HBS ENTREPRENEURSHIP ESSENTIALS
Practice Practice Exam
**Question 1. Which of the following best captures the Sahlman definition of
entrepreneurship?**
A) Starting a company with abundant resources
B) Pursuing an opportunity without regard to resources currently controlled
C) Replicating a proven business model in a new market
D) Focusing solely on product innovation
Answer: B
Explanation: Sahlman defines entrepreneurship as the pursuit of an opportunity regardless of
the resources the entrepreneur currently controls.
**Question 2. In market sizing, the Serviceable Obtainable Market (SOM) refers to:**
A) The total revenue potential of the global market
B) The portion of the market a company can realistically capture in the short term
C) The segment of customers willing to pay premium prices
D) The market size after accounting for regulatory constraints
Answer: B
Explanation: SOM is the realistic share of the market a startup can capture given its resources
and competitive position.
**Question 3. Which metric compares the cost to acquire a customer with the revenue
generated from that customer over its lifetime?**
A) Burn Rate
B) Runway
C) CAC vs. LTV
D) Gross Margin
Answer: C
, HBS ENTREPRENEURSHIP ESSENTIALS
Practice Practice Exam
Explanation: Customer Acquisition Cost (CAC) versus Lifetime Value (LTV) measures the
profitability of acquiring a customer.
**Question 4. A “blue‑ocean” strategy is primarily aimed at:**
A) Competing directly with incumbents on price
B) Creating a new market space with no direct competition
C) Reducing operational costs through automation
D) Acquiring competitors to increase market share
Answer: B
Explanation: Blue‑Ocean strategy focuses on uncontested market space, making competition
irrelevant.
**Question 5. In the POCD framework, “Context” refers to:**
A) The founding team’s skills and experience
B) The macro‑environmental forces beyond the entrepreneur’s control
C) The terms of the investment deal
D) The product‑market fit of the venture
Answer: B
Explanation: Context covers external factors such as regulations, technology trends, and
macro‑economic conditions.
**Question 6. Which of the following is a “deal‑breaker” fatal flaw in an early‑stage business
concept?**
A) High gross margins
B. Strong founder commitment
C) Lack of a clear revenue model
, HBS ENTREPRENEURSHIP ESSENTIALS
Practice Practice Exam
D. Large total addressable market
Answer: C
Explanation: Absence of a clear way to generate revenue is a fatal flaw that can derail a venture.
**Question 7. The “minimum viable product” (MVP) is used to:**
A) Launch a fully featured product to capture market share immediately
B) Test core hypotheses with the smallest set of features possible
C) Secure a large series‑A investment
D) Protect intellectual property through patents
Answer: B
Explanation: An MVP allows entrepreneurs to validate assumptions quickly with minimal
resources.
**Question 8. Which financing source typically provides capital in exchange for equity but also
offers strategic industry connections?**
A) Bootstrapping
B) Angel investors
C) Venture capital (VC)
D) Bank loans
Answer: C
Explanation: VCs provide equity financing and often bring strategic partnerships, mentorship,
and networks.
**Question 9. The “valley of death” in a startup’s lifecycle refers to:**
A) The period after IPO when stock volatility spikes
B) The time between initial funding and achieving breakeven cash flow
, HBS ENTREPRENEURSHIP ESSENTIALS
Practice Practice Exam
C) The phase of rapid scaling that strains operations
D) The moment when a founder leaves the company
Answer: B
Explanation: The valley of death is the cash‑flow gap between early financing and sustainable
revenue.
**Question 10. Which of the following best describes a “post‑money valuation”?**
A) The valuation of a company before any new investment is added
B) The valuation after the new investment has been accounted for
C) The total assets of the company on the balance sheet
D) The discounted cash flow estimate of future earnings
Answer: B
Explanation: Post‑money valuation includes the newly injected capital, reflecting the company’s
value after financing.
**Question 11. When estimating willingness to pay (WTP), an entrepreneur should primarily
focus on:**
A) The average income of the target market
B) The price customers are currently paying for substitute solutions
C) The cost of production for the product
D) The number of competitors in the market
Answer: B
Explanation: WTP is anchored to what customers currently spend on existing alternatives.
**Question 12. In a term sheet, an “anti‑dilution clause” protects investors from:**
A) Loss of voting rights after a down‑round financing
Practice Practice Exam
**Question 1. Which of the following best captures the Sahlman definition of
entrepreneurship?**
A) Starting a company with abundant resources
B) Pursuing an opportunity without regard to resources currently controlled
C) Replicating a proven business model in a new market
D) Focusing solely on product innovation
Answer: B
Explanation: Sahlman defines entrepreneurship as the pursuit of an opportunity regardless of
the resources the entrepreneur currently controls.
**Question 2. In market sizing, the Serviceable Obtainable Market (SOM) refers to:**
A) The total revenue potential of the global market
B) The portion of the market a company can realistically capture in the short term
C) The segment of customers willing to pay premium prices
D) The market size after accounting for regulatory constraints
Answer: B
Explanation: SOM is the realistic share of the market a startup can capture given its resources
and competitive position.
**Question 3. Which metric compares the cost to acquire a customer with the revenue
generated from that customer over its lifetime?**
A) Burn Rate
B) Runway
C) CAC vs. LTV
D) Gross Margin
Answer: C
, HBS ENTREPRENEURSHIP ESSENTIALS
Practice Practice Exam
Explanation: Customer Acquisition Cost (CAC) versus Lifetime Value (LTV) measures the
profitability of acquiring a customer.
**Question 4. A “blue‑ocean” strategy is primarily aimed at:**
A) Competing directly with incumbents on price
B) Creating a new market space with no direct competition
C) Reducing operational costs through automation
D) Acquiring competitors to increase market share
Answer: B
Explanation: Blue‑Ocean strategy focuses on uncontested market space, making competition
irrelevant.
**Question 5. In the POCD framework, “Context” refers to:**
A) The founding team’s skills and experience
B) The macro‑environmental forces beyond the entrepreneur’s control
C) The terms of the investment deal
D) The product‑market fit of the venture
Answer: B
Explanation: Context covers external factors such as regulations, technology trends, and
macro‑economic conditions.
**Question 6. Which of the following is a “deal‑breaker” fatal flaw in an early‑stage business
concept?**
A) High gross margins
B. Strong founder commitment
C) Lack of a clear revenue model
, HBS ENTREPRENEURSHIP ESSENTIALS
Practice Practice Exam
D. Large total addressable market
Answer: C
Explanation: Absence of a clear way to generate revenue is a fatal flaw that can derail a venture.
**Question 7. The “minimum viable product” (MVP) is used to:**
A) Launch a fully featured product to capture market share immediately
B) Test core hypotheses with the smallest set of features possible
C) Secure a large series‑A investment
D) Protect intellectual property through patents
Answer: B
Explanation: An MVP allows entrepreneurs to validate assumptions quickly with minimal
resources.
**Question 8. Which financing source typically provides capital in exchange for equity but also
offers strategic industry connections?**
A) Bootstrapping
B) Angel investors
C) Venture capital (VC)
D) Bank loans
Answer: C
Explanation: VCs provide equity financing and often bring strategic partnerships, mentorship,
and networks.
**Question 9. The “valley of death” in a startup’s lifecycle refers to:**
A) The period after IPO when stock volatility spikes
B) The time between initial funding and achieving breakeven cash flow
, HBS ENTREPRENEURSHIP ESSENTIALS
Practice Practice Exam
C) The phase of rapid scaling that strains operations
D) The moment when a founder leaves the company
Answer: B
Explanation: The valley of death is the cash‑flow gap between early financing and sustainable
revenue.
**Question 10. Which of the following best describes a “post‑money valuation”?**
A) The valuation of a company before any new investment is added
B) The valuation after the new investment has been accounted for
C) The total assets of the company on the balance sheet
D) The discounted cash flow estimate of future earnings
Answer: B
Explanation: Post‑money valuation includes the newly injected capital, reflecting the company’s
value after financing.
**Question 11. When estimating willingness to pay (WTP), an entrepreneur should primarily
focus on:**
A) The average income of the target market
B) The price customers are currently paying for substitute solutions
C) The cost of production for the product
D) The number of competitors in the market
Answer: B
Explanation: WTP is anchored to what customers currently spend on existing alternatives.
**Question 12. In a term sheet, an “anti‑dilution clause” protects investors from:**
A) Loss of voting rights after a down‑round financing
