Deck 7: Building the Founding Team

Question 1

The size of your organization is inversely correlated to the amount of revenue your business can derive.

Answer 1

False

Question 2

Certain personalities are better suited for entrepreneurship than others.

Answer 2

False

Question 3

Analysis of your resume will help you decide what other team members your firm needs.

Answer 3

True

Question 4

Over 95% of entrepreneurs in the US report that their co-founders are the main source of seed financing.

Question 5

Entrepreneurs who are overly conscious of their own weaknesses are more likely to fail.

Question 6

A business superstar is unlikely to possess all the business skills needed for long term success.

Question 7

In the early years, it is critical for firms to focus on revenue-generating employees, instead of support staff.

Question 8

Early stage companies tend to be hierarchal.

Question 9

Co-founders of a start-up should work on every task and decision together.

Question 10

The Myers-Briggs personality type indicator can accurately predict an individual's likelihood for success in an entrepreneurial endeavor.

Question 11

You can't build a successful team unless you understand your own strengths and weaknesses and the best place for you at the company.

Question 12

After you have started a business, it is a bad idea to combine your new job with working fulltime elsewhere.

Question 13

Fast, dramatic growth can be a mistake for a business.

Question 14

If the business is your idea, it is best if you are the CEO.

Question 15

If you decide to start a venture, you should notify your current employer as soon as possible.

Question 16

Hiring a salesperson is more attractive than increasing support staff in regards to revenue generated.

Question 17

It is more common for teams to self-destruct because of personal conflicts than for lack of funding.

Question 18

Your team members can help you to evaluate feedback from outside sources.

Question 19

Entrepreneurship is hard work but most entrepreneurs become millionaires in five years.

Question 20

Ventures founded by teams tend to generate more revenue, be more profitable, create more jobs within growth industries than those founded by single individuals,.

Question 21

Startups should negotiate employee salaries below market levels.

Question 22

What does the movie, Startup.com, demonstrate?

A) How outside financing contributes to equity
B) How expensive lawyers can be
C) How working together can affect the relationship of two lifelong friends
D) How much the government is willing to help young entrepreneurs
E) None of the above

Question 23

It often takes four months or more to identify and hire key employees.

Question 24

Which of the following personality traits best predicts entrepreneurial success?

A) Analytical
B) Risk taker
C) Expressive
D) Amiable
E) None of the above

Question 25

Which of the following is true about teams?

A) Teams help you evaluate feedback from outsiders.
B) Teams increase your contact network exponentially.
C) Teams increase your revenue.
D) Teams provide you with moral support.
E) All of the above

Question 26

Which of the following should the founder of the venture do first when deciding whether or not to be the CEO of his company?

A) Ask for his/her friends opinion
B) Take at least three personality tests
C) Review his/her resume
D) Work as a hired manager for at least 4 years
E) Consult with his/her team members

Question 27

Board members should be encouraged to act in the best interest of the principal owner exclusively.

Question 28

What opportunities can a young company offer its potential team members?

A) Growth into higher management positions
B) Above average market salaries
C) More attractive social benefits packages
D) Secure and stable jobs
E) All of the above

Question 29

You may find an angel investor who will guide you at the early stages of your venture.

Question 30

It is a mistake to distribute the entire supply of options to existing employees.

Question 31

It is important for growth-oriented companies to prioritize hiring; who should be prioritized first:

A) Administrative support staff
B) In-house legal counsel
C) Top management consulting talent
D) Revenue generating salespeople
E) None of the above

Question 32

A study by Inc. 500 found that many CEOS had what quality in common?

A) Patience
B) An ability to work well under highly stressful conditions
C) High risk tolerance
D) A high IQ
E) An ability to accept constructive criticism

Question 33

Individuals that possess which of the following traits are most likely to launch their own businesses?

A) Overly conscious of their own weaknesses
B) An aptitude for benchmarking their competitors' strengths
C) Can objectively evaluate his strengths and weaknesses
D) Emphasizes his or her strengths
E) Oblivious to his or her own weaknesses

Question 34

How much, according to the National Restaurant Association, do restaurants generate in net income before taxes on average, approximately?

A) 2.5%
B) 4.5%
C) 8.5%
D) 15%
E) 25%

Question 35

Free resources are poor substitutes for a qualified lawyer.

Question 36

Company culture is incredibly difficult to change after it has been established.

Question 37

Founder shares should be distributed equally between all founders.

Question 38

If employees own equity in the company, their interests are aligned with those of the company.

Question 39

According to Inc. 500, what percent of entrepreneurs start businesses with their friends or family members?

A) Less than 5%
B) About 10%
C) About 20%
D) Approximately 40%
E) More than 65%

Question 40

In general, founder shares should be granted to at least 10 people.

Question 41

Which of the following should an entrepreneur do when creating a venture?

A) Expropriate her current employer's intellectual property
B) Use her employer's resources for the new venture
C) Notify her current employer about the intention to create a new venture
D) Spend all her time working for the new venture
E) Live off her savings

Question 42

Why should you have one or two members of your Board of Directors who can be considered independent?

A) So they can act in the interest of the principal owner
B) They are not susceptible to potential conflicts of interest
C) They usually make the final decisions
D) They have a long list of business and professional contacts
E) They will answer the majority of the entrepreneur's questions

Question 43

Stock appreciation rights of employees accrue only if:

A) The stock price decreases
B) Combined with options
C) The employees perform well
D) The stock price increases
E) None of the above

Question 44

What is the minimum expected level of lawyers' fees?

A) $50/hour
B) $100/hour
C) $150/hour
D) $200/hour
E) $250/hour

Question 45

What are the disadvantages of distributing founder shares equally among all co-founders?

A) The lack of a primary shareholder slows down the decision making process
B) CEO may be doing as much work as CEOs of comparable companies, but have less potential upside
C) Such distribution makes unwanted acquisitions easy
D) A and B
E) A and C

Question 46

What is the most commonly used form of equity compensation?

A) Restricted stock
B) Phantom stock
C) Options
D) Stock appreciation rights
E) None of the above

Question 47

Which factor should you consider when choosing a lawyer:

A) Size of the firm
B) Billing rates
C) A lawyer that has a deep knowledge of the industry
D) If you get along
E) All of the above

Question 48

None of the following tools are usually considered a reward for "sweat equity," except:

A) Founder shares
B) Option pool
C) Restricted stock
D) Stock appreciation rights
E) Phantom stock

Question 49

According to the chapter, which of the following is not an acceptable means of maintaining an entrepreneurs' personal cash flow?

A) Working full-time and devoting time to the new venture
B) Working part-time and devoting time to the new venture
C) Living off personal savings
D) Living for his/her spouses' income
E) All of the above are acceptable

Question 50

Which of the following is true about a company's culture?

A) A company's culture is relatively easy to change
B) As a company grows, it is common for the culture to evolve
C) More team members will fit your company's culture over time
D) Problems with the team do not arise in companies with strong culture
E) All elements of a company's culture constantly change

Question 51

Options give the holder the right to:

A) Increase the number of the company shares he is allowed to purchase
B) Buy a share in the company at a below-market rate
C) Secure a salary increase on a regular basis
D) Sell his stocks on the open market for more than the prevailing market price
E) Demand a refund on his contribution to company's equity

Question 52

All of the following is true about phantom stocks except:

A) They are expensed over the vesting period
B) They are not actually issued equity
C) The company needs cash when phantom stocks are exercised
D) They grant the holders additional voting power
E) They lower the dilution effect

Question 53

How much equity is commonly set aside for employee options?

A) 15-20%
B) 20-25%
C) 25-30%
D) 35-40%
E) 45-50%

Question 54

Inappropriate sources of members for Board of Advisors include:

A) Shareholders' representatives
B) Entrepreneurs
C) Individual with insights about your target customer
D) Your professors
E) Venture capitalists

Question 55

What attribute characterizes "restricted stock"?

A) Does not grant voting rights
B) Cost less per share
C) Become vested over time
D) Has a reduced interest rate
E) Higher liquidation priority than unsecured debt

Question 56

Which of the following are not mentioned in the chapter as external team members?

A) Board of Directors
B) Lawyers
C) Accountants
D) Angel investors
E) Foreign partners

Question 57

Which of the following is not a reason for distributing equity among employees?

A) New companies often can't pay market rates for salary and wages
B) Including some equity in the compensation package aligns the employee with the company
C) The sense of ownership boosts morale
D) Distributing equity among employees reduces the risk of hostile takeover
E) Having some equity, the team sticks together during the rough times in the early launch phase

Question 58

You are least likely to resolve an interpersonal conflict in your team by:

A) Firing one of the parties
B) Hiring an outside expert who is perceived as a neutral party
C) Explaining to the parties involved that their arguments reduce the team's efficiency
D) Mediating between the parties
E) Transferring one of the parties to another team