MBA Entrepreneurship 3

Question 1

What is 'sweat equity' in entrepreneurship?

Accepted Answer

Ownership stake granted to founders or early team members in exchange for their labor and time rather than cash investment

Answer

Sweat equity recognizes contributions of labor, expertise, and time rather than cash, compensating founders and key early employees with ownership shares that vest over time.

Question 2

What is a 'startup accelerator'?

Accepted Answer

A fixed-term, cohort-based program providing mentorship, resources, and small seed investment in exchange for equity to help startups grow rapidly

Answer

Accelerators like Y Combinator provide startups with seed funding, intensive mentorship, networking, and culminate in a Demo Day where startups pitch to investors.

Question 3

What is 'intellectual property' (IP) protection most critical for startups?

Accepted Answer

Securing legal rights to inventions, designs, brands, and creative works to maintain competitive advantage

Answer

IP protection through patents, trademarks, copyrights, and trade secrets prevents competitors from copying a startup's innovations, preserving its competitive moat and increasing its valuation.

Question 4

What is 'churn rate' and why does it matter for startups?

Accepted Answer

The percentage of customers who cancel or stop using a product over a given period, indicating retention health

Answer

Churn rate measures the percentage of customers lost in a period — high churn signals product-market fit problems, while low churn indicates strong customer retention and sustainable growth.

Question 5

What is the purpose of a 'cap table' (capitalization table) for startups?

Accepted Answer

A spreadsheet tracking all equity ownership — shares outstanding, ownership percentages, and how they change through funding rounds

Answer

A cap table records who owns what in a company — founders, investors, employees with options — and is essential for tracking dilution, calculating ownership percentages, and planning future funding rounds.

MBA - Degree Master of Business Administration Practice Test

MBA - Degree Master of Business Administration Practice Test

MBA Entrepreneurship 3