Based on published sources; 18 pages.
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The main teaching goals for this class are: (1) to improve the students’ understanding of a start-up’s rapid and high-risk growth strategy, in particular its financing process; and (2) to develop the students’ analytical and decision-making skills regarding this matter. More specifically, this class can help students to improve their understanding of: the importance of the socio-economical, political, and technological context in the shaping of entrepreneurial opportunities; the step-wise process of growth finance; the multiple forces and stakeholders that impact the decision-making of firms; the (gradual) exit of founders from fast-growing firms/their loss of control; the pros and cons of an IPO (initial public offering).
The Dutch telecommunications start-up Versatel took a rapid and high-risk growth strategy, in particular, financially, and was contemplating an IPO to gain further financing.
In the beginning of 1999, it became clear to Gary Mesch, co-founder of Versatel, that an initial public offering (IPO or 'going public') should be considered a serious option to further finance the rapid growth of his company. After securing hundreds of millions of euros to construct Versatel's own fiber-optic telecommunications network and the acquisition of customers, Versatel still required significant capital to finance its growth and repay interest obligations. In just four years, the company had grown from 15 employees in 1995 to more than 300 in 1998. Many questions crossed Gary's mind, but one was most pressing: Would going public even be possible?
The case covers all stages of the entrepreneurial process – gestation, hyper-growth, and exit. The extreme measures Versatel took to achieve hyper-growth serve as a good tool for illustrating and comparing various financing methods for a start-up.
