Question 1

For all the GEM nations, the prevalence rate of informal investors is positively correlated with social security taxes and with taxes on capital and property.

Accepted Answer

The prevalence rate of informal investors in GEM (Global Entrepreneurship Monitor) nations is generally negatively correlated with social security taxes and taxes on capital and property. Higher taxes can discourage informal investments by reducing disposable income and the attractiveness of investment returns.

Question 2

Almost every new business raises its initial money from the founders themselves and what we call informal investors, including:

Accepted Answer

The answer of Almost every new business raises its initial...

Question 3

Eighty percent of the venture capital invested in the United States finances hi-tech companies; by contrast only 29 percent of the venture capital invested in other G7 nations is in hi-tech companies.

Accepted Answer

The statement is true, as per the given information.

Question 4

What was the percentage increase of poor women who were reached by microfinance from December 1999 to December 2010?

Accepted Answer

The percentage increase of poor women reached by microfinance from December 1999 to December 2010 was 1001%, indicating a significant expansion in outreach during this period.

Question 5

In every nation, there is far more informal than formal investment from venture capitalists.

Accepted Answer

Most investment in startups and small businesses comes from informal sources such as friends and family, angel investors, and crowdfunding, rather than formal venture capital firms.

Question 6

Among the G7 nations, the United States has the highest prevalence rate (3.8%)and the United Kingdom has the lowest (1.1%).These two nations also have the highest and lowest TEA (Total Entrepreneurial Activity)rates; from this we can conclude that the prevalence rate for informal investors and the TEA rates among all nations are perfectly correlated.

Accepted Answer

Correlation does not imply causation, and the prevalence rates for informal investors and TEA rates can vary independently among different nations.

Question 7

The split of the percent of entrepreneurs who expect to profit from their ventures and the percent of those that do not is almost ________ of the split among informal investors.

Accepted Answer

The answer of The split of the percent of entrepreneurs...

Question 8

The fact that a country has sufficient startup capital overall means that every deserving nascent business receives funding.

Accepted Answer

While having sufficient startup capital may increase the availability of funding for businesses, it does not necessarily mean that every deserving nascent business will receive funding. There are still factors such as market competition, business plans, and track record that investors will consider before investing in a business.

Question 9

What is the average amount of a microenterprise loan through the Grameen Bank?

Accepted Answer

The average amount of a microenterprise loan through the Grameen Bank is approximately $360.

Question 10

In general, trade sales produce nearly as big a capital gain as IPOs.When a company executes a trade sale, it almost always has the option of an IPO, as well.

Accepted Answer

Trade sales and IPOs can result in different levels of capital gain and a company may choose one over the other based on their specific goals and circumstances. While a company may have the option of an IPO after considering a trade sale, it is not always the case that trade sales produce nearly as big a capital gain as IPOs.

Question 11

One of the principal reasons for the failure of classic venture capital in Europe at the start of the 1990s was the failure of the secondary markets after the general stock market crash of October 1987.

Accepted Answer

The failure of the secondary markets after the general stock market crash of October 1987 was indeed one of the reasons for the failure of classic venture capital in Europe at the start of the 1990s.

Question 12

Although there is no direct link between classic venture capital investment and taxation, there is an indirect link via informal investors, who are influenced by how much they pay in taxes.

Accepted Answer

Informal investors, such as angel investors, may be influenced by tax incentives or deductions, which can indirectly affect the flow of capital into venture investments.

Question 13

The rarest source of capital for nascent entrepreneurs is______.

Accepted Answer

Venture capital is the rarest source of capital for nascent entrepreneurs as it is typically only available to those with high-growth potential and a proven track record of success. Friends and family can often be a common source of initial funding, and financial advisors can provide guidance on securing funding. Foolhardy investors are not a recommended source of capital as they may make risky decisions without fully understanding the business or market.

Question 14

Who comprises the "4Fs"?

Accepted Answer

The "4Fs" typically refers to the four primary sources of early-stage funding for startups: Founders, Family, Friends, and Foolhardy investors. Option E correctly identifies these four groups.

Question 15

According to Figure 9.5, an R² of 0.78 indicates that 78% of the variation in annual amount per informal investor is explained by:

Accepted Answer

The answer of According to Figure 9.5, an R² of...

Question 16

The expected internal rate of return or IRR (compound annual return on investment)is calculated from the expected payback time and the times return for formal investors and entrepreneurs who reported both.

Accepted Answer

The expected internal rate of return (IRR) is calculated based on the expected cash flows and the time value of money. It is not directly calculated from the payback time and times return, though those factors may be used in the calculation. However, it is common for formal investors and entrepreneurs to report both the expected IRR and the payback time and times return.

Question 17

It is unreasonable to hypothesize that the higher the rate of taxation, the less likely that a person will have discretionary money to invest.

Accepted Answer

It is reasonable to hypothesize that higher taxation can reduce disposable income, potentially leaving less money available for discretionary spending or investment.

Question 18

The amount of capital that entrepreneurs need to start their ventures depends mainly on______.

Accepted Answer

The amount of capital required for starting a venture can depend on various factors including the type of business, the ambitions of the entrepreneur, the location of the business, and the country of origin. Each of these factors can significantly influence the initial capital outlay needed.

Question 19

While classic venture capitalists finance very few companies, some of the ones that they do finance play a crucial role in the development of ______industries.

Accepted Answer

Classic venture capitalists tend to focus on funding knowledge-based industries, which are characterized by research, development, and innovation. These industries often have high growth potential and require significant investment in intellectual capital. Examples of knowledge-based industries include biotechnology, software development, and renewable energy.

Question 20

Which of the following categories of informal investors expects the highest return on his or her investment, since it is made in a more detached manner?

Accepted Answer

Foolhardy investors are those who invest in a more detached and less emotional manner, expecting higher returns than other categories of informal investors. Founders, family, and friends may have a more personal and emotional connection to the investment, leading to lower return expectations.

Quiz 9: Facing Entrepreneurial Ventures Worldwide