chapter 10 Essay

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Entrepreneurship: Successfully Launching New Ventures, 4e (Barringer/Ireland)
Chapter 10 Getting Financing or Funding

1) inDinero, the company profiled in the opening feature for Chapter 10, is described by its cofounders as "the fastest way for small businesses to manage their finances." Which of the following is not true about inDinero's founding story?
A) In 2009, inDineor's founders applied to TechStars, which is a Boulder, CO-based seed-stage fund/incubator, and were turned down.
B) The idea for inDinero originated in mid-2009 while its cofounders were still in college.
C) In April 2010, the founders of inDinero applied to Y Combinator, an organization that provides seed-stage funding, mentorship, and networking opportunities to participants, and were turned down.
D) inDinero reportedly has over 15,000 users .
E) In late 2009 and early 2010, the founders of inDinero tried to raise angel funding and were unsuccessful.
Answer: C
Diff: 1 Page Ref: 320
Topic: The Importance of Getting Financing or Funding
AACSB: Reflective Thinking
Objective: Explain the process of funding an entrepreneurial business venture

2) According to the textbook, many entrepreneurs go about the task of raising capital haphazardly because:
A) they are uncomfortable talking about money and they haven't written a business plan
B) they lack experience in this area and because they don't know much about their choices
C) they are focused on the nuts and bolts of starting their business
D) they haven't completed a feasibility analysis or business plan
E) they are intimidated by the process and they are unsure of how much money they need
Answer: B
Diff: 2 Page Ref: 321
Topic: The Importance of Getting Financing or Funding
AACSB: Reflective Thinking
Objective: Explain the process of funding an entrepreneurial business venture

3) Kimberly Jones is the founder of a company in the medical equipment industry. Kimberly's firm is still in the feasibility analysis stage and doesn't have a product that is ready to sell. The company is spending about $25,000 per month and expects to maintain that level of spending until it reaches profitability. The $25,000 a month is Kimberly's:
A) consumption rate
B) utilization rate
C) burn rate
D) usage rate
E) liquidity rate
Answer: C
Diff: 1 Page Ref: 321
Topic: The Importance of Getting Financing or Funding
AACSB: Reflective Thinking
Objective: Explain the process of funding an entrepreneurial business venture
4) The three reasons startups need funding are:
A) cash flow challenges, capital investments, and lengthy product development cycles
B) business research, cash flow challenges, and costs associated with building a brand
C) bonuses for members of the new venture team, attorney fees, and lengthy product development cycles
D) attorney fees, capital investments, and marketing research
E) bonuses for members of the new venture team, marketing research, and personnel costs
Answer: A
Diff: 2 Page Ref: 321
Topic: The Importance of Getting Financing or Funding
AACSB: Reflective Thinking
Objective: Explain the process of funding an entrepreneurial business venture

5) In startup firms, inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example?
A) cash flow challenges
B) marketing costs
C) personnel costs
D) capital investments
E) lengthy product development cycles
Answer: A
Diff: 2 Page Ref: 321
Topic: The Importance of Getting Financing or Funding
AACSB: Reflective Thinking
Objective: Explain the process of funding an entrepreneurial business venture

6) For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or
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