Inside Varsity Group Inc.'s 11th-floor headquarters in the District, clutter serves as the decor and twentysomethings in jeans are doubled and tripled up in small offices. A rear wall is about to be knocked down to make more room. For the first time in four years, the e-commerce company is bursting at the seams.

It's an enviable situation, considering how many of its dot-com peers are long dead -- and how close it came to suffering the same fate.

In true Internet-boom form, Eric J. Kuhn created the company in 1997 at the age of 26. His goals were twofold: to escape from a career in law that wasn't to his liking and to revolutionize the college textbook industry, freeing students everywhere from campus bookstore monopolies.

So off he went, banging on doors of venture capitalists and book distributors. A chance golf course meeting led to an introduction to one of billionaire Warren Buffett's wealthy kin, who agreed to listen to Kuhn's pitch. "Next thing I knew we were on a plane to Omaha . . . and he wrote us a check for $1 million," Kuhn said of the Buffett relative. "That was our angel money."

Within three years, the company, then called, had raised $40 million in venture funding. Kuhn was in and out of meetings with top executives from the Internet and publishing industries, earning what he calls an "MBA on the fly." Selling books through the Internet at a discount was the big idea, but the company's primary focus became something quite different and more grandiose -- building a national brand. ran ads regularly on MTV and in college newspapers. The company built a network of thousands of student representatives on campuses across the country and bulked up to a staff of more than 250 employees, many of whom worked in marketing.

In February 2000, the company hit what seemed then to be the ultimate mark of success: It went public. VarsityBooks' stock debuted at $10 a share on the Nasdaq Stock Market and, at its peak, the company was worth $207 million. "That was sort of instilled on the forehead of every young CEO," Kuhn said of the euphoria of the moment, "and I did it."

The giddy moment was over all too soon for most dot-com companies, and it proved especially brief for Varsity Group. The Internet bubble burst a month after its IPO, and Kuhn had to get on the phone every quarter to tell analysts and investors about the multimillion-dollar losses his company was racking up. For every $100 in books the company sold, he said, it was spending $100 on marketing.

"All of a sudden people were telling us we were ugly, that they didn't like us anymore," Kuhn recalled. "When you're a public company everything becomes magnified . . . and it was a company I started. It was a self-reflection."

In April 2000, Kuhn went to a company board meeting bearing charts and graphs that showed the company would go under within a couple of months at the rate it was burning cash. Area dot-coms such as LifeMinders Inc. and Inc., both of Reston, and Value America Inc. of Charlottesville were struggling publicly by then. Big e-commerce firms such as Inc. and WebVan Group Inc. were fast becoming the bane of investors everywhere.

So threw away its business model, and Kuhn began making deep cuts in the staff, firing friends and colleagues who had believed in his mission. That, Kuhn says now, was the hardest part by far.

"We were a very close-knit group of people. We all had a good time together," said Matthew Finger, a regional sales manager who, like much of the staff, joined the company right after college in 1999. "It just seemed like the climate was changing for the worse back in 2000. . . . It was hard. You saw some of your friends go."

The staff shrank to fewer than 15 people, and the company's stock plummeted, eventually trading as low as 6 cents a share. In March 2001, VarsityBooks was delisted from Nasdaq. By then, Kuhn and the board had zeroed in on a new, much narrower strategy for the company. In the previous year, a few small private high schools had approached the firm to see if their students could order books through the site. It was a largely ignored fragment of business for a company that had set out to conquer college campuses, but it offered the prospect of a far more reliable source of revenue.

Setting up makeshift bookstores every fall is a nuisance for private-school administrators and students, Kuhn says, so some schools were eager to outsource the task. Students log on to the company's site, find their school's listing, and click to order the books that are required for the classes they'll take that year. Area schools including St. Stephen's and St. Agnes in Alexandria, Georgetown Visitation Preparatory School in the District and Maryvale Preparatory School in Brooklandville, Md., are among the 315 schools that Varsity Group now counts as customers.

While Wall Street analysts stopped covering the company and fewer and fewer people listened to its quarterly investor calls, Varsity Group started eking out a profit. In 2003 the company earned $4.4 million on $25.2 million in revenue. Since then, it has increased its customer base by 50 percent, Kuhn said, so he expects its financial results for this year to grow accordingly.

Now, with a staff of 35 employees, Varsity Group is bringing in more revenue than it did when 250 were on the payroll. And while the company's stock hovers around $6.15 a share (it closed yesterday at $6.16, up 5 cents), the growth was sufficient for Varsity Group to be relisted on Nasdaq in September.

According to a Nasdaq spokeswoman, Kuhn was asked to preside over the daily ceremonial opening of the market in New York because Varsity Group was the first e-commerce company to claw its way back to the national index after being delisted.

The experience was, in many ways, more meaningful than the initial public offering, said Kuhn, who is now 34.

"This wasn't luck. It was hard work on the part of all the people out there," Kuhn said, pointing past the door of his sparsely decorated office. "We feel like we're back in the game, but it's the bottom of the first inning."

Ellen McCarthy writes about the local tech scene every other Thursday. Her e-mail address is