GMAT Question of the Day: Daily via email | Daily via Instagram New to GMAT Club? Watch this Video

It is currently 29 Feb 2020, 00:08

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

Start-up companies financed by venture capitalist have a much lower

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

Find Similar Topics 
Manager
Manager
avatar
Joined: 03 Jul 2006
Posts: 140
Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post Updated on: 09 Oct 2018, 21:00
4
7
00:00
A
B
C
D
E

Difficulty:

  5% (low)

Question Stats:

92% (01:19) correct 8% (01:50) wrong based on 1947 sessions

HideShow timer Statistics

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, 17:40.
Last edited by bb on 09 Oct 2018, 21:00, edited 5 times in total.
formatting for the verbal review project
Manager
Manager
User avatar
Joined: 21 Jun 2014
Posts: 96
Location: United States
Concentration: General Management, Strategy
GMAT 1: 630 Q45 V31
GPA: 3.4
WE: Engineering (Computer Software)
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 04 Jul 2015, 21:13
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

Regards,
Manish Khare

Press kudos if you like the solution.
_________________
Regards,
Manish Khare
"Every thing is fine at the end. If it is not fine ,then it is not the end "
Director
Director
User avatar
G
Joined: 28 Nov 2014
Posts: 812
Concentration: Strategy
Schools: Fisher '19 (M$)
GPA: 3.71
Reviews Badge
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 05 Jul 2015, 23:25
What about option B ?'

On what basis can we eliminate it. Looking for a sound reasoning.
Intern
Intern
User avatar
Joined: 15 Aug 2014
Posts: 7
GMAT 1: 640 Q47 V31
GMAT ToolKit User
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 22 Jul 2015, 02:24
anewbeginning wrote:
What about option B ?'

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. :)
Verbal Forum Moderator
User avatar
V
Status: Greatness begins beyond your comfort zone
Joined: 08 Dec 2013
Posts: 2455
Location: India
Concentration: General Management, Strategy
Schools: Kelley '20, ISB '19
GPA: 3.2
WE: Information Technology (Consulting)
GMAT ToolKit User Reviews Badge CAT Tests
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 24 Sep 2016, 07:11
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.

Answer E
_________________
When everything seems to be going against you, remember that the airplane takes off against the wind, not with it. - Henry Ford
The Moment You Think About Giving Up, Think Of The Reason Why You Held On So Long
Intern
Intern
User avatar
Joined: 08 Feb 2016
Posts: 36
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 04 Nov 2016, 21:50
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
_________________
Once you know the answer, it is easy to justify.
Director
Director
User avatar
G
Joined: 26 Oct 2016
Posts: 596
Location: United States
Concentration: Marketing, International Business
Schools: HBS '19
GMAT 1: 770 Q51 V44
GPA: 4
WE: Education (Education)
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 29 Apr 2017, 06:58
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.
_________________
Thanks & Regards,
Anaira Mitch
IIMA, IIMC School Moderator
User avatar
V
Joined: 04 Sep 2016
Posts: 1391
Location: India
WE: Engineering (Other)
CAT Tests
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 07 Apr 2018, 05:11
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.
_________________
It's the journey that brings us happiness not the destination.

Feeling stressed, you are not alone!!
GMAT Club Verbal Expert
User avatar
D
Status: GMAT and GRE tutors
Joined: 13 Aug 2009
Posts: 3172
Location: United States (CO)
GMAT 1: 780 Q51 V46
GMAT 2: 800 Q51 V51
GRE 1: Q170 V170

GRE 2: Q170 V170
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 08 Apr 2018, 17:31
1
1
adkikani wrote:
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.

We are told that start-ups financed by VCs have a much lower failure rate. This might suggest that those companies have a lower failure rate BECAUSE they are financed by VCs. In other words, the source of financing might impact success.

Quote:
(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.

Choice (E) gives us some additional information. VCs base their funding decisions on factors such as 1) characteristics of the entrepreneur and 2) quality of strategic planning. This implies that the VCs are looking at those factors to try to determine which companies are likely to succeed.

So those companies do NOT tend to succeed because they are financed by VCs. Rather, the VCs tend to finance companies that already ARE likely to succeed. The source of funding does not CAUSE the success. The VCs are just good at looking at certain factors to determine which companies are likely to succeed. In other words, the VCs are good at betting on the right companies. But if those same companies had been financed by other sources, they should be just as likely to succeed.

I hope that helps!
_________________
GMAT/GRE tutors @ www.gmatninja.com (we're hiring!) | GMAT Club Verbal Expert | Instagram | Blog | Bad at PMs

Beginners' guides to GMAT verbal: RC | CR | SC

YouTube LIVE verbal webinars: all videos by topic

SC articles & resources: How to go from great (760) to incredible (780) on GMAT SC | That "-ing" Word Probably Isn't a Verb | That "-ed" Word Might Not Be a Verb, Either | No-BS Guide to GMAT Idioms | "Being" is not the enemy | WTF is "that" doing in my sentence?

RC, CR, and other articles & resources: All GMAT Ninja articles on GMAT Club | Using LSAT for GMAT CR & RC |7 reasons why your actual GMAT scores don't match your practice test scores | How to get 4 additional "fake" GMAT Prep tests for $29.99 | Time management on verbal

SC & CR Questions of the Day (QOTDs), featuring expert explanations: All QOTDs | Subscribe via email | RSS

Need an expert reply? Hit the request verbal experts' reply button; be specific about your question, and tag @GMATNinja. Priority is always given to official GMAT questions.
Non-Human User
User avatar
Joined: 01 Oct 2013
Posts: 8377
Re: Start-up companies financed by venture capitalist have a much lower  [#permalink]

Show Tags

New post 22 May 2019, 05:10
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
GMAT Club Bot
Re: Start-up companies financed by venture capitalist have a much lower   [#permalink] 22 May 2019, 05:10
Display posts from previous: Sort by

Start-up companies financed by venture capitalist have a much lower

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  





Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne