Deck 9: Building a New-Venture Team

Question 1

The fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and sellers, is referred to as the ________.

A) liability of preparedness
B) liability of newness
C) burden of novelty
D) burden of freshness
E) millstone of innovation

Answer 1

B

Question 2

Which of the following statements is NOT true regarding the attributes of the founder(s) of a firm?

A) Evidence suggests that important entrepreneurial skills are enhanced through higher education.
B) Founders with prior entrepreneurial experience are more likely to avoid costly mistakes.
C) Founders with experience in the same industry as their new ventures will typically have "blinders" on and are typically not as effective as founders new to the industry.
D) Founders with broad social and professional networks have an advantage.
E) New ventures that are started by a team rather than an individual have an advantage.

Answer 2

C

Question 3

The members of homogeneous teams are ________ in terms of their ________.

A) diverse; abilities and experiences
B) diverse; abilities, but very similar in terms of their experiences
C) similar; abilities and experiences
D) diverse; experiences, but very similar in terms of their abilities
E) sometimes diverse; abilities and experiences and sometimes similar along the same dimensions

Answer 3

C

Question 4

The term "liability of newness" refers to the fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firms lack "track records" with outside buyers and suppliers.

Question 5

Which of the following statements is incorrect regarding founding teams?

A) The members of heterogeneous teams are diverse in terms of their abilities and experiences.
B) Teams that are working together for the first time have an advantage over teams that have worked together before.
C) The psychological support that cofounders of a new business can offer one another is an important element of a firm's success.
D) The members of homogeneous teams are very similar in terms of their abilities and experiences.
E) Studies show that more than one individual starts 50 to 70 percent of all new teams.

Question 6

Kathy Denver is preparing to launch a home security firm. The team of people that will launch Kathy's firm are as follows: Kathy (CEO), Trevor (VP-Finance), Shelia (VP-Sales), a four-person Board of Directors, a five-person Board of Advisors, and Kathy's primary investor, who will assume an advisory role. The group of people that will launch Kathy's firm is called its ________.

A) startup squad
B) new venture panel
C) new venture team
D) startup cadre
E) startup troop

Question 7

According to the textbook, studies show that more than one individual starts ________ percent of all new firms.

A) 20 to 25
B) 50 to 70
C) 5 to 15
D) 30 to 40
E) 75 to 90

Question 8

The members of heterogeneous teams are ________.

A) diverse in terms of their abilities and experiences
B) diverse in terms of their abilities, but very similar in terms of their experiences
C) similar in terms of their abilities and experiences
D) diverse in terms of their experiences, but very similar in terms of their abilities
E) sometimes diverse in terms of their abilities and experiences and sometimes similar along the same dimensions

Question 9

Sam Atkinson, a new entrepreneur who had just launched his venture, joined an entrepreneurship boot camp. Sam's goal in joining the boot camp was to overcome the liability of ________.

A) entry barriers
B) foreignness
C) startups
D) failure
E) newness

Question 10

Wild Friends Food, the company profiled in the opening feature of Chapter 9, is a food company. Which of the following statements is incorrect regarding Wild Friends Foods co-founders, its personnel policies or the company itself?

A) Wild Friends Food has two co-founders.
B) The co-founders both are low drama type of people.
C) The co-founders have complementary skills.
D) The idea for Wild Friends Food was created at a Startup Weekend event in San Francisco.
E) The firm is located in Eugene, Oregon.

Question 11

Which of the following qualities was NOT identified in the textbook as a preferred attribute of the founder(s) of a firm?

A) Prior entrepreneurial experience
B) Firm started by a team
C) Relevant industry experience
D) Prior experience working in a government or university position
E) Higher education

Question 12

According to the textbook, prior entrepreneurial experience ________.

A) is one of the poorest predictors of future entrepreneurial performance
B) is one of the most consistent predictors of future entrepreneurial performance for entrepreneurs under 50 years of age, but not for entrepreneurs over 50 years of age
C) is one of the most consistent predictors of future entrepreneurial performance
D) is one of the most consistent predictors of future entrepreneurial performance in service firms, but not in manufacturing firms
E) has no relationship to future entrepreneurial performance

Question 13

Which of the following statements is untrue regarding founding teams?

A) The members of heterogeneous teams are diverse in terms of their abilities and experiences.
B) The members of homogenous teams are very similar in terms of their abilities and experiences.
C) Teams that have worked together before have an edge.
D) Studies show that more than one individual starts 50 to 70 percent of all new firms.
E) It is generally believed that new ventures started by an individual have an advantage over new ventures started by a team.

Question 14

Savanna Combs opened a clothing boutique two years ago. Unfortunately, the boutique failed after 18 months. Savanna attributes the failure of her boutique to the fact that her employees couldn't adjust quickly enough to their new roles and that her boutique lacked a "track record" with outside buyers and sellers, which made it difficult to form partnerships and make sales. Savanna suffered from what research calls the ________.

A) burden of novelty
B) millstone of innovation
C) liability of newness
D) liability of preparedness
E) burden of newness

Question 15

Which of the following was NOT identified in the textbook as an element of a new venture team?

A) Board of advisors
B) Suppliers and vendors
C) Key employees
D) Lenders and investors
E) Management team

Question 16

Describe the term "liability of newness" and suggest several ways that a new venture can overcome this handicap.

Question 17

According to the textbook, which of the following statements is inaccurate regarding the size and composition of the founding team of a firm?

A) There is no relationship between a founding team's size and its effectiveness.
B) A founding team larger than four people is typically too large to be practical.
C) The members of a homogeneous founding team are similar in terms of their abilities and experiences.
D) The members of a heterogeneous founding team are diverse in terms of their abilities and experiences.
E) A founding team can be too big, causing communication problems and increasing potential for conflict.

Question 18

The high failure rate among new ventures is due, in part, to the liability of newness, which refers to the fact that new companies often falter because ________.

A) they are underfunded and the founders of the firms don't move quickly enough to put together boards of directors and boards of advisors that can provide them direction and advice
B) the founders of the firms underestimate the complexities involved with starting a new business and the firms lack a "track record" with outside buyers and sellers
C) the people who start the firms can't adjust quickly enough to their new roles and the firms lack a "track record" with outside buyers and sellers
D) the people who start the firms can't adjust quickly enough to their new roles and they are underfunded
E) the founders of the firms underestimate the complexities involved with starting a new business and they don't move quickly enough to establish business partnerships

Question 19

A ________ is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.

A) new venture panel
B) startup team
C) new venture team
D) new project team
E) startup cadre

Question 20

The What Went Wrong feature in Chapter 9 focuses on Devver, a 2008 startup that helped software developers use cloud-based services to "test" their code in an expedient manner. According to the feature, one of the primary reasons Devver failed was ________.

A) it lacked a cofounder who loved the business side of running a startup
B) the cofounders couldn't get along
C) it didn't build a robust partnership network
D) it didn't solicit advice from attorneys, bankers or business consultants
E) it didn't have a Board of Advisors

Question 21

A(n) ________ is a person who works for a business as an apprentice or trainee for the purpose of obtaining actual experience.

A) freelancer
B) consultant
C) intern
D) virtual assistant
E) novice

Question 22

A board of directors is typically made up of both ________ and ________ directors.

A) junior; senior
B) inside; outside
C) experienced; inexperienced
D) novice; expert
E) paid; unpaid

Question 23

Calvin Tucker is in the process of launching an educational services firm. He plans to incorporate the firm. Because the firm will be incorporated, Calvin is legally required to have a ________.

A) board of investors
B) board of advisors
C) customer advisory board
D) board of directors
E) panel of advisors and peers

Question 24

The Savvy Entrepreneurial Firm feature in Chapter 9 focuses on "lifehacks." According to the feature, a "lifehack" refers to any trick, shortcut, ability, or novelty method that increases a person's ________, efficiency, and effectiveness in both his or her personal life and career.

A) productivity
B) longevity
C) exitability
D) networkability
E) profitability

Question 25

Sam Simpson is a four-time business owner. One thing that has served Sam well throughout his entrepreneurial career is his ability to build and maintain relationships with people whose interests are similar or whose relationships could bring advantages to his new ventures. According to the textbook, Sam is a good ________.

A) networker
B) socializer
C) linker
D) assembler
E) connector

Question 26

Adam Miller is a general partner in a venture capital firm that just funded Gold Coast Software, a software firm in Santa Barbara, California. Gold Coast Software is incorporated, and Adam has taken a seat on the firm's board of directors. In board of directors terminology, Keith is a(n) ________ director.

A) subordinate
B) senior
C) distant
D) inside
E) outside

Question 27

Which of the following statements is incorrect regarding boards of directors?

A) If a new venture organizes as a corporation, it is not legally required to have a board of directors, but it is strongly recommended.
B) A board is typically made up of both inside and outside directors.
C) The board is responsible for declaring dividends.
D) Most boards meet formally three or four times a year.
E) The boards for publicly-traded companies are required by law to have audit and compensation committees.

Question 28

A(n) ________ is a person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients.

A) employee
B) virtual assistant
C) intern
D) trainee
E) freelancer

Question 29

James Williams is the Chief Operating Officer of a startup in the health food industry. He is also a member of his firm's board of directors. In board of directors terminology, James is a(n) ________ director.

A) inside
B) outside
C) expert
D) junior
E) senior

Question 30

Liz Zackery just launched a firm in the sporting goods industry. On the day the company was launched, Liz issued a press release, indicating that the vice president of New Balance, a highly respected athletic shoe and sports apparel company, had agreed to serve on her board of directors. Liz knows that such a high quality appointment will send an important message to her potential clientele. This phenomenon is referred to as ________.

A) championing
B) signaling
C) profiling
D) indicating
E) trumping

Question 31

In the context of boards of directors, a(n) ________ director is someone who is not employed by the firm.

A) outside
B) inside
C) external
D) impartial
E) peripheral

Question 32

A board of directors' three formal responsibilities are to ________.

A) periodically update the firm's business plan, declare dividends, and write the firm's marketing plan
B) appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation
C) write the firm's strategic plan, declare dividends, and conduct the annual meeting
D) appoint the officers of the firm, conduct the annual meeting, and submit the firm's annual report to the Securities & Exchange Commission
E) provide funding to the firm, write the firm's strategic plan, and submit the firm's annual report to the Securities & Exchange Commission

Question 33

A board of directors' three formal responsibilities are to appoint the officers of the firm, oversee the affairs of the corporation, and ________.

A) conduct the annual meeting
B) provide funding for the firm
C) submit the firm's annual report to the stockholders
D) declare dividends
E) write the firm's strategic plan

Question 34

Jason Andersen just finished writing a business plan for a new type of office supply store. One thing Jason included in the "Management Team & Company Structure" section of his business plan is a chart that depicts the most important skills that are needed for his business and where skills gaps exist. Jason included a(n)________ in his business plan.

A) skills profile
B) talent report
C) abilities profile
D) expertise report
E) talent summary

Question 35

A board of directors' three formal responsibilities are to appoint the officers of the firm, declare dividends, and ________.

A) write the firm's strategic plan
B) conduct the annual meeting
C) provide funding for the firm
D) represent the firm in public relations activities
E) oversee the affairs of the corporation

Question 36

A skills profile is a chart that depicts the ________.

A) preferable skills and abilities of the members of a firm's board of advisors
B) preferable skills and abilities of the members of a firm's board of directors
C) most important skills that are needed in a business startup and where skills gaps exist
D) skills and abilities that will be needed for a firm to maintain an aggressive growth strategy
E) skills of a company's customers and how those skills impact the products and services a company provides

Question 37

In the context of boards of directors, a(n) ________ director is a person who is also an officer of the firm.

A) outside
B) junior
C) inside
D) expert
E) senior

Question 38

The process of building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to the firm is called ________.

A) linking
B) socializing
C) networking
D) associating
E) connecting

Question 39

According to the textbook, although a board of directors has formal governance responsibilities, its most useful role is to ________.

A) provide guidance and support to the firm's managers
B) submit papers on behalf of the firm to the SEC
C) represent the firm in public relations activities
D) conduct the firm's annual meeting
E) provide funding to the firm

Question 40

A(n) ________ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist.

A) expertise report
B) talent profile
C) abilities summary
D) skills profile
E) talent summary

Question 41

Although a board of directors has formal governance responsibilities, its most useful role is to provide guidance and support to the firm's managers.

Question 42

Founding teams that have worked together before, as opposed to teams that are working together for the first time, have an edge.

Question 43

Networking is building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm.

Question 44

Melissa Jones just launched a firm in the wireless communications industry. Shortly after the company was launched, Melissa announced that a prominent Silicon Valley venture capitalist had agreed to serve on her board of directors. Melissa knows that such a high quality appointment will send an important message to her potential business partners and clientele. This phenomenon is referred to as ________.

A) trumping
B) championing
C) profiling
D) signaling
E) indicating

Question 45

Homogeneous teams are diverse in terms of their abilities and experiences.

Question 46

A virtual assistant is a freelancer who provides administrative, technical, or creative assistance to clients remotely from a home office.

Question 47

Are more firms started by individuals or founding teams? What are the advantages to founding a firm as a team rather than as an individual?

Question 48

Shelly Cook recently launched a social network for chefs. One thing Shelly is thinking about creating is a panel of experts who can provide her ongoing direction and advice regarding the future of her business. Shelly is thinking about creating a(n) ________.

A) analysis panel
B) discussion board
C) advisory board
D) suggestion panel
E) accountability panel

Question 49

Which of the following was NOT identified in the textbook as an attribute of an effective board member?

A) Strong personal and professional networks
B) Unknown in their field
C) Investment and/or operating experience
D) Ability and willingness to mentor the CEO and the top managers of the firm
E) Pattern recognition skills

Question 50

Which of the following was NOT identified in the textbook as an attribute of an effective board of directors?

A) Homogeneous set of experiences and talents
B) Customer-focused point of view
C) Ability and willingness to stand up to the CEO and top managers of the firm
D) Strong communication with the CEO
E) Decisiveness

Question 51

What is a skills profile and what is it used for?

Question 52

What is the difference between a heterogeneous and a homogeneous founding team? Which type of team has the advantage?

Question 53

A new venture team is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.

Question 54

A skills profile is a chart that depicts the most important skills that are needed and where skills gaps exist.

Question 55

Studies show that more than one individual starts 50 to 70 percent of all new firms.

Question 56

Prior entrepreneurial experience is a poor predictor of future entrepreneurial performance.

Question 57

Kelly Andersen founded a technology consulting firm several years ago. Her firm has grown rapidly and is financially successful. One thing that Kelly attributes her success to is that early on she assembled a panel of experts who provided her ongoing direction and advice about her business. What Kelly created is called a(n) ________.

A) consultation panel
B) suggestion panel
C) idea board
D) accountability panel
E) advisory board

Question 58

A(n) ________ is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.

A) consultation board
B) idea panel
C) counseling panel
D) advisory board
E) suggestion panel

Question 59

It is generally believed that new ventures started by an individual have an advantage over those started by a team.

Question 60

Prior entrepreneurial experience, relevant industry experience, and networking are attributes that strengthen the chances of a founder's success.

Question 61

SCORE is a for-profit organization that provides consulting services to small businesses.

Question 62

Which of the following statements about advisory boards is incorrect?

A) The fact that a corporation has a board of directors does not preclude it from establishing one or more advisory boards.
B) An advisory board can be established for general purposes or can be set up to address a specific issue or need.
C) Similar to a board of directors, an advisory board has legal responsibility for the firm in certain areas.
D) An advisory board is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.
E) A growing number of startups are forming advisory boards.

Question 63

A business ________ is an individual who gives professional or expert advice, on a volunteer or fee basis.

A) consultant
B) intern
C) employee
D) virtual assistant
E) mentor

Question 64

An advisory board is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.

Question 65

Which of the following is incorrect regarding the typical role of consultants in business startups?

A) Give professional advice
B) International consulting firms (e.g., Accenture and Bearing Point) are financially beyond the reach of most small firms.
C) Consultants fall into two categories-paid consultants and consultants who are made available for free.
D) Give expert advice
E) Help manage the day-to-day activities of the firm

Question 66

According to the textbook, most boards of advisers have between ________ and ________ members.

A) 5; 15
B) 2; 4
C) 10; 18
D) 2; 3
E) 4; 7

Question 67

Which of the following statements about advisory boards is incorrect?

A) If a firm has a board of directors, it is not permitted to have an advisory board.
B) Many people are more willing to serve on a company's board of advisors than its board of directors because it requires less time and there is no potential legal liability involved.
C) Most boards of advisers have between 5 and 15 members.
D) A growing number of startups are forming advisory boards.
E) An advisory board can be established for general purposes or can be set up to address a specific issue or need.

Question 68

Similar to a board of directors, an advisory board possesses legal responsibility for the firm.

Question 69

The fact that a corporation has a board of directors precludes it from having a board of advisors.

Question 70

Most boards of advisers have between 3 and 5 members.

Question 71

An advisory board can be established for general purposes or can be set up to address a specific need.

Question 72

More people are willing to serve on a company's board of directors than on its board of advisors.

Question 73

All consultants are paid consultants.

Question 74

What is SCORE? What is its role in helping a firm fill out its new venture team?

Question 75

Consultants fall into two categories-paid consultants and consultants who are made available for free or at a reduced rate through a nonprofit or government agency.