Deck 6: Building the Founding Team

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Certain personalities are better suited for entrepreneurship than others.

Question 5

A talented entrepreneur should be able to substitute for an experienced management team.

Question 6

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

Question 7

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

Question 8

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

Question 9

Over 95% of entrepreneurs in the US report that their team members are the main source of seed financing.

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

Early stage companies tend to be hierarchal.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

Founder shares should be distributed equally between all founders.

Question 23

Free resources are poor substitutes for a qualified lawyer.

Question 24

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 25

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 26

According to a study by Babson College and London Business School, businesses with growth aspirations plan on employing more than 20 people within the next:

A)2 Years
B)3 Years
C)4 Years
D)5 Years
E)None of the above

Question 27

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 28

Which of the following personality traits best predicts entrepreneurial success?

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

Question 29

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

Question 30

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

Question 31

How much, according toDeloitte & Touche, do restaurants generate in net income before taxes on average, approximately?

A)2%
B)3%
C)10%
D)13%
E)17%

Question 32

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 33

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

Question 34

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

Question 35

If employees own equity in the company, they usually work harder.

Question 36

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 37

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 38

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

Question 39

Which of the following is true about teams?

A)Teams provide constructive feedback for your ideas.
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 40

Startups should negotiate employee salaries below market levels.

Question 41

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 42

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 43

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 44

Explain why solo entrepreneurs are generally less successful than team players.

Question 45

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 46

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 47

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 48

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 49

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 50

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 51

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 52

By making your team members work long hours, you put them at risk of:

A)Burnout
B)Family pressure
C)Stress
D)Reduced efficiency
E)All of the above

Question 53

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 54

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 55

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 56

All of the following is true about phantom stocks except:

A)They are expensed over the vesting period
B)They give employees the right to own 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 57

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

Question 58

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 59

Why should you have one or two board members 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 60

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 61

Describe what a sample staffing plan might look like.

Question 62

What valuable contributions can your team members bring to your company?

Question 63

Describe the pros and cons of a dual job strategy at the early stages of the venture.

Question 64

Explain the benefits, to the firm, of a vesting schedule for employee options and shares.

Question 65

Give examples of compensations used to make your start-up attractive for valuable team members.

Question 66

Why are lawyers and accountants considered to be external members of your team?

Question 67

Who should you invite to join the Board of Advisors of your firm and why?

Question 68

Explain how entrepreneurs should use psychological or personality tests as one way to develop self-awareness.

Question 69

Explain why company culture is important.

Question 70

Three major problems your team may face are burnout, interpersonal conflicts and family pressure.Describe how you can prevent and overcome them.

Question 71

What are some indicators of the right co-founders and team members for your start-up?

Question 72

How can entrepreneurs ensure that options improve organizational performance?

Question 73

What are some of the methods used to identify an entrepreneur's strengths and weaknesses?

Question 74

Describe the balance between too much and too little communication with a board of advisors.