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# Start-up companies financed by venture capitalist have a

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Start-up companies financed by venture capitalist have a  [#permalink]

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Updated on: 24 Jun 2017, 00:36
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Official Guide for GMAT Verbal Review, 2nd Edition
Practice Question
Question No.: 20
Page: 122
Difficulty:

Start-up companies financed by venture capitalist have a much lower failure rate than companies financed by other means. Source of financing, therefore, must be a more important causative factor in the success of a start-up company than are such factors as the personal characteristics of the entrepreneur, the quality of strategic planning, or the management structure of the company.

Which of the following, if true, most seriously weakens the argument above?

(A) Venture capitalists tend to be more responsive than other sources of financing to changes in a start-up company’s financial needs.
(B) The strategic planning of a start-up company is a less important factor in the long-term success of the company than are the personal characteristics of the entrepreneur.
(C) More than half of all new companies fall within five years.
(D) The management structures of start-up companies are generally less formal than the management structures of ongoing businesses.
(E) Venture capitalists base their decisions to fund start-up companies on such factors as the characteristics of the entrepreneur and quality of strategic planning of the company.

Originally posted by rkatl on 10 Aug 2006, 18:40.
Last edited by Vyshak on 24 Jun 2017, 00:36, edited 3 times in total.
formatting for the verbal review project
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10 Aug 2006, 19:02
Quote:

(E) it must be. the characteristics that VCs consider important have been indicated as not important in the statement.
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10 Aug 2006, 21:41
Clear E.

It stresses that even venture capitalists look for the same qualities that have been rejected by the author.

Why not A

A strengthens the argument.
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10 Aug 2006, 22:53
1
Straight E.
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11 Aug 2006, 07:14
Straight (E), fundamental venture capital investment logic.

2:02

*** Always start with E on "which of the following" CRs/PSs/DSs if pressed for time. Another Kaplandish strategy. Disclaimer: may not be effective with the PVue version of GMAT because kaplan simply reprints the same books each year with a different cover...
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06 Oct 2013, 14:48
bumping up for review and further discussion
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04 Jul 2015, 22:13
3
Look at the conclusion : Source of financing, therefore, must be a more important causative factor in the success of a start-up company .
This argument can be weakened only if the source of financing itself look at the factors as the personal characteristics of the entrepreneur, the quality of strategic planning, or the management structure of the company.

Option A talks only about the financial responsiveness .
Option E talks about the line of reasoning discussed above.Hence it is the right answer

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06 Jul 2015, 00:25

On what basis can we eliminate it. Looking for a sound reasoning.
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22 Jul 2015, 03:24
anewbeginning wrote:

On what basis can we eliminate it. Looking for a sound reasoning.

The conclusion says Source of financing (X) > Other factors(Y) - such as the personal characteristics of the entrepreneur(Y1), the quality of strategic planning(Y2), or the management structure of the company(Y3).

We need an option which somehow weakens the fact that X>Y. Option B states that the strategic planning of a start-up company(Y2) < the personal characteristics of the entrepreneur(Y1). How Y1, Y2 and Y3 contribute towards the success of the start-up company doesn't weaken the conclusion. Since there is no information given in this option regarding X, this option is irrelevant.

Hope it helps.
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14 Apr 2016, 10:49
Conclusion: Source of funding is more important than other factors in the success of start ups
Premise: VC financed start ups have a low failure rate than start ups financed by other means.

Flaw: Premise compares two different forms of financing for the success of start ups. Conclusion is about financing and other factors in the success of the start ups. Mind the gap please. There is no evidence to prove the conclusion.

Something which points out this gap i.e. other factors are as important if not more important than financing will weaken the argument.

Another way to look:
Negated Conclusion: Source of funding is less important that other factors in the success of start ups.
Answer choice with the premise should support the negated conclusion.
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05 Aug 2016, 10:38
(E) Venture capitalists base their decisions to fund start-up companies on such factors as the characteristics of the entrepreneur and quality of strategic planning of the company.

Author gives a flawed conclusion connecting Source of the fund to the success. But it's actually the decision of the Venture capitalists, whom to fund matters.
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12 Aug 2016, 00:12
Keats wrote:

On what basis can we eliminate it. Looking for a sound reasoning.

So the CR focuses on concluding that it is because of venture capitalist and not personal traits of the owner due to which start-ups succeed.

We need to find something which breaks this and focuses on the factor that personal traits matter and not just venture capitalist.

Option E achieves both saying that venture capitalist look for personal traits, hence we can say that personal traits matter most.
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24 Sep 2016, 08:11
Start-up companies financed by venture capitalist have a much lower failure rate than companies financed by other means. Source of financing, therefore, must be a more important causative factor in the success of a start-up company than are such factors as the personal characteristics of the entrepreneur, the quality of strategic planning, or the management structure of the company.

Type - Weaken
Boil it down - Source of financing is more causative important factor than personal characteristics of the entrepreneur, the quality of strategic planning, or the management structure of the company. for Success of company

Which of the following, if true, most seriously weakens the argument above?

(A) Venture capitalists tend to be more responsive than other sources of financing to changes in a start-up company’s financial needs.
(B) The strategic planning of a start-up company is a less important factor in the long-term success of the company than are the personal characteristics of the entrepreneur.
Out of scope as it does not talk about Financing source
(C) More than half of all new companies fall within five years. Irrelevant
(D) The management structures of start-up companies are generally less formal than the management structures of ongoing businesses. Irrelevant - management structures of ongoing business is beyond scope
(E) Venture capitalists base their decisions to fund start-up companies on such factors as the characteristics of the entrepreneur and quality of strategic planning of the company.
please explain the reasoning. Correct answer - VC funding is not more important because VCs are funding start ups based on a few factors.

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04 Nov 2016, 22:50
Conclusion: "Funding by VC" is more important factor than "personal characteristics of the entrepreneur", "quality of strategic planning", or "management structure of the company"
Simplified conclusion: F is more important factor than X, Y, Z

Correct answer choice should weaken the conclusion.

(A) Venture capitalists tend to be more responsive than other sources of financing to changes in a start-up company’s financial needs.
This choice talks only about factor F and nothing in relation to X, Y, Z
(B) The strategic planning of a start-up company is a less important factor in the long-term success of the company than are the personal characteristics of the entrepreneur.
This talks only about factors Y and X. No mention of relationship to F
(C) More than half of all new companies fall within five years.
No factors (F, X, Y ,Z) and their impact is discussed here
(D) The management structures of start-up companies are generally less formal than the management structures of ongoing businesses.
Talks only about factor Z. No mention of relationship to F
(E) Venture capitalists base their decisions to fund start-up companies on such factors as the characteristics of the entrepreneur and quality of strategic planning of the company.
Discusses the impact of X and Y on F. Shows that factors X and Y are taken into account when deciding F, hence weakening the conclusion.
Implies, F = f(X, Y), => F is made from X and Y, so conclusion of "F more important than X and Y" is challenged/weakened

Thanks
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27 Dec 2016, 07:09
So simple E is the Ans.(within 50 sec)

Only E attacks against the conclusion of the passage clearly by showing VC 's decisions r based upon characteristics of entrepreneur....and so on.
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01 Jan 2017, 22:58
The OA is correct and explanations provided in the thread appear sufficient. If there are any specific questions, please post them here and then click again on the "Request Expert Reply" button – closing this request.
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13 Mar 2017, 15:38
we need to find answer weakining the claim or saying that source of financing is not what all depends on
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29 Apr 2017, 07:58
Solution 1 :-
Premise :- X financed by Venture lower failure rate than by other means.{ X = start-up companies}
Conclusion :- Source of financing is a more important factor in the success of X than are such factors as the personal characteristics of the entrepreneur, the quality of strategic planning, or the management structure of the company.
Weaken :- Source of financing is not more important in the success of X than are such factors as the personal characteristics of the entrepreneur, the quality of strategic planning, or the management structure of the company.
Option E fits the bill.
Venture capitalists base their decisions to fund start-up companies on such factors as the characteristics of the
entrepreneur and quality of strategic planning of the company.
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16 Aug 2017, 22:39
Correct choice is 'C' - The statement properly identifies evidence that weakens the argument.
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07 Apr 2018, 06:11
GMATNinja VeritasPrepKarishma

Can you please explain how (E) fits in to the bill here?

Conclusion: Causal
Cause - Effect
Source of financing (ie Finance by VCs) - > Determining success rate of start up.

How to weaken:
Alternate cause -> same effect
Alternate causes are : personal characteristics of entrepreneur, quality of strategic planning or management structure.

(E) says Same cause : Funding of VCs but influenced by alternate causes.
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Re: Start-up companies financed by venture capitalist have a &nbs [#permalink] 07 Apr 2018, 06:11

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