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Questions and Answers
According to the article, what is the approximate percentage of start-ups that fail to deliver a positive return to investors?
According to the article, what is the approximate percentage of start-ups that fail to deliver a positive return to investors?
- One-third
- Two-thirds (correct)
- One-quarter
- One-half
The author's primary motivation for researching why start-ups fail stemmed from a desire to improve the curriculum and teaching methods at Harvard Business School.
The author's primary motivation for researching why start-ups fail stemmed from a desire to improve the curriculum and teaching methods at Harvard Business School.
True (A)
Besides 'horses' (opportunities) what other factor do venture capitalists often cite as a key determinant of a start-up's success or failure?
Besides 'horses' (opportunities) what other factor do venture capitalists often cite as a key determinant of a start-up's success or failure?
Jockeys
The author has contributed to the creation of more than ______ electives focusing on various aspects of launching a new venture at HBS.
The author has contributed to the creation of more than ______ electives focusing on various aspects of launching a new venture at HBS.
Which research method was NOT employed by the author in the investigation into why start-ups fail? (select one)
Which research method was NOT employed by the author in the investigation into why start-ups fail? (select one)
Why was the author unnerved?
Why was the author unnerved?
According to the article, venture capital investors prioritize the attractiveness of the business opportunity over the capability of the founder.
According to the article, venture capital investors prioritize the attractiveness of the business opportunity over the capability of the founder.
What type of course is 'The Entrepreneurial Manager' at Harvard Business School?
What type of course is 'The Entrepreneurial Manager' at Harvard Business School?
Which of the following factors contributed to Quincy's collapse, besides the founders themselves?
Which of the following factors contributed to Quincy's collapse, besides the founders themselves?
Quincy's founders successfully leveraged their professional networks to recruit experienced team members and secure favorable relationships with factory managers.
Quincy's founders successfully leveraged their professional networks to recruit experienced team members and secure favorable relationships with factory managers.
What alternative funding source could Quincy's founders have pursued instead of venture capital firms?
What alternative funding source could Quincy's founders have pursued instead of venture capital firms?
Quincy's founders could have avoided operational problems by ______ their entire design and production process to a single factory partner.
Quincy's founders could have avoided operational problems by ______ their entire design and production process to a single factory partner.
What was a key attribute that made Quincy vulnerable to neglecting customer needs, despite claiming to embrace lean start-up principles?
What was a key attribute that made Quincy vulnerable to neglecting customer needs, despite claiming to embrace lean start-up principles?
What specific operational challenge did Quincy face due to their inexperience?
What specific operational challenge did Quincy face due to their inexperience?
Bringing in a cofounder with apparel industry experience was considered as a potentially beneficial strategy for Quincy.
Bringing in a cofounder with apparel industry experience was considered as a potentially beneficial strategy for Quincy.
What was the primary reason venture capital firms pressured Quincy to grow at full tilt?
What was the primary reason venture capital firms pressured Quincy to grow at full tilt?
What was the primary initial objective for Triangulate's matching engine according to the provided content?
What was the primary initial objective for Triangulate's matching engine according to the provided content?
Wings achieved substantial viral growth and a high level of user engagement due to the 'wingman' concept.
Wings achieved substantial viral growth and a high level of user engagement due to the 'wingman' concept.
What factors did Wings users prioritize in recommended matches over the initial matching engine algorithm and 'wingman' concept?
What factors did Wings users prioritize in recommended matches over the initial matching engine algorithm and 'wingman' concept?
The dating site, __________, addressed the issue of unequal attention distribution on typical dating sites by allowing users to vote on profile elements before seeing photos.
The dating site, __________, addressed the issue of unequal attention distribution on typical dating sites by allowing users to vote on profile elements before seeing photos.
Match the following stages of Triangulate's dating platform development with their corresponding descriptions:
Match the following stages of Triangulate's dating platform development with their corresponding descriptions:
Why did Nagaraj and his team ultimately pivot away from the Wings dating site?
Why did Nagaraj and his team ultimately pivot away from the Wings dating site?
The DateBuzz model resulted in less-attractive individuals getting fewer contacts and attractive users receiving significantly fewer queries.
The DateBuzz model resulted in less-attractive individuals getting fewer contacts and attractive users receiving significantly fewer queries.
Before launching a product, what type of analysis should entrepreneurs perform to understand the market?
Before launching a product, what type of analysis should entrepreneurs perform to understand the market?
What is a key challenge faced by fashion start-ups regarding garment designs and inventory?
What is a key challenge faced by fashion start-ups regarding garment designs and inventory?
Investors generally prefer to provide all the necessary capital upfront to start-ups, ensuring they have sufficient resources from the beginning.
Investors generally prefer to provide all the necessary capital upfront to start-ups, ensuring they have sufficient resources from the beginning.
According to the content, what is a potential consequence for a start-up that stumbles or stalls?
According to the content, what is a potential consequence for a start-up that stumbles or stalls?
Entrepreneurs who launch MVPs without sufficient upfront research risk wasting time and capital on __________ that are likely to miss their mark.
Entrepreneurs who launch MVPs without sufficient upfront research risk wasting time and capital on __________ that are likely to miss their mark.
What behavior does the lean start-up movement's rhetoric, such as 'launch early and often,' risk encouraging?
What behavior does the lean start-up movement's rhetoric, such as 'launch early and often,' risk encouraging?
Match the following concepts from the text with their descriptions:
Match the following concepts from the text with their descriptions:
Why did VCs refuse to back Sunil Nagaraj's original plan for Triangulate?
Why did VCs refuse to back Sunil Nagaraj's original plan for Triangulate?
According to the content, entrepreneurs can always pivot to a better solution, irrespective of the capital required or the time it takes to validate the new approach.
According to the content, entrepreneurs can always pivot to a better solution, irrespective of the capital required or the time it takes to validate the new approach.
What is a common pitfall for engineer-entrepreneurs when developing a new product?
What is a common pitfall for engineer-entrepreneurs when developing a new product?
Entrepreneurs should primarily pitch their solutions during initial interviews with potential customers to gauge interest.
Entrepreneurs should primarily pitch their solutions during initial interviews with potential customers to gauge interest.
What type of analysis should entrepreneurs conduct to understand the strengths and weaknesses of existing products in the market?
What type of analysis should entrepreneurs conduct to understand the strengths and weaknesses of existing products in the market?
After identifying customer segments and their unmet needs, the next step in solution development is to brainstorm a ______ of solutions.
After identifying customer segments and their unmet needs, the next step in solution development is to brainstorm a ______ of solutions.
What is the primary purpose of conducting user testing on existing solutions during the problem definition stage?
What is the primary purpose of conducting user testing on existing solutions during the problem definition stage?
Entrepreneurs should only interview likely early adopters and not ‘mainstream’ prospects as the needs of the mainstream prospects are not important in the initial stages.
Entrepreneurs should only interview likely early adopters and not ‘mainstream’ prospects as the needs of the mainstream prospects are not important in the initial stages.
What is the purpose of iterating and testing prototypes during the solution development phase?
What is the purpose of iterating and testing prototypes during the solution development phase?
What is the primary goal of MVP tests in the product design process?
What is the primary goal of MVP tests in the product design process?
What is the primary goal of an MVP (Minimum Viable Product) test?
What is the primary goal of an MVP (Minimum Viable Product) test?
Entrepreneurs should always adhere strictly to their initial preconceived notions and solutions throughout the product design process.
Entrepreneurs should always adhere strictly to their initial preconceived notions and solutions throughout the product design process.
What can be a negative consequence of an entrepreneur's bias for action, as mentioned in the content?
What can be a negative consequence of an entrepreneur's bias for action, as mentioned in the content?
Delaying a ______ eats up scarce capital, shortening a venture’s runway.
Delaying a ______ eats up scarce capital, shortening a venture’s runway.
Why is it important for entrepreneurs to avoid being too emotionally attached to a specific problem-solution pairing?
Why is it important for entrepreneurs to avoid being too emotionally attached to a specific problem-solution pairing?
According to the content, the best MVPs have the highest fidelity and most advanced features to impress early customers.
According to the content, the best MVPs have the highest fidelity and most advanced features to impress early customers.
What can happen if an entrepreneur's persistence turns into stubbornness?
What can happen if an entrepreneur's persistence turns into stubbornness?
Match the following entrepreneurial behaviors with their potential drawbacks:
Match the following entrepreneurial behaviors with their potential drawbacks:
Flashcards
Start-up Success Rate
Start-up Success Rate
More than two-thirds of start-ups do not provide a positive return to investors.
Author's Research Trigger
Author's Research Trigger
The author's motivation to understand why start-ups fail came from the inability to answer that question despite years of experience.
Research Methods on Start-up Failures
Research Methods on Start-up Failures
The author gathered insights through interviews, surveys, published accounts, and case studies.
"Why Startups Fail" Focus
"Why Startups Fail" Focus
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VC's Key Investment Factor
VC's Key Investment Factor
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"Horses" and "Jockeys" in Start-ups
"Horses" and "Jockeys" in Start-ups
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VC's reasons for start-up failure
VC's reasons for start-up failure
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Divergence from VC Assumptions
Divergence from VC Assumptions
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Shifting Fashion Trends
Shifting Fashion Trends
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Mete out Capital
Mete out Capital
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Pivoting
Pivoting
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Learning by Doing
Learning by Doing
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Minimum Viable Product (MVP)
Minimum Viable Product (MVP)
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False Starts
False Starts
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"Ready, Fire, Aim"
"Ready, Fire, Aim"
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Matching Engine
Matching Engine
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Licensing Deal
Licensing Deal
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Triangulate's Dating Site Purpose
Triangulate's Dating Site Purpose
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Wings Dating Site
Wings Dating Site
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Wingman Concept
Wingman Concept
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Dating Site Criteria
Dating Site Criteria
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Unsustainable Business Model
Unsustainable Business Model
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Business Pivot
Business Pivot
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DateBuzz
DateBuzz
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Hypergrowth trap
Hypergrowth trap
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Postmortem analysis
Postmortem analysis
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Outsourcing
Outsourcing
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Industry-aligned funding
Industry-aligned funding
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Partial lean adoption
Partial lean adoption
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Large, lumpy resource commitments
Large, lumpy resource commitments
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Lack of industry experience
Lack of industry experience
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Resource provider culpability
Resource provider culpability
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False Start (in startups)
False Start (in startups)
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Product Design Process
Product Design Process
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Problem Definition
Problem Definition
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Early Adopters
Early Adopters
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Mainstream Prospects
Mainstream Prospects
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Competitive Analysis
Competitive Analysis
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Solution Development
Solution Development
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Solution Validation
Solution Validation
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MVP Fidelity
MVP Fidelity
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Adaptability in Product Design
Adaptability in Product Design
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Over-Action Bias
Over-Action Bias
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Stubbornness in Entrepreneurship
Stubbornness in Entrepreneurship
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Impact of Delayed Pivot
Impact of Delayed Pivot
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Entrepreneurial Balance
Entrepreneurial Balance
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Study Notes
- Two-thirds of start-ups never show a positive return.
- According to Venture Capital investors start-ups fall short because of "horses" (opportunities) or "jockeys" (founders).
- The six patterns of failure are fully described in the book, "Why Startups Fail".
Four Other Patterns That Doom Start-ups
- False positives: Early-stage entrepreneurs often misinterpret signals about market demand.
- Good Idea, Bad Bedfellows - VC investors seek the right stuff in founders: resilience, passion, and experience leading teams. Good start-up include employees, strategic partners, and investors.
Quincy Apparel Case Study
- In May 2011, Alexandra Nelson and Christina Wallace sought feedback on their start-up concept, Quincy Apparel
- The business identified that young professional women had a hard time finding affordable and stylish work attire.
- Quincy Apparel enabled customers to specify four separate garment measurements, akin to tailoring men's suits.
- Six trunk shows were held where women tried on outfits and placed orders, with 25% of the 200 attendees making purchases.
- The co-founders secured $950,000 in venture capital.
- Early angel investor joined the company.
- Initial and repeat orders were strong, with 39% of customers making repeat purchases from Quincy's first collection.
- Production problems led to poor garment fit, resulting in high returns
- Cash reserves were negatively impacts from processing returns and correcting production issues.
- The team was forced to trim the product line after failing to raise more capital
- Business operations were shut down less than a year after its launch
- Founders shared decision-making authority slowing responses when action was needed; neither founder had experience in clothing design & manufacturing.
- Production was outsourced to third-party factories, which were slow to meet production commitments.
- The founders aimed to raise $1.5 million, the founders secured $950,000.
- Investors pressured them to grow at full tilt, similar to technology start-ups however this forced Quincy to build inventory, draining cash before resolving production issues.
- A range of resource providers contributed to the venture's collapse. Lack of fashion industry experience was the root of problems
Triangulate (Wings and DateBuzz) Case Study
- In 2010, Sunil Nagaraj founded online dating start-up Triangulate; originally intended to build a matching engine.
- The engine would automatically extract consumers' profile data from social networks and media sites.
- VCs did not back the plan unless a licensing deal has been signed.
- Nagaraj raised $750,000 to power Triangulate's own dating site, a Facebook app called Wings
- Nagaraj's team abandoned both the matching engine and the wingman concept less than a year after launching Wings to connect to Facebook
- Nagaraj's team launched a new dating site called DateBuzz; DateBuzz redistributed attention in ways that boosted user satisfaction.
- Triangulate shut down and returned $120,000 to investors, because it spent it's funds on costly customer acquisition.
- Three big pivots in less than two years and the team following the fail fast mantra, the demise of Triangulate was characterized by "wrong opportunity, right resources.”.
- Triangulate team gave short shrift to consumer discovery and MVP, they failed to validate the demand for a matching engine, akin to Quincy's trunk shows.
- Steve Blank, the startup guru ,insists entrepreneurs complete a phase called "customer discovery.”
The three-step Product Design Process.
- Before commencing engineering work, conduct interviews with potential. Interview early adopters and mainstream prospects.
- Brainstorm a range of solutions, prototype several concepts, and get feedback.
- Run a series of MVP tests to evaluate demand for the favored solution.
Maintaining Balance: Conventional Wisdom and It's Pitfalls
- Great entrepreneurs make things happen and move fast, but this can tempt an entrepreneur to truncate exploration.
- True entreprenerus must be determined and resilient, but persistence towards stubbornness makes it difficult recognizing a false start.
- A burning desire impacts employee, investors, and partners. However in the extreme, passion skips upfront research.
The Dangers When Conserving Resources
- If a startup cannot consistently deliver on its value proposition due to lack of crucial skills, founders must hire employees with those skills, or risk being stuck with bad bedfellows.
The Dangers With Fast Start-ups
- Rapid growth can tempt founders to curtail customer research. Also, fast growth puts heavy demands on team members and partners.
- A doomed venture ties up resources that could be put to better use
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Description
This quiz covers key aspects of start-up failures, including investor returns, critical success factors cited by venture capitalists, and the importance of business opportunity attractiveness. It explores research methods used in failure analysis and entrepreneurial course types at Harvard Business School.
