Entrepreneurship 4: Financing and Profitability Quiz Answers

All Weeks Entrepreneurship 4: Financing and Profitability Quiz Answers

Start-ups can benefit from a wide variety of financing options on the path to profitability, but how do you know which one to choose? This course explores different financing models, including bootstrapping, organic growth, debt and risk capital, and also provides a clear overview of equity financing including the key types of investors: angels, venture capital, and crowdfunding.

You’ll learn about terms, and term sheets, exit modes and what exit strategy might be best for you. By the end of this course, you’ll have an understanding of what success looks like and how it can be financed. You’ll also be ready for the capstone project, in which you will get feedback on your own pitch deck, and may even be selected to pitch to investors from venture capital firms.

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Entrepreneurship 4: Financing and Profitability Week 1 Quiz Answers

Quiz 1: Building a Business Model and a Customer Base Quiz

Q1. According to many entrepreneurs, what is the one key rule for success in entrepreneurship?

Develop a robust business plan
Find the right business partner
Hire the right people
Don’t run out of cash

Q2. What is an example of a disruptive business model?

Foxconn
Peapod
Warby Parker
Samsung

Q3. How is a business model different than a general strategy?

A business model is an outcome of a strategy
A strategy is a component of a business model
A business model is not different than a general strategy
A business model is a description, but a strategy is an action

Q4. Which of the following is not a kind of business model:

Value Chain
Disruptive
Architecture
Influencer

Q5. Why are business models important? (Check all that apply)

They act as a checklist to make sure you are planning properly
They accurately predict your profit
They are asked for in bank loan applications
They tell a story of how your company makes money

Q6. What is the best strategy for customers who are low value but active?

Foster loyalty
Minimize effort targeting these customers
Targeted promotions
Increase transactions

Q7. What is the CLV (net of acquisition cost) if customer acquisition cost is $600 and expected contribution is $350 per period for a total of 5 periods?

$850
$1,150
$600
$1,500

Q8. What is the CLV (net of acquisition cost) if customer acquisition cost is $600, expected contribution is $350 per period, and retention rate is 70% per period for a total of 5 periods (round to the nearest whole dollar)?

$371
$340
$440
$393

Q9. What is the CLV if the return is $350 per period, churn is 0.3, and discount rate is 0.1 for an indefinite number of periods?

$1000
$1,166
$875
$833

Q10. Research shows entrepreneurs are willing to accept a discount to work with a prestigious venture capital firm. According to Joseph Ansanelli, why are entrepreneurs choosing to do this rather than choosing other sources of capital?

They value the specific experience and knowledge of an individual partner in the venture capital firm
The venture capital firm can help them recruit talent
The venture capital firm can help them connect to potential customers
All of these are reasons to work with a prestigious venture capital firm at a discount

Entrepreneurship 4: Financing and Profitability Week 2 Quiz Answers

Quiz 1:Financing Methods and Valuation Quiz

Q1. On average, what is the largest source of funding for startups?

Angel
Self-funding
Venture Capital
Friends and Family

Q2. Who would typically use a convertible note when funding your business?

Credit Card Companies
Venture Capitalists
Small Business Lenders
Friends and Family

Q3. Which of the following statements about angel investments is true?

Angel investors want equity in your company
Angel investors are generally wealthy individuals interested in investing in startups
All of these statements are true
Angel investors are mostly interested in the seed stage

Q4. Which of the following financing pathways are NOT dilutive sources of funding?

Venture Capital
Super Angels
Bank Loans
Angel Investors

Q5. With each round of fundraising, approximately what portion of the company equity is given up?

10%-20%
10%-30%
10%-40%
10%-50%

Q6. Which of the following financing options typically provides the largest amount of investment?

Accelerators
Venture capital
Super Angel
Angel Investors

Q7. In 2012, which of the following areas received significantly more investments from angel investors than from venture capitalists?

Retailing/distribution
Consumer products and services
Biotechnology
Software

Q8. What is the post-money valuation if the pre-money value is $2M and an investor invests $4M?

Q9. Which of the following statements about convertible debt is not true?

Investors who agree to convertible notes usually receive a discount in the very early stage of a business
Although technically debt, convertible notes convert to equity later
Convertible debt allows startups to raise money while delaying the valuation discussion
Investors will not be able to put a limit on the valuation at which investors’ notes convert to equity

Q10. If a company raises a $5 million Series A round from an investor at a $20M post-money valuation, and later the company raises $10M at a $100M valuation, how much more must the investor invest to keep his/her original stake?

$5M
$1M
$10M
$2.5M

Entrepreneurship 4: Financing and Profitability Week 3 Quiz Answers

Quiz 1:Choosing Financing, and Calculating Breakeven Quiz

Q1. Which of the following are forms of startup financing?

Venture capital and angel investors
All of these are forms of startup financing
Crowdfunding and bootstrapping
Government grants and commercial banks

Q2. Two conceptual problems that plague the financing of startup type markets include ___ and ___.

Negotiations; due diligence
Valuation; bootstrapping
Hidden information; hidden action
Asymmetrical information; due diligence

Q3. Which of the following is true?

Venture capital performance is almost always successful
Entrepreneurs always take the highest financial valuation offer
None of these are true
Venture capitalists with a high reputation are three times more likely to have their offers accepted

Q4. As the founder of a company, you are more likely interested in which two types of crowdfunding?

Charity and peer-to-peer lending
Equity and reward based
Peer-to-peer lending and equity
Reward based and charity

Q5. To get the most out of crowdfunding, you should do the following EXCEPT ___.

Hire outside consultants
Understand your target audience
Produce high quality videos
Appeal to online communities

Q6. Which of the following is true about debt financing?

Debt is generally less costly to founders
None of these are true
Debt requires you to give up an ownership interest
Debt is usually subordinate to equity

Q7. All of the following are forms of debt financing EXCEPT ___.

Factoring
Convertible notes
Venture capital
Equipment financing

Q8. The burn rate is the ___.

Net negative cash flow per unit time
Total expenditure per month
Projected balance of cash out into the future
Amount of cash you have on hand before you run out of money

Q9. Breakeven time refers to ___, whereas breakeven quantity refers to ___.

Time to payback original investment; units per time required to make a profit
Time to positive cash flow; units per time required to make a profit
Time to pay back original investment; units per time required to recover fixed cost
Time to positive cash flow; units per time required to recover fixed cost

Q10. Which of the following is an issue with calculating breakeven?

Margin cannot be calculated
Does not take variable costs into account
Assumes fixed level of spending
Cannot be calculated for non-physical items

Entrepreneurship 4: Financing and Profitability Week 4 Quiz Answers

Quiz 1:Strategies for the Pitch and the Exit Quiz

Q1. What is the goal for your pitch deck?

To get to the next set of conversations
To raise money
To detail everything there is to know about your company
To convince investors they will miss out if they do not invest

Q2. How should you NOT emphasize your solution in your pitch deck?

Describe customers using your product
Explain the benefits to the customers
Be super product focused
Use pictures and stories

Q3. Good executive summaries should ___.

Include names of all the notable people you know
Overstate numbers to make the opportunity look more attractive
Be adapted according to what the investors already know
Describe financials and your entire model in detail

Q4. All of the following are true of pro forma financial statements EXCEPT ___.

They are an accounting of your actual financial performance
They are usually supported by a more detailed budget for the next 12 months
Analysis is generally done by month
They include three standard forms: income statement, cash flow statement, and balance sheet

Q5. In preparing pro forma financial statements, start with the ___.

Balance sheet
Statement of equity
Cash flow statement
Income statement

Q6. Revenue and cost numbers in the model should be ___.

Entered directly based on best estimates
Multiplied by a constant multiplier from historical data
Based on operating parameters of the business
Based on numbers that are needed to achieve the desired results

Q7. All of the following are examples of stakeholder liquidity or exits EXCEPT ___.

Debt financing
Initial public offerings
Buyout of shares
Mergers and acquisitions

Q8. If organizational synergies and faster resource acquisition are more important to you, you may want to consider ___.

Mergers and acquisitions
Buyout of shares
Initial public offerings
Private ownership

Q9. A public offering may have potential disadvantages such as ___.

All of these are true
Higher costs, both direct and indirect
It provides competitors with insight into your competitive position
It is hard to time the market, and there is no objective threshold

Q10. If innovation is more important to you, you may want to consider ___.

Private ownership
Mergers and acquisitions
Initial public offerings
Buyout of shares

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