Chapter 12 Full Test Bank Bootstrapping and Crowdfunding for

Test Bank

Chapter 12: Bootstrapping and Crowdfunding for Resources

Multiple Choice

1. When someone states, “I don’t have money to start a business,” what fact might you tell them to consider?

a. Most businesses start without any formal investment.

b. This is a valid reason for not starting a business.

c. Formal investment will be needed to make a successful company.

d. People who have no money cannot start a business.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: 12.1. What Is Bootstrapping?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

2. What is the name given to the process of building a business with very little, or no, funding?

a. seed startup

b. bootstrapping

c. zero funding

d. skeleton funding

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Knowledge

Answer Location: 12.1. What Is Bootstrapping?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

3. Jose is opening a small restaurant. On weekends, he works with his cousin to construct the tables, chairs, and counters that will go into the restaurant. What is the name given to the result of these efforts?

a. labor equity

b. owner labor

c. sweat equity

d. family ownership

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Knowledge

Answer Location: The Bootstrapped Startup

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

4. SuLin is setting up a small construction shop and uses his personal credit card to purchase the company’s basic equipment. This process is referred to as which of the following?

a. venture capital

b. sweat equity

c. external funding

d. bootstrapping

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: The Bootstrapped Startup

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

5. What are "the 3 Fs" for financial assistance?

a. the three major sources of formal funding

b. a slang term meaning angel investors

c. family, friends, and fools

d. free financial funding

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Knowledge

Answer Location: 12.1. What Is Bootstrapping?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

6. Which of the following is an advantage of bootstrapping?

a. You can expand your business faster.

b. You will avoid risk.

c. Outside investors are more likely to fund you if you have bootstrapped.

d. You have tapped into a lucrative source of advice and connections.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: Bootstrapping or External Financing?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

7. A company launching 100% through bootstrapping would use what source of funding?

a. angel investor

b. venture capital funds

c. personal funds

d. a bank loan

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Knowledge

Answer Location: 12.1. What Is Bootstrapping?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

8. Using whatever resources you have to save money while you are getting your business started is referred to as what type of strategy?

a. seed money

b. guerilla startup

c. penny pinching

d. skeletal startup

Learning Objective: 12.2: Identify common bootstrapping strategies used by entrepreneurs.

Cognitive Domain: Knowledge

Answer Location: 12.2. Bootstrapping Strategies

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

9. Seth starts his company with computers that he found on craigslist.com and some office furniture from the basement of his parents’ home. This strategy would be considered which of the following?

a. startup

b. sweat equity

c. penny pinching

d. zero-based funding

Learning Objective: 12.2: Identify common bootstrapping strategies used by entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: 12.2. Bootstrapping Strategies

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

10. Hard work an entrepreneur personally puts in to get a business up and running is known as ______.

a. penny pinching

b. bootstrapping

c. sweat equity

d. affordable loss

Learning Objective: 12.2: Identify common bootstrapping strategies used by entrepreneurs.

Cognitive Domain: Knowledge

Answer Location: The Bootstrapped Startup

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

11. The process of raising capital for a new venture from a large audience, usually through the Internet, is called ______.

a. crowdfunding

b. penny pinching

c. crowdsourcing

d. bootstrapping

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Knowledge

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

12. Using the Internet to attract, aggregate, and manage ostensibly inexpensive or even free labor from enthusiastic customers and like-minded people is called ______.

a. crowdfunding

b. penny pinching

c. crowdsourcing

d. bootstrapping

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Knowledge

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

13. Crowdfunding is a resource for ______.

a. talent

b. intellectual property

c. money

d. labor

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Comprehension

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

14. Crowdsourcing is a resource for ______.

a. money

b. investors

c. physical capital

d. labor and talent

Learning Objective: 12.2: Identify common bootstrapping strategies used by entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

15. In reference to crowdfunding, a backer is best described as ______.

a. a person who will pay back a loan if you fail to do so

b. a person who contributes support in a crowdfunding venture

c. a financial institution that lends money to a startup

d. the financial institution that manages the transfer of money

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Knowledge

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

16. Crowdfunding and crowdsourcing would both be considered which of the following strategies?

a. formal fundraising

b. bootstrapping

c. angel investing

d. penny pinching

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Comprehension

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

17. People sharing their medical information online so as to help in the development of pharmaceuticals and medical devices that can be used to improve medical treatment is an example of ______.

a. networking

b. crowdfunding

c. crowdsourcing

d. angel investing

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Comprehension

Answer Location: Crowdsourcing to Improve Medical Treatment

Difficulty Level: Hard

AACSB Standard: Financial theories, analysis, reporting, and markets

18. Crowdsourcing is a bootstrapping method that saves money while obtaining valuable ______ resources.

a. information

b. financial

c. technological

d. social media

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Comprehension

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

19. Wikipedia encouraging its users to edit and update its free online encyclopedia is an example of ______.

a. patronage

b. equity

c. crowdfunding

d. crowdsourcing

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Application

Answer Location: Crowdsourcing to Reduce Labor Costs

Difficulty Level: Medium

AACSB Standard: Application of knowledge

20. Wikihouse freely provides user-submitted blueprints for anyone who wishes to build an affordable custom-built house with 3D printing. This is an example of ______ because ______.

a. crowdsourcing; it uses the expertise of the crowd to greatly reduce the cost of design and construction

b. crowdfunding; it uses the Internet to quickly generate a large user base for Wikihouse

c. bootstrapping; it allows amateur designers an opportunity to disrupt the construction business

d. Wikifunding; it uses the open-source Wikipedia platform to generate new solutions and opportunities

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Comprehension

Answer Location: Crowdsourcing Through Technology

Difficulty Level: Hard

AACSB Standard: Financial theories, analysis, reporting, and markets

21. Which of the following needs can be addressed primarily through crowdsourcing?

a. A company wants to procure a library of freely downloadable photographs for its photo app.

b. A company wants to increase profits by raising subscription fees to its video streaming app.

c. A company wants to reduce waste in its manufacturing process by working with a single vendor.

d. A company wants to raise funding to support expansion of its product lines.

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Application

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Application of knowledge

22. According to the 2012 American Dream Composite Index, ______ tend to be between the ages of 24 and 35, are more likely to be men, and to have an income of over $100,000 per year.

a. bootstrappers

b. crowdsourcing participants

c. angel investors

d. crowdfunding backers

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: 12.4. Crowdfunding Startups and Entrepreneurships

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

23. According to the text, small companies and individuals may choose to manufacture prototypes in China because Chinese factories can manufacture in ______ batches at ______ costs.

a. multiple; moderate

b. small; low

c. frequent; high

d. large; low

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Knowledge

Answer Location: Crowdsourcing Through Technology

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

24. Users of the popular GPS app Waze periodically report driving conditions while on the road, allowing all users to benefit from live traffic updates. Waze is an example of crowdsourcing because ______.

a. users have free access to the same traffic information

b. users freely contribute traffic information for use by the app

c. the app has a very large and loyal user base

d. the app asks for donations at the end of each drive

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Application

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

25. As discussed in the text, Crowdfunder, AngelList, Fundable, and Circle Up are examples of sites that ______.

a. allow funding requests under $1,000

b. allow funding requests over $5 million

c. give backers the opportunity to invest in exchange for ownership or future returns

d. do not allow companies to offer equity as a reward

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Comprehension

Answer Location: Equity Crowdfunding

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

26. How much money can be raised through crowdfunding?

a. only small amounts, under $1,000

b. small amounts, generally under $5,000

c. as much money as can be raised through family and friends

d. from small amounts to amounts in the millions of dollars

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Comprehension

Answer Location: 12.4. Crowdfunding Startups and Entrepreneurships

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

27. How does Kickstarter get its money?

a. by charging a percentage of the funds obtained from each successful project

b. by charging members a modest fee for posting their request

c. by using crowdfunding themselves

d. by listing themselves as a nonprofit and getting grants

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

28. What must be offered by someone who uses Kickstarter for a fundraising project?

a. They must create something to share with others.

b. They must offer to return the exact amount of the contributed funds within a given period of time.

c. They must offer to give a portion of their funds to a charity.

d. They must offer a moneyback guarantee if a backer decides to rescind his or her contribution.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

29. What happens on Kickstarter if the funds are not raised in the given amount of time?

a. The project is automatically extended for another 30 days.

b. The project owner can keep the money raised up to the end of the period.

c. The project owner can transfer funds earned to a project of his or her choice.

d. The money is not earned and no money will be received.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

30. What happens if the funds raised on Kickstarter exceed those specified at the start of the project?

a. The excess money is contributed to a general fund.

b. The owner of the project can keep the excess funds.

c. No one is allowed to contribute once the goal has been attained.

d. The excess must be returned to the last contributors.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

31. Which of the following could not be offered in a Kickstarter campaign?

a. a free product or product sample

b. participation in a cash award raffle

c. presale delivery of the product or service

d. free tickets to a play

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Comprehension

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

32. What is the most effective reward to offer to Kickstarter contributors?

a. a cash award

b. awards-in-kind that offer equivalent value for the cash contributed

c. promising contributors that they will be the first to receive the product, along with a contribution award

d. offering to list the person as a founding contributor on all product and service literature

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Comprehension

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

33. The most established crowdfunding site is ______.

a. Indiegogo

b. Kickstarter

c. Crowdrise

d. Tilt

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Easy

AACSB Standard: Application of knowledge

34. How does equity crowdfunding differ from other types of crowdfunding?

a. Investors are given the opportunity to become company shareholders.

b. Funds are raised from a community of angel and venture capitalists.

c. Funds are provided by the government.

d. Financial institutions are allowed to raise funds on these sites.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Comprehension

Answer Location: Equity Crowdfunding

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

35. What made equity crowdfunding in the United States possible?

a. the success of other crowdfunding sites

b. the JOBS Act, signed by President Obama

c. changes in Dow Jones

d. advances in the software of crowdfunding sites

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Equity Crowdfunding

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

36. What is characteristic of the patronage model of crowdfunders?

a. Investors provide financial support with no expectation of direct return.

b. Investors are given prizes for their financial support, such as product samples or experiences.

c. Equity is exchanged for the contribution.

d. Funds are treated as loans.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Knowledge

Answer Location: Patronage Model

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

37. What is characteristic of the investor model of crowdfunders?

a. Investors provide financial support with no expectation of direct return.

b. Investors are given prizes for their financial support, such as product samples or experiences.

c. Equity is exchanged for the contribution.

d. Funds are treated as loans.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Knowledge

Answer Location: The Investor Model

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

38. What is characteristic of the lending model of crowdfunders?

a. Investors provide financial support with no expectation of direct return.

b. Investors are given prizes for their financial support, such as product samples or experiences.

c. Equity is exchanged for the contribution.

d. Funds are treated as loans.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Knowledge

Answer Location: Lending Model

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

39. What is characteristic of the reward model of crowdfunders?

a. Investors provide financial support with no expectation of direct return.

b. Investors are given prizes for their financial support, such as product samples or experiences.

c. Equity is exchanged for the contribution.

d. Funds are treated as loans.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Knowledge

Answer Location: Reward-Based Crowdfunding

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

40. Crowdfunding can help you save money on marketing because it provides ______.

a. customer service automation

b. your customers with a free sample of your product

c. you with an idea of the level of interest in your product

d. free access to mailing lists

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Comprehension

Answer Location: The Advantages of Crowdfunding for Global Entrepreneurs

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

41. Which of the following accurately describes a major advantage to crowdfunding?

a. Projects are easy to conduct.

b. There are different options in getting funded, aside from giving a part of the company away.

c. It is relatively risk free.

d. It is the easiest way to get worldwide recognition.

Learning Objective:

Cognitive Domain: Comprehension

Answer Location: The Advantages of Crowdfunding for Global Entrepreneurs

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

42. When conducting a crowdfunding campaign, why is it important to talk to others who have used crowdfunding?

a. You will get a better idea of what to do and what to avoid in your campaign.

b. You can engage them in your own campaign.

c. You can gain valuable information about their product or service.

d. They may want to buy your business.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 4. Seek and Accept Advice

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

43. Kevin is about to launch a crowdfunding campaign and posts a request on his Facebook page, asking people to share their experiences on crowdfunding sites. What element of conducting a campaign is Kevin observing?

a. Set the right fundraising goal.

b. Practice the pitch.

c. Seek and accept advice.

d. Get the campaign started.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Application

Answer Location: 4. Seek and Accept Advice

Difficulty Level: Medium

AACSB Standard: Application of knowledge

44. Greg is using a fundraiser site and is offering 10 shares of stock to those who contribute a minimum of $100 to his product. What model of crowdfunding is Greg using?

a. investor

b. patronage

c. reward

d. lending

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Application

Answer Location: The Investor Model

Difficulty Level: Medium

AACSB Standard: Application of knowledge

45. Lorraine offers to give people a percentage of the profits earned from her theater production as a reward for donating $100 to the production’s equipment. Kickstarter did not approve her campaign because ______.

a. it was a theater production and not a product

b. she wanted to offer a financial reward

c. she was asking too much of an investment, given the reward

d. she was asking too little of an investment, given the reward

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Application

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

46. As described in the text, one of the problems with the Coolest Cooler and its Kickstarter campaign was that ______.

a. the USB charger caused electric shocks to several customers

b. shipping was too expensive for more customers

c. supporters lost faith over delayed production

d. they crowdfunded on multiple sites, betraying community guidelines

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

47. According to the text, in the crowdfunding model, the ______ is everything.

a. formal proposal

b. video pitch

c. written description

d. sales pitch

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Knowledge

Answer Location: 7. Focus on the Pitch

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

48. As recent studies have shown, projects with spelling mistakes are how much less likely to be successful than projects without?

a. 13%

b. 27%

c. 50%

d. 75%

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Knowledge

Answer Location: 7. Focus on the Pitch

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

49. If you cannot convey your product or service idea to your audience of prospective financial backers in a few short sentences, you should ______.

a. provide everyone with a detailed business plan document.

b. abandon your product or service idea.

c. spend time getting a clearer sense of the essence of your product.

d. remind your audience that they are missing out on a unique opportunity.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 1. Make Sure Your Product or Service Solves a Real Problem

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

50. Crowdfunding entrepreneurs should set a funding target that is ______.

a. aggressive to signal confidence in the product or service for potential investors.

b. low and easy to outperform in order to generate buzz around the product or service.

c. realistic enough to attract backers but high enough to cover costs.

d. as high as possible to generate as much initial cash as possible to infuse into the business.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 6. Money Matters

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

51. When should you begin broadcasting your product to attract an audience?

a. when your product is ready to ship

b. when your product is in production

c. when you have your first working prototype

d. now

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Knowledge

Answer Location: 5. Get Your Campaign Started—Now!

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

52. Research has shown that what percentage of crowdfunded products are delivered later than expected?

a. 25%

b. 40%

c. 60%

d. 75%

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Knowledge

Answer Location: 5. Get Your Campaign Started—Now!

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

53. If you have a successfully crowdfunded product and you know you are going to miss your advertised ship date, what should you do?

a. Do nothing.

b. Change the date on your crowdfunding site but do not draw attention to it.

c. Be honest; alert your backers and notify others through the crowdfunding site.

d. Shift the blame to someone else (manufacturers, distributors, suppliers, etc.).

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Knowledge

Answer Location: 10. Avoid the Crowdfunding Curse!

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

54. Which crowdfunding platform allows its patrons to fund illustrators, authors, podcasters, musicians, and other independent creators?

a. RocketHub

b. Crowdcube

c. OurCrowd

d. Patreon

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

55. Which crowdfunding platform focuses on science-related projects?

a. RocketHub

b. GoddardGroup

c. OurCrowd

d. Patreon

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

True/False

1. When borrowing from friends and family, it is better to treat the arrangement as a formal loan.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: 12.1. What Is Bootstrapping?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

2. Crowdsourcing would be the fastest way of raising financial capital for your business.

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Comprehension

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

3. You would like to raise funds for a foodbank in your local community. Kickstarter would be an excellent source for the initial funds.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Application

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Easy

AACSB Standard: Application of knowledge

4. In the investor model, crowdfunding backers will expect an equity stake in your business.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Knowledge

Answer Location: 12.5. The Four Contexts for Crowdfunding.

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

5. In the patronage model, investors will contribute to your project with no expectation of direct return.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Knowledge

Answer Location: Patronage Model

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

6. John is raising money on a crowdfunding site, and in return for contributions, offers to let the contributor purchase prelaunch product. John is using a patronage model of crowdfunding.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Application

Answer Location: Reward-Based Crowdfunding

Difficulty Level: Easy

AACSB Standard: Application of knowledge

7. One of the advantages of crowdfunding is that the audience does not expect you to have a good product pitch. They understand that you are in the early stages of your product or service development.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 7. Focus on the Pitch

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

8. According to the text, a disadvantage of bootstrapping and building up a business piece by piece is that you’re less likely to generate a larger customer base.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: The Bootstrapped Startup

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

9. Most entrepreneurs choose to seek out angel investors or other external investors in the beginning.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: Bootstrapping or External Financing?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

10.Equity crowdfunding is increasing in popularity all over the world.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Equity Crowdfunding

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

11. Crowdfunding is a resource for talent and labor, and crowdsourcing is a resource for money.

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Comprehension

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

12. When setting a funding goal, focus on how much money you would like to have rather than on how much you will need.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 6. Money Matters

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

13. Research has shown that the majority of crowdfunded projects are delivered later than expected.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Knowledge

Answer Location: 10. Avoid the Crowdfunding Curse!

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

14. Crowdfunding has been used to raise billions of dollars for all kinds of industries.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: 12.4. Crowdfunding Startups and Entrepreneurships

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

15. There is no time limit for trying to raise funds through Kickstarter.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

16. Indiegogo is the largest global crowdfunding site in the world.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Knowledge

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

17. Bootstrapping and starting slowly enables entrepreneurs to avoid any and all risk.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: The Bootstrapped Startup

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

18. Crowdfunding backers invest solely on the merits of a product rather than their impression of the entrepreneur involved with the product.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 7. Focus on the Pitch

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

19. The first step entrepreneurs should take before starting a crowdfunding campaign is to begin manufacturing the product.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 3. Be Prepared

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

20. When seeking advice from other crowdfunders, focus on those who have been successful; there’s little to learn from those who failed.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 4. Seek and Accept Advice

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

21. The most successful crowdfunding efforts are a result of testing, refining, and planning.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Knowledge

Answer Location: 2. Test and Refine Your Idea

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

22. Crowdfunding offers the advantage of giving you an idea of the level of enthusiasm and interest in your product or service before you even launch.

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Knowledge

Answer Location: The Advantages of Crowdfunding for Global Entrepreneurs

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

23. Thanks to the Internet, the likelihood of a new business getting formal investment is pretty good.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Knowledge

Answer Location: 12.1. What Is Bootstrapping?

Difficulty Level: Easy

AACSB Standard: Financial theories, analysis, reporting, and markets

24. If you choose the right bootstrapping strategy, you can likely avoid having to invest sweat equity.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Comprehension

Answer Location: The Bootstrapped Startup

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

Essay

1. Imagine that you have developed a software application and want to raise money for legal advice, filing initial business and regulatory forms, and funding your travel and marketing expenses. Describe how you would fund these early efforts.

Learning Objective: 12.1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Cognitive Domain: Application

Answer Location: Bootstrapping or External Financing?

Difficulty Level: Easy

AACSB Standard: Application of knowledge

2. Imagine that you have developed a software application and are now ready to “open shop.” Describe some of the penny-pinching techniques you would use to get your business started.

Learning Objective: 12.2: Identify common bootstrapping strategies used by entrepreneurs.

Cognitive Domain: Application

Answer Location: 12.2. Bootstrapping Strategies

Difficulty Level: Medium

AACSB Standard: Application of knowledge

3. Imagine that you have developed a concept for a wood chipper that will provide more safety features than current products. You have some rough designs but would like to use Internet-based sources to develop these ideas into a prototype that can be tested. What resources would you use, and how would you use them?

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Application

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Application of knowledge

4. Imagine that you have just written a book on urban farming. You need money in order to print and distribute your first printing. How would you use Internet-based resources for this purpose?

Learning Objective: 12.3: Explain the difference between crowdsourcing and crowdfunding.

Cognitive Domain: Application

Answer Location: 12.3. Crowdfunding Versus Crowdsourcing

Difficulty Level: Medium

AACSB Standard: Application of knowledge

5. Select a product that you might want to fund on Kickstarter. Explain the steps you would take to make sure that your campaign fulfills the requirements of the Kickstarter site.

Learning Objective: 12.4: Describe the effects of crowdfunding on entrepreneurship.

Cognitive Domain: Application

Answer Location: Types of Crowdfunding Sites

Difficulty Level: Medium

AACSB Standard: Application of knowledge

6. Compare the investor model of crowdfunding with the lending model. What are the advantages and disadvantages of each for the entrepreneur?

Learning Objective: 12.5: Define the four contexts for crowdfunding.

Cognitive Domain: Analysis

Answer Location: 12.5. The Four Contexts for Crowdfunding

Difficulty Level: Medium

AACSB Standard: Analytical thinking

7. You are ready to start your crowdfunding campaign. Describe what you should do to ensure a successful campaign.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Comprehension

Answer Location: 12.6. A Quick Guide to Successful Crowdfunding

Difficulty Level: Medium

AACSB Standard: Financial theories, analysis, reporting, and markets

8. Identify a project that could use crowdfunding and crowdsourcing. Identify the many opportunities that would benefit from these online sourcing and funding options.

Learning Objective: 12.6: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Cognitive Domain: Analysis

Answer Location: 12.6. A Quick Guide to Successful Crowdfunding

Difficulty Level: Medium

AACSB Standard: Analytical thinking