Mini Case study

Varsity News Network (VNN) is a Grand Rapids, MI based company providing software to U.S. high school athletic directors to assist them in managing and all their various activities, including but not limited to: Student/player roster management, communications with athletes, students and body, parents, maintaining health records, game and field scheduling, advertising, ticket sales, promotions, statistics tracking, fund raising, reporting on games and league standings. The software is used to cover the wide variety of sports played throughout the year by men and women.

There are approximately 25,000 high schools in the U.S. with an average of 500 students per school. Presently VNN has signed up 15% of the schools in the U.S. as customers and its various software packages that presently manage about one third of the duties that the athletic directors have. To keep the site interesting VNN also collects and curates stories which it posts on the website.

VNN believes having 50% of the schools in the U.S. as customers will allow them to be the dominant market leader and recognize significant economies of scale. It will also allow VNN to bring onboard national advertisers and undertake e-commerce for major brands. This would be a revolutionary way to get directly to consumers in small towns with advertising and sales directed toward enthusiastic sports fans.

VNN does all of its own software development in Grand Rapids. The high company growth is putting stress on VNN financially and putting impossible demands on the development team to keep up with the software development. VNN has found it difficult to add high quality local developers and is afraid that quickly hiring a lot of people, even if they can find them, will result in a significant initial negative cash flow In particular they are challenged with:

1). Ongoing upgrading of existing systems and ensuring compliance

2) Onboarding new schools

3) Writing new software to handle additional athletic director tasks

4) Finding and curating content

5) Developing software for large scale advertising and e-commerce.

VNN has numerous small competitors with who provide a range of different individual apps for athletic director needs, often for a limited geographical area. Recently a couple of competitors have raised significant capital to acquire and “roll up” a number of the small companies that VNN fears might become strong national competitors. VNN’s team believes its software is vastly superior to the competition and if the company raises additional capital it could, over a two or three year period, build an end to end software package that would elegantly meet most of the athletic directors needs.

The VNN management faced two major questions:

1.. Should they undertake a major capital raise to fund their

Software development?

2. If they didn’t raise the money what should their strategy be?

What would the students suggest to VNN management and how does it tie to the class themes?