2.5 [related to the Economics in Practice on p. 262]

Netscape Communications Corporation was founded in April 1994, and was one of the pioneers in the era when Internet was evolving as a revolutionizing phenomenon.

Netscape came up with a broad portfolio of digital products, which had great utility and were very user friendly as well. Netscape Navigator was the flagship product and generated more than 50% of its revenue.

With its products that were simple to use and understand, Netscape brought Internet to the masses and gave rise to the notion of “surfing on the internet”. Netscape followed the “give away today and make money tomorrow” strategy, and soon became the industry leader in the area of web browsers. Even though Netscape became hugely popular, it had yet to make any money when it decided to go for an initial public offering (IPO).

Why might a company like Netscape choose the IPO route to raise funds? What are some of the other options that the company might have considered before deciding on the IPO, and why might these options have been less attractive to Netscape?