in entrepreneurship EXCEPT:

The person has an idea that can change the world, or at least some small part of it, in a positive way.

The person wants to earn as much money as possible as quickly as possible. (ANSWER)

The person has a passion, is comfortable developing skills, and might want to control his/her own destiny.

The person has come up with a technological breakthrough and wants to capitalize on it or expedite how quickly it is deployed.

Ventures founded by individuals tend to be more successful than those founded by teams. (T/F)

FALSE

In "A Student's Guide to Startups," author Paul Graham warns that real entrepreneurship is not like a class project because:

You can't learn entrepreneurship in a classroom.

TrueSolving a rare and valuable problem usually involves figuring out the real problem in an iterative process. (ANSWER)

One semester is simply not enough time to figure out customers' real needs.

The teamwork on a classroom project is nothing like teamwork in the real world.

In "Where Is The Best Place To Learn How To Become A Successful Entrepreneur?" author Kimberly Whitler states that aspiring entrepreneurs can learn all of the following from consumer packaged goods companies EXCEPT:

How to take smart, calculated risks. (ANSWER?)

How to innovate beyond just new product ideas.(NOT IT)

How to manage cash and short-term financial needs.

How to develop and pitch new ideas.

In "Design Your Way to a Happier Life," authors Evans and Burnett encourage students to figure out what your passion is and then everything else will fall into place. (T/F)

FASLE

According to Paul Graham, the author of "A Student's Guide to Startups," most startups end up doing something different than they planned. (T/F)

TRUE

According to the Kauffman Foundation, new businesses account for nearly all net new job creation in the United States.(T/F)

TRUE

According to the "History of Entrepreneurship" reading by Johnson Hur, the following developments facilitated entrepreneurial activity EXCEPT:

The availability of energy production

The availability of cheap labor as people moved from rural areas to cities

The invention of modern warfare (ANSWER)

The invention of currency (money) to replace barter

Professor Bill Green argues that an important aspect of entrepreneurship is the creation of an enterprise that can ultimately function independently from the entrepreneur. (T/F)

TRUE

The US government defines a "small business" as a company with...

Fewer than 50 employees

Only one "small" office of less than 500 sq ft

Fewer than 500 employees (ANSWER)

Less than $2M in annual revenue

The "China Syndrome" is a common mistake of entrepreneurs who:

Think that success is getting a small share of an extremely large market. (ANSWER)

Think that the best option is to outsource production to China.

Think that the long-term competition will come from Chinese companies.

Think that it is best to enter a market with an inexpensive, low quality product and improve it only when customers demand it.

A common mistake for early stage ventures is to try to:

Sell to everyone by making products that fit the need of every possible customer. (ANSWER)

Sell to a highly-focused set of customers.

Sell only to potential customers with large amounts of disposable income.

Sell products based on a very narrow product-market fit.

The best market targeting advice for a start-up is:

Apply your limited resources to a narrow, carefully defined new market that you can dominate. (ANSWER)

Apply your limited resources to capturing a small part of the largest market you can identify.

Acquire more resources, such as money and partners and skills, so you can target as large a market as possible.

Acquire more resources, such as money and partners and skills, so that you have the most time and capabilities to successfully launch your product.

All of the following are steps in the Market Segmentation process EXCEPT:

Estimate market size by multiplying the total number of potential customers by the expected price of the product or service. (ANSWER)

Brainstorm a wide array of market opportunities.

Narrow to a short list of interesting opportunities based on characteristics of the customers, competition, and your team.

Conduct primary market research by talking to and observing customers.

A key advance of securing a beachhead market is that you should have the strength to attack adjacent (similar) markets with different offerings. (T/F)

FALSE

To be successful, a venture must select the absolute best beachhead market. (T/F)

FALSE

An end-user profile is a description of a narrowly defined subset of end users with similar characteristics and with similar needs. (T/F)

TRUE

It is generally not a good idea to have someone on your executive team who fits the end-user profile because that person will not be able to be objective about the value of the product. (T/F)

FALSE

When figuring out the potential revenue per customer (e.g., the price of your product), you should consider all of the following EXCEPT:

How much you would like to charge your customers in order to maximize company revenue. (ANSWER)

How much your potential customers spend to accomplish what your product does.

How much your potential customers have spent for similar products in the past.

How much value your product provides for customers.

When calculating Total Addressable Market, you should take the time to get it to be as accurate as possible, because you do not want to have to revisit it later. (T/F)

FALSE

The Persona can be a powerful decision-making tool by helping the venture distinguish between potential customers that should be served now and potential customers that should be targeted at a later time. (T/F)

TRUE

It is generally a good idea to interview 3-5 potential Persona candidates before you generate your fact sheet so that you can select one of them as the best option. (T/F)

FALSE

A great starting point for identifying a Persona is:

Someone who has already purchased the product or service (ANSWER)

A close family member or friend who can be available to answer questions

A potential customer who appears to be really enthusiastic about the product or service

An industry expert who is very knowledgeable about trends and competition

The Matthew Sacks video on Opportunity Recognition demonstrates the importance of a clear career path, constantly keeping in mind where you plan to go next. (T/F)

FALSE

An attractive market segment is characterized by:

Customers who perceive that our product or service will be clearly better than what they can purchase from others (ANSWER)

Customers who make choices about products or services quickly

Customers that we mostly know through our network

Customers who really take their time to evaluate products and services before making a purchase

Which traits are positively correlated with individuals becoming entrepreneurs?

Optimistic

Immigrant or child of an immigrant

High self-esteem

All of the above (ANSWER)

The Matthew Sacks video on Opportunity Recognition shows that building a skill set in the corporate world can give you insight into entrepreneurial opportunities. (T/F)

TRUE

For entrepreneurs, a market is:

A group of current or potential customers that want to buy a product or service (ANSWER)

A group of current or potential companies that can produce a product or service

A financial platform where stocks are traded

An online platform where consumers buy retail goods

At the most basic level, an attractive market is:

Large and growing (ANSWER)

Nearby

Underserved by other companies

Easy to understand

Factors that improve technology diffusion/new product acceptance include:

High risk of failure

Compatibility with current practices (ANSWER)

Product or technology complexity

Significant advertising budget

A key components of the Value Proposition Canvas is:

The technological sophistication of your innovation

The jobs that your customer is trying to get done (ANSWER)

The preferences your customer has for distribution channel and customer service

The revenue model for generating profit

When discussing value propositions the term MVP stands for:

Multiple Value Possibilities

Maximum Vector Paths

Most Valuable Player

Minimum Viable Product (ANSWER)

The Value Proposition Canvas is composed of two parts:

The buyers and the sellers

The customer profile and the value map (ANSWER)

The revenue proposition and the value map

The customer profile and the business model

During the life cycle use case analysis, entrepreneurs commonly make all of the following mistakes EXCEPT:

Overestimating how easy it will be for the customer to use the product.

Overestimating the enthusiasm the customer has for the product.

Overestimating how long the customer will wait before purchasing the product again. (ANSWER)

Overestimating the amount of value the customer will gain by using the product.

To generate a high-level specification of your product, you should start with a detailed written description that identifies key features and functions. (T/F)

FALSE

To formulate your quantified value proposition, compare the "possible" state (customer uses you product) to the "as-is" state (current customer use/behavior) to show a difference in measurable value. (T/F)

TRUE

All of the following are the quantifiable product benefits that may create value for a customer EXCEPT:

Better

Newer (ANSWER)

Cheaper

Faster

Identifying 10 high-potential customers (after your Persona) helps ensure that:

You have identified enough product features to convince any possible customer to buy your product.

You have identified a scalable opportunity, not just a one-customer solution. (ANSWER)

You will be able to reach break-even volume.

You will be able to convince a private investor to invest equity capital in your venture.

Getting some negative feedback while interviewing 10 high-potential customers means that:

Your product does not effectively target your Personal-- you need to brainstorm new product features before re-starting the interview process.

You did not choose the right 10 potential customers-- you should identify 10 new high potential customers and start the interviewing process again.

Your opportunity is not viable-- it's time to go back to the drawing board.

Your customer base actually cares about the problem, which is a good sign. (ANSWER)

An LLC (limited liability corporation) is a relatively flexible entity structure in which decision-making can be the responsibility of managers or the owners, depending on how it is set up. (T/F)

TRUE

A utility patent (the most common type) provides protection for 20 years from:

the filing date of the full patent application submitted to the USPTO

the date on which the company first sells product using the patent

the filing date of the earliest application submitted to the USPTO (ANSWER)

the date on which the patent is granted

If two or more people start a business together, then unless they file a registration as an alternate entity, the business is by default a partnership. (T/F)

TRUE

An LLC is an excellent choice for a small business, because it combines limited liability for the owners with pass-through of profits to owners to avoid double taxation. (T/F)

TRUE

Intellectual property refers to intangible personal property which may be protected by various legal mechanisms. (T/F)

TRUE

One of the major benefits of a c-corporation is that income is distributed directly to the owners (pass-through) so that they only pay personal taxes on it. (T/F)

FALSE

In general, a partnership entity passes income directly to the partners (pass-through) so that they only pay taxes on the income as individuals. (T/F)

TRUE

In the United States, intellectual property rights can be provided by the courts through "common law" or by the federal government. (T/F)

TRUE

Which of the following is usually NOT a key factor in selecting the entity type for a new company?

Taxes

Management

Industry (ANSWER)

Liability

Prospect theory describes how consumers may view a new technology by what they are giving up versus what they are getting. Choose the following innovation that best represents this theory:

Diet Cherry Dr. Pepper | Give up: Coca-Cola taste ; Get: 2 flavors (MAYBE?)

Satellite Radio | Give up: Free Music ; Get: Better Selection

Electric Cars | Give up: gas stations ; Get: battery (NO)

Segway | Give up: walking ; Get: stylish vehicle (NO)

The QWERTY keyboard is a good example of:

A standard that has no competitors

An inferior standard that remains in place because of government regulations

A superior standard that has yet to be improved upon

An inferior standard that remains in place because users don't want to change (ANSWER)

In the Value Proposition Canvas, customer "jobs" can be functional, social, or emotional. (T/F)

TRUE

The power of the Value Proposition Canvas is that it helps ensure that your product features and capabilities target all of a customer's potential pains and gains. (T/F)

FALSE

Product Market Fit is best described as :

using an innovative product design approach

Finding the largest market

Alignment between your value proposition and customer segment (ANSWER)

Finding the forecast that best fits the market demand curve

During a life cycle use case analysis you must try to see the product through the customer's eyes rather than your own. (T/F)

TRUE

A quantifiable value proposition goes into detail on technology, features, and functions. (T/F)

FALSE

To be considered a trade secret, information must be used in a company's business to give an advantage over competitors AND

the company must make reasonable efforts to keep the information a secret (ANSWER?)

the company must register the information with the federal government (NO)

the company must file for at least one other type of intellectual property protection on the information (patent, copyright, trademark) (NO)

the company must have kept the information a secret for at least 20 years

A trademark must be registered with either the state or federal government to provide protection. (T/F)

FALSE

A trademark is a word, name, symbol, sound, color, smell, or device that is used to identify and distinguish the products of a person or company from other products. (T/F)

TRUE

Unlike patents, trademarks can be potentially protected forever (T/F)

TRUE

You have decided to take your t-shirt idea and turn it into a full-time business. What entity formation type likely represents your best option right now?

Partnership

C-Corporation

Limited Liability Corporation (LLC)

Sole Proprietorship (ANSWER)

An LLC (limited liability corporation) is a relatively flexible entity structure in which decision-making can be the responsibility of managers or the owners, depending on how it is set up. (T/F)

TRUE

From the 'Why Good Ideas Fail' talk, what is a step that entrepreneurs can take to make their ideas catch on with consumers?

Find Believers

1% improvement over other solutions

Partner with well known investors (NO)

Self-Selection (ANSWER?)

The starting point for being an entrepreneur is answering the following question: "What can I do well that I would love to do for an extended period of time?" (T/F)

TRUE

In "Most entrepreneurs are not rock stars," David Friedberg suggests that if your goal is to have impact with an innovation, your best option is probably:

Plan out for a 10-15 year timeframe to ensure that you can do quality work and address all necessary issues.

Launch a new company and raise as much money as you can to scale the business quickly.

Create a practice venture first so you can test out the entrepreneurial experience before you launch your real venture.

Go to work for a large company since they have direct access to customers and users already. (ANSWER)

An entrepreneurial mindset can be especially valuable when:

You have very short, simple projects to complete

You have an extremely well-defined set of goals to achieve and resources available to use

You are working entirely by yourself

There is limited time, information, and/or other resources (ANSWER)

One of the key goals of MHR 322 (this class) is to:

Give you an opportunity to experience what it feels like to be an entrepreneur to see if you like it or not (ANSWER)

Convince you to avoid being an entrepreneur when you graduate

Be the most difficult course you take this semester

Convince you to be an entrepreneur when you graduate

According to the "History of Entrepreneurship" reading by Johnson Hur, entrepreneurs were likely responsible for weapons trading among early civilizations. (T/F)

TRUE

The Austrian economist Schumpeter defines entrepreneurship as:

Starting a new business entity.

Rolling the dice with the opportunity to get rich or lose it all.

A process of creative destruction. (ANSWER)

Having the vision to see the future before your competitors.

You might find it interesting that according to the State of Wisconsin, a "Domestic business" is one that has its primary registration in Wisconsin. A company that is incorporated anywhere else (like Illinois, or Delaware) is a "Foreign business."

A C-corporation in Wisconsin's is a "business," but an LLC is listed as a Limited Liability Company.

What is Wisconsin Alumni Research Foundation (WARF) "entity type"?

Non-Stock Corporation

WARF

a not-for-profit entity

which Wisconsin DFI calls a "Non-Stock corporation."

These kinds of entities exist for a social purpose other than making money.

Match the types of people to the role they play in the decision-making unit for a McDonald's Happy Meal

CHILD- end-user

PARENT- economic buyer

RONALD MCDONALD- champion

OLDER SIBLING- influencer (advertising)

PARENT WHO IS VEGETARIAN- veto authority