Twenty years ago today, Netscape's shares began trading. To many the initial public offering of Netscape marked the beginning of the Internet age. It was certainly the first event that signified to the world outside of Silicon Valley how big the Internet could be. Much has changed since then but much remains that same. Netscape has largely disappeared. But technology companies, after the boom and bust that followed Netscape's deal, are hot once again. These days it's more about apps and smart phones than the Internet that Netscape opened for so many users two decades ago. And, unlike then, many of the hottest companies of the current tech boom are opting to stay private, and put off an IPO for as long as possible, ironically following the advice of Marc Andreessen, one of Netscape's founders. Ten years ago, Fortune compiled an oral history of Netscape and its IPO. Many of the people involved in the deal are once again key figures in the current tech boom.
It was the spark that touched off the Internet boom. On Wednesday, Aug. 9, 1995, a 16-month-old Silicon Valley startup called Netscape tried to go public, but demand for the shares was so high that for almost two hours that morning, trading couldn't open. The stock, which had been priced at $28 a share, zoomed as high as $75 that day and closed at $58. Measured against the market frenzies that came later, its rise might have seemed predictable. But it blew the minds of people in the tech world like Sun Microsystems co-founders Andy Bechtolsheim (now at Cisco Systems) and Bill Joy (now a venture capitalist).
Until then, Silicon Valley was just a place where microchips were made, not the fountainhead of global commerce. The public was oblivious to the Internet; "surfing" meant catching a wave in the ocean or mindlessly flicking the TV's remote control.
But Netscape mesmerized investors and captured America's imagination. More than any other company, it set the technological, social, and financial tone of the Internet age. Its founders, Marc Andreessen and Jim Clark—a baby-faced 24-year-old programmer from the Midwest and a restless middle-aged tech pioneer who badly wanted to strike gold again—inspired a generation of entrepreneurs to try to become tech millionaires. Executives with old- economy experience thought they could stake a claim to startup riches by quitting their jobs and following the example of Jim Barksdale, the former McCaw Communications chief who came in as Netscape's CEO. And Netscape's practice of openly sharing technology so that other programmers and their companies could build upon its ideas helped give rise to a global technology community, the open-source movement.
All that happened just ten years ago. In the following pages, we capture the voices of the IPO's primary players as well as those of people who had bit parts. They reveal how Netscape founder Jim Clark initially was focused on anything but the Internet; the unique blend of Gen X technologists and seasoned managers that became a template for so many of the dot-coms that followed; and the surprise of the IPO itself—even Netscape's investment-banking firm, Morgan Stanley (ms), didn't appreciate what it had wrought.
As engineer John Giannandrea (employee No. 18) memorably observes, Netscape brought the world Internet time, which whirls much faster than reality's clock. Iconic and brilliant, yet deeply confused as a business, the company rocketed from birth to huge acclaim to oblivion in fewer than five years ...
So let's step back in time to the early 1990s. The Internet is a hodgepodge of mostly government and academic networks. The World Wide Web is a nascent system of onscreen pages that are viewable—if you know a lot of tech mumbo jumbo—on the Internet. Software to make web surfing easy is only now being written in computer labs by students like Lou Montulli at the University of Kansas. Montulli is destined to become one of Netscape's first engineers.
LOU MONTULLI: I started working on software for the web back in the early '90s. It came out of a project to do a campuswide information system. I was doing another job at the University of Kansas computer center that was essentially PC support. It was boring. So I started writing this software.
Montulli's interests bring him into contact with Marc Andreessen at the University of Illinois, who by then is working on Mosaic, a browser to help navigate the web. At this point, interactive TV is being ballyhooed as the consumer-technology application of tomorrow.
MARC ANDREESSEN: Interactive TV was going to be right now. I'd read that in the Times and the Journal, and then Wired magazine started coming out. We were working on Mosaic, and I went down to the corner store at two in the morning to buy food. I bought Wired and walked back to my office in the shivering cold in a snowstorm, and I'm like, "There's all this stuff going on, and what we're doing isn't part of it!" The Internet was, like, not in the magazine.
At Illinois, Andreessen persuades Eric Bina, a quiet, intense programmer eight years his senior, to help build a browser.
ERIC BINA: I was bored with my current project, and Marc's really good at getting people psyched. He showed me web pages and was talking the whole time about the potential this had for changing the way people access information [if browsers could be improved]. He said, "Well, this would probably be too difficult or impossible, right?" He knew the best way to get me to do something is to call it impossible.
A major proponent of interactive TV is Jim Clark, a onetime Stanford University professor who is founder and chairman of Silicon Graphics. SGI has become a billion-dollar-plus company by bringing 3-D computing to the engineering world; it is also a primary supplier to an ambitious interactive-TV trial in Florida.
JIM CLARK: I had advocated using cable-TV systems for all kinds of media distribution, for movies on demand and things like that. We did a contract for Time Warner (twc) [Fortune's parent company] in Orlando that used a computer that was equivalent to the set-top box. All that stuff was expensive—$5,000 per set.
Students and researchers at work on various aspects of the web know one another primarily via e-mail. A conference in Boston in 1993 is the first time that Montulli meets Andreessen, engineer Aleks Totic, and others from Illinois in person.
MONTULLI: We'd all known each other's e-mail personalities and had long, drawn-out design sessions and arguments over e-mail. But it's very different over e-mail vs. face-to-face. Aleks Totic almost killed all of us that week. Aleks is quirky, and he drives quirky. There were four of us packed in this tiny deathtrap of a car one night, and we came to the top of this rise, and there was a lane shift and this huge Mack truck. He swerved at the last moment. The web would have been very different had we actually impacted with that truck.
In December 1993, Andreessen, who by now has graduated and is working for $6.85 an hour at the university's National Center for Supercomputing Applications (NCSA), leaves Illinois. The code for Mosaic stays behind.
ANDREESSEN: I lined up interviews and took a programming job at a company in Palo Alto. I liked the idea of moving someplace that wasn't so cold. The Valley was kind of dormant then. Apple Computer (aapl) was the walking dead.
But West Coast technologists and businesspeople are starting to notice Mosaic and other browsers such as Erwise from Helsinki University of Technology and Viola from the University of California at Berkeley. One is Danny Rimer, an analyst at Hambrecht & Quist (H&Q), a San Francisco investment bank; another is John Doerr, a venture capitalist at Kleiner Perkins, who listens to his friend Bill Joy. Jim Clark has his sources too.
DANNY RIMER: I started playing with the browser at H&Q—we were trying to find every website that was being created. One of the most popular was the Internet Underground Music Archive, which is pretty funny, given what's happened with Kazaa and Napster and iTunes. It took about 2½ hours to download a song, but it was cool.
JOHN DOERR: Bill Joy had said to me, "John, this Internet is going to be enormous. It is moving very, very rapidly. When you see an opportunity, just dive in." He didn't put it this way, but it was the equivalent of "Trust the Force." So I was prepared when I saw the Mosaic browser in '94.
JEFF TREUHAFT: I worked at Silicon Graphics, and my role was to demo the technology to key customers. Jim Clark was on the same floor, and he would constantly come and ask to see what was going on in terms of new products. One thing he was shown by somebody I was working with was an early version of the Mosaic browser.
Clark has been sidelined from active management at SGI and is preparing to leave. In search of another big idea to commercialize, he consults with venture capitalists New Enterprise Associates (NEA) in Menlo Park, Calif. Alex Slusky, a junior-level VC, is assigned to help.
ALEX SLUSKY: One day Jim was very excited. He'd downloaded this product—I don't know that he called it a browser, but that's of course what it was. He had spent half the day playing with it. He was fascinated. He had sent e-mails to its creators wanting to meet them.
ANDREESSEN: He contacted me out of the blue. The first time we got together he wanted to meet for breakfast, and we met at Café Verona in Palo Alto at 7 A.M. It was the first time I'd woken up at 7 A.M., as opposed to having still been up at 7 A.M., in about four years. I remember mostly being tired. He said, "I want to start a new thing. I don't know what it is yet. But I want to figure it out, and I'm looking for people to do it with me." Jim was probably talking to a dozen people at that point.
Clark and Andreessen begin meeting regularly to discuss ideas. They talk at his Atherton home as well as at Il Fornaio, another Palo Alto restaurant.
ANDREESSEN: We had a couple of big dinners. Jim really likes red wine, and I don't know if I'd ever drunk red wine in my life. So I'm sitting around the table with guys who'd worked at places like Macromedia, and I'm drinking red wine and thinking, Wow, this tastes pretty good. And I went out to the parking garage across the street and got in my new red Mustang, the car that I'd bought when I came to California, and I ripped the entire bumper off on a steel beam that I'd parked next to. I drove home very slowly. That was the last time I did that. It was a learning experience about red wine.
CLARK: Marc and I wrote a business plan for an interactive online gaming company. We were talking to Nintendo, and they were going to fund us. But we weren't going to get anything out of it. They wanted to own the whole thing. So in the end we gave up on that.
Finally, after about three months, we were sitting in my living room. Marc said, "I don't know what we're going to do, but we've got to do something, because all my friends back at Illinois are graduating soon." I said, "What do think we should do?" And he said, "Well, we could always go hire them and create a Mosaic killer." And I said, "I don't know how we're going to make money at that, but okay. I'll fund it. Let's hire them." Two days later we were on a plane. I almost canceled because of a really bad storm, but Marc persuaded me to get on the plane.
In March 1994, Clark and Andreessen recruit many of Andreessen's former cohorts, including Mosaic co-author Bina, who telecommutes from Illinois. They also enlist Lou Montulli from Kansas.
MONTULLI: I was still a student, and I get this voicemail from Jim's secretary. She says, "You need to be in Illinois tomorrow." And I'm like, Oh, shit, that means I have to buy an airline ticket now, which is real expensive, and I can't afford that. So I called her back and said, "Am I going to get reimbursed? Because it's like 600 bucks, and it's like my whole monthly salary." And she said, "Yeah, just go." I was on the way to the airport half an hour later.
I beat Jim and Marc to Illinois because they got delayed by a snowstorm. We had individual meetings with Jim, essentially so he could give each of us the pep talk. We all came away with the impression he could talk us into anything. We called it the Jedi Mind Trick. He'd walk in and say, "These are not the droids you were looking for," and we'd go for it. He filled our heads with giant numbers of how we were going to make riches and be the most important people on the planet.
Clark also sets out to hire veteran Silicon Valley engineers. He and Andreessen christen the company Mosaic Communications, after the Mosaic browser they aim to upstage.
JOHN GIANNANDREA: I was employee No. 18. I joined very early on with a bunch of people from Silicon Graphics. Jim had hired what we called the NCSA kids, so basically all the people who ever worked on a web browser were hired in like one week. Then he hired an equal number of seasoned SGI engineers. They hired all these young kids who had never shipped a product before. And then they hired a bunch of people who worked at SGI and had shipped very complicated products to Fortune 500 companies and defense contractors many times over. And that was the first 30 employees or so of Netscape.
Word about Clark's new startup gets around Silicon Valley fast. Clark hires a band of young businesspeople to craft financial and marketing plans. Greg Sands, a newly minted MBA, becomes Netscape's first product manager.
GREG SANDS: I applied for business school at Stanford, and I showed up out here in the fall of '92 pretty much knowing no one in the Bay Area. I used every opportunity to get to know people in both the entrepreneur community and the venture community. A friend of mine at NEA, Alex Slusky, called and said, "We've been working with a Silicon Valley legend. Are you interested in meeting him? He's going to start a company. If so, fax me a copy of your résumé, and I'll send it to him." And 36 hours later Jim Clark called me.
The world beyond Silicon Valley learns of Mosaic from a May 1994 article in the New York Times headlined "New Venture In Cyberspace By Silicon Graphics Founder." It starts the Netscape buzz. Mary Meeker, a tech stock analyst at Morgan Stanley, notices the uptick in interest.
MARY MEEKER: The article was not the first time I'd heard of Mosaic, but it was the first time I thought about the company as a business. I called our banker, Frank Quattrone, and said, "You know Jim Clark. I'd love to spend some time with these guys."
As the banker who took Silicon Graphics public in the early '80s, Quattrone remembers Clark's presentations to investors on the multicity tour known as the road show and believes he is worth betting on.
FRANK QUATTRONE: On the Silicon Graphics road show he became known as the Carl Sagan of the company because he could convince investors—most of whom didn't even know why you needed 2-D technology—why you needed 3-D technology and why it was so hard to pull off. He would very persuasively, not in an overly brainiac way, explain how you needed billions and billions of operations per second in order to make a 3-D image come to life.
That summer Fortune names Mosaic Communications one of its 25 Cool Companies (July 11, 1994). Even non-Californians take notice, including former FedEx executive Jim Barksdale, president of McCaw Communications, a Seattle company that is being acquired by AT&T (t).
JIM BARKSDALE: I was reading Fortune. I didn't read it religiously, although I'm now on the board of the company that publishes it. Anyway, there was an article on, like, 25 hot companies, and it opened with a big picture of Jim Clark and Marc Andreessen sitting on computer terminals.
I thought they had a heck of an idea. I had been involved for years in the building and installing of information systems. I knew the frustration of trying to interconnect networks. The browser used as a generic interface struck me as a hell of an idea.
Inside the startup, the young turks and grown-up engineers are together writing code, and a handful of businesspeople are trying to figure out how to sell the software.
SANDS: The world was just exploding around us. It was extraordinary energy. We were working like crazy. For the browser engineers, what they were working on was crystal clear, but for the rest of us it was very unclear what we were doing, where we were headed, and ultimately, how we were going to make money.
GIANNANDREA: [We decided on a business model, which] was basically to give away the browsers and sell server software. Silicon Graphics and Sun were building server computers, of course, but there was no such thing as web-server software. So we hired a bunch of server people who wrote the first web servers.
Among the engineers, what will become the dot-com boom's hypercaffeinated startup culture is taking shape.
GIANNANDREA: It was a race to ship something as fast as humanly possible. Jim Clark was in a hurry because he wanted to ship the first commercial web browser. Mosaic wasn't the only company trying to do that. There was another startup called Spyglass and a whole bunch of others all trying to do it. The whole concept of Internet time was invented that summer.
MONTULLI: We had a really nice office in downtown Mountain View. It had balconies and beautiful views out onto the Santa Cruz Mountains. There were all these restaurants and all this exotic food, like sushi. I'd never had sushi before. From a living-the-California-dream perspective, it was over the top. It was really cool.
With all this work in front of us, you could literally work 16, 18 hours a day and there'd still be more to do. We would sleep at the office. There were conference rooms that had futons, and you could catch a nap for three or four hours and go back to work. My routine would be come to work, work till three or four in the morning, sleep for three or four hours on the cot, then work through the next day till about midnight or two, and then go home and sleep for like 13, 14 hours straight. And then come back.
The atmosphere is like a college dorm during finals—not surprisingly, since their technology chief is Andreessen, who has just turned 23.
GIANNANDREA: Marc's way of working was to be in meetings or doing whatever business things during the day, being the face of the company with Clark. Then in the late afternoon or early evening, he would dive into technical stuff. He'd send out e-mails like at three in the morning, saying, Change these 27 things. So then by the next morning people would be working on those things.
Clark has Andreessen vet all hires. It is important that the young company's technical visionary feel comfortable with employees, especially the "adults" who are about to join. Among them are Mike Homer, an ex-Apple executive who eventually becomes VP of marketing, and Todd Rulon-Miller, an ex-IBMer who becomes VP of sales.
TODD RULON-MILLER: Marc was like 23, and the sky had no limits, and domination of the world was his potential, and he was going to go do it. There wasn't a lot of wisdom, but he couldn't have had it at that age. When I interviewed with him, he was on a workstation staring intently into the screen. I don't think he looked at me. I sat in a chair next to him. He was playing Doom.
And I didn't even know what Doom was.
QUATTRONE: Andreessen looked like a high school student on steroids. He's a great guy. He was calm and quiet—not flashy—but you could tell there was genius lurking beneath the surface.
As Andreessen's celebrity grows, Bina, now over 30, avoids the limelight.
BINA: I was too old. The press really needed a young guy to be the face of this new thing. It had to be something brought out by this new generation. Not to mention that Marc is good at speaking and I am not.
In August, four months after founding the company, Clark begins talking to venture capitalists about funding. Netscape needs money: It is eating through the $3 million he has put up out of his own pocket. Clark approaches New Enterprise Associates, which had helped fund SGI, though he is still bitter that VCs made far more money on SGI than he did. He badly wants to reverse the equation this time around.
CLARK: I brought the venture community in out of fear that I'd be out there alone and that I was squandering my entire net worth, which at that time was around $15 million, on a pipe dream.
SLUSKY: NEA had the opportunity to fund this business. But Jim asked for the then unheard-of valuation for a startup of around $18 million, and NEA just could not see its way to a valuation that high. Startups were being funded at valuations of $2 million to $4 million. Saying no was the safe answer.
So NEA introduced the deal to Kleiner Perkins. I sat in John Doerr's office and described the situation to him. NEA's hope was that Kleiner Perkins would talk some sense into Jim and get the valuation lower. Instead they funded him—they were willing to take risks that NEA was not.
DOERR: It was very clear that this point-and-click, graphical way of directing people around the Internet was going to be an enormous opportunity.
In September, Kleiner Perkins invests $5 million (at a $21 million valuation); Doerr joins the board and assumes the role of player-coach that VCs often perform at a critical stage of a startup. One of his first missions is to recruit senior executives.
RULON-MILLER: On a Saturday night my wife and I had been out for dinner, and we got home and the message light was blinking on the phone. We sat on the edge of the bed, and we're taking off our shoes and trying to relax, and I hit the message button and the voicemail goes something like "Hello, Todd, John Doerr, Kleiner Perkins. Kevin Compton [another Kleiner partner] tells me you can sell ice to Eskimos. I need to meet you." My wife looks at me, and I look at her, and he goes on, "Jim Clark and I are flying in on Flight blah, blah, blah Delta, 9:05 Tuesday evening, be there." The message ended. My wife looked at me and said, "What was that?" And I said, "I think it's Mission: Impossible."
The wooing of Barksdale, who was head of technology at Federal Express before running McCaw, proceeds throughout the fall.
BARKSDALE: One night I got a call after hours, and I answered, and it was a headhunter. If he'd called during hours, I wouldn't have talked to him. We had recently sold McCaw Communications to AT&T, and the deal was supposed to close anytime, but it took longer than we expected. The headhunter is named David Beirne, and he's fast-talking and aggressive. He starts by saying, "I've got a client at Microsoft. They're looking for a chief operating officer." And I tell him, "I'm not interested." And he says, "Well, I've got another company, a startup, Mosaic Communications." And I say, "I just read an article about them." I didn't want to go to Microsoft (msft) to be the fourth man in a one-man outfit, particularly when the one man was Bill Gates--he's ten years younger than me, and an icon. But it tickled my fancy that this Mosaic Communications might be a third bite at the apple. FedEx (fdx) to McCaw, and now this thing. Three great startups. Then I took a call from John Doerr and Jim Clark. Doerr was the venture capitalist in Netscape. I'd never heard of him.
As all this is going on, Microsoft is scratching its head. Sam Jadallah has just signed on as an aide to Steve Ballmer, the software giant's head of sales (and future CEO).
SAM JADALLAH: There was definitely a buzz at Microsoft about the Internet—we were trying to understand why everybody was getting all hyped up. Certainly for us up in the Northwest, we didn't know what to make of it. It seemed pretty cool, pretty exciting, but really what were you going to do with it? How was it going to change your day-to-day work?
Netscape has buzz but also faces perils. The University of Illinois is alleging that Clark and Andreessen have stolen the intellectual property for the browser and the Mosaic name, and is threatening to sue.
RULON-MILLER: Success was not a given in fall 1994. We were getting sued by the University of Illinois, and we were hours away from being shut down [if the university prevailed]. There were subpoenas going. Those were very intense times.
On Oct. 15, Mosaic Communications releases the beta, or test, version of its browser. The finished product is many weeks from being ready, but the team's agility and speed derive in part from a willingness to enlist the help of outside programmers.
GIANNANDREA: The concept that was unusual was doing a beta—the idea that you could ship the thing before it was ready and invite people to download it, and then they'd let you know what the bugs were. It was like saying, "Here's a beta version. It's free. Please help us test it." This was part of what attracted people to the whole Internet concept. It was more open. It was faster moving. It was more democratic. Our idea was that the more people participate, the better the product will be.
To appease the university, the company needs a new name.
SANDS: One morning Jim grabbed me and Paul Koontz, who was VP of marketing, and Marc, and pulled us into Marc's office, which was not particularly large and was very chaotic—papers stacked everywhere and boxes of Honeycomb cereal everywhere where there weren't papers. Jim said, "We've got to make progress on [renaming the company]." And I said, "We've got a couple of ideas, but they're not great." Then it just kind of popped into my head, and I said, "How about Netscape?" Everyone kind of looked around, saying, "Hey, that's pretty good. That's better than these other things." It gave a sense of trying to visualize the Net and of being able to view what's out there.
Mosaic adopts the name, initially for the browser, and on Nov. 14 for the company. The engineers frenetically fix bugs for the browser's commercial release, and the businesspeople fret about how to price it.
MIKE HOMER: We put out the beta on Oct. 15. Then we put out Version 1.0 around Dec. 15. In the meantime all these other things had to get decided, especially the free browser and issues like How do you do licensing? What's the pricing?
TREUHAFT: We all felt there was something big happening. We proved month after month that the idea we had was big, and that, for all the right reasons, we were playing our own role in trying to hype it and make it even bigger and create the opportunity for ourselves and for partners and for other folks.
SANDS: Right about the end of 1994, we actually did trim back 15 or 20 people. It just wasn't clear exactly where the money was going to come from or how quickly it was going to ramp up.
On Dec. 15, 1994, the company launches Version 1.0 of its browser, Netscape Navigator. Netscape is nine months old, has burned through much of the $9 million that's been invested so far, and has yet to record a single dollar of sales.
GIANNANDREA: We put this thing up, and it's midnight, and somebody broke out some beers, and we were like, "Okay, we've shipped it, for better or worse it's gone." And we sat and watched. We had servers rigged so that every time somebody downloaded the browser, you'd hear a cannon go off. It started to go off just after midnight. All the first downloads were from Japan and Australia, because they were awake. By the next morning, I don't remember the exact numbers, but tens of thousands of copies had been downloaded. Now people take for granted that they'll put out a version of something and a million copies will be downloaded in a week. But nothing like that had ever happened before.
The browser launch is the end of Netscape's infancy. The arrival of Jim Barksdale soon after starts the company growing into a real business.
BARKSDALE: In December we went skiing in Aspen. My children were all there, and I had my laptop with my dial-up connection at the house, and I brought up the Mosaic browser. And I said, "Let me show you this thing." They were pretty intrigued by it. They were computer literate. I said, "Ask me a question." So my daughter Susan asked about some law case that she was studying, and I pulled it right up. My daughter Betsy asked if I could find a third-grade lesson plan, and I told her there were only four billion of them, even back then. My son David, who was a big fan of the Grateful Dead, wanted to know when they were going to be in New Orleans. And I pulled that up. They were all dumbfounded. It was that easy to find things.
We played with it the rest of the weekend, and I was back and forth on the phone with Doerr and Clark. That's when we decided to do it, and I went to work in January. Before I did, I flew over to see [AT&T CEO] Bob Allen in New Jersey, in Basking Ridge, and gave him my resignation. He was aghast. He asked where I was going, and I said, "Netscape Communications," and he said, "Who?" I said, "They do this Internet browser thing," and he was not pleased. But within a year AT&T was all over Netscape trying to be partners.
SANDS: When Barksdale came, the place really did calm down. Clark introduced him to the company and said, "Jim is the CEO. He's the decision-maker. If you disagree with him, go talk with him. Don't come to me." That was also when we started generating revenue and started seeing how quickly things were taking off—selling browsers to corporations. Sometimes companies would call and say, "Hey, I just realized I've got 1,000 people who are using this product, and I want to make sure I'm in compliance."
BARKSDALE: I was very reserved about being a big-company guy. I didn't want to give the appearance of telling them what to do. I remember holding back on things I knew needed doing, whether it was in structure or governance or sales, because I didn't want to subtract from their magic. Clark hired me to run the place, and then he stepped back. I tried to apply the lessons I had learned in past jobs so we could continue to move quickly without making mistakes. I didn't want to do anything to slow this down, yet I was mindful it could become a train wreck if it grew too fast.
QUATTRONE: The two things that happened that got us to take Netscape very seriously were, one, when they got John Doerr as an investor, and two, when they brought in Barksdale. That's when we knew we would have to pay attention, because Barksdale was the real deal.
HOMER: I actually have a little book of Barksdale sayings. Things like "If you see a snake, kill the snake, but don't play with dead snakes." That means that if it's an important issue, discuss it. Resolve it. But once you've discussed it and resolved it, don't bring it up again. We called that the Rule of Snakes. He was a calming influence, yet with a sense of urgency about the business, which is extremely difficult to have in one person. I have a sense of urgency, but no one would ever accuse me of being a calming influence.
As Barksdale gets established, Clark is busy courting media companies to become customers of and investors in Netscape. In April 1995, Knight-Ridder, Hearst, Times Mirror, and TCI all invest. Barksdale also recruits a major-league CFO—Peter Currie, an ex-Morgan Stanley banker and Stanford Business School classmate of Frank Quattrone. Currie arrives not a moment too soon. Through the first half of the year, Netscape is seeing rapid revenue growth from corporate licenses on web browsers. Sales jump from $5 million in the first quarter to $12 million in the second. Headcount grows to more than 250 by mid-1995.
HOMER: We put this browser out on Oct. 15 and by Jan. 1 we've got a few million of them out there. It looked as though the dogs were eating the dog food. We wanted more money because we were starting to formulate realistic plans about what the business over the course of that year would be.
By June, Clark is agitating for an IPO.
CLARK: I viewed the IPO as a marketing event. Frank Quattrone was our banker. I knew him from when we went on the road show at Silicon Graphics. Morgan Stanley and Frank understood the process really well. I kind of stacked the deck a little bit. I wanted us to go public, because I thought it'd be good for us from a PR standpoint, and I did go into this thing to make money, so I was looking for a reward as well. I got the lawyers and Frank and his team to come give a pitch. After that, the management kind of reluctantly decided it would be a good thing to do.
PETER CURRIE: Spyglass had just filed [in mid-May], and that got Jim Clark thinking. He came to the June board meeting and said, "We ought to file to go public." John Doerr right away said, "Put the puck on the ice!" I was the only fool in the room who said, "Boy, it's awful early." But I do remember saying in the same sentence, "But we can market the heck out of this thing."
QUATTRONE: There was debate in the company about when to go public, which culminated in a board meeting in June. Barksdale and Currie were more conservative. They wanted to make sure the company was using a lot of traditional metrics and had been there long enough to feel comfortable with the business before going public. Clark was more aggressive. Then we talked about risks. The big risk was that Microsoft would bundle a browser in the next version of its Windows operating system. We thought that could happen as early as September. The looming competition is what got the more conservative board members over the hump.
No company can go public in August. That's conventional wisdom. But my judgment was that with Jim Clark and John Doerr and Jim Barksdale and Peter Currie and Marc Andreessen and Morgan Stanley all involved, people would show up for this one in August.
Yet another factor helps convince the board and its advisors. They know they are onto something big—the Internet—and it isn't that large a leap of faith to try to cash in. Besides, Netscape's revenue is doubling every quarter, and by its second quarter of actually selling software licenses, the company is on the threshold of profitability.
ANDREESSEN: Kleiner's Law No. 6, or whatever, is, "If you're standing at a party and they're passing around hors d'oeuvres, take some." Jim Clark made a really, really, really solid read of the markets and said, "We can definitely do it now."
MEEKER: Was it early for the company to go public? Sure. There has been a rule of thumb that a company should have three quarters of obviously robust revenue growth. And you also traditionally wanted to see three quarters of profitability—improving profitability, for newer companies. Netscape was not profitable at the time, so that was certainly a new idea. But the market was ready for a new set of technology innovations, and Netscape was the right company in the right place at the right time with the right team.
Netscape files to go public on June 23, 1994. The reception it gets on its road show is the first sign that a bubble psychology is gripping the investment community. The Internet is about to become the flavor of the decade.
CURRIE: When we went from city to city, instead of meeting with three or four analysts in a given institutional investment firm, we'd have 50 or 75. And it wasn't all people who were going to buy the stock. They wanted to know about the Internet. Many of the questions we got had more to do with the Internet as a cultural phenomenon and as an approximate but not immediate commercial opportunity.
QUATTRONE: A lot of people had missed out on the Microsoft IPO because they didn't believe in PCs and they didn't believe in software. They thought the stock was too expensive all along the way until Microsoft was worth $10 billion. Man, were they wrong. There had been enough talk about the Internet, and John Doerr had done a good job evangelizing it. People were looking for the next platform. Where am I going to be able to find the next Microsoft? Who's the next Bill Gates? What's the next high-margin opportunity that's going to change the entire landscape of technology? So it was the opportunity to be the standard-bearer, the Microsoft of this new era.
The myth of the golden management team starts here too. Later IPOs (think Webvan) will have almost nothing to offer but big-name leadership.
HOMER: I did everything I could to package Marc and Clark. We had this cool guy, and the other guy is like Yoda. It's so good as a story for the press. Then you throw Barksdale into it, and it was like, Oh, man, this is a whole new toy. As a PR and marketing person, it's like, holy mackerel, I've got a Jedi Council here. So I packaged those guys as the face of the company, and on the road show it just made total sense. You talk about a marketing event—it was about as big a marketing event as we could make.
MEEKER: The reason the market was ready, willing, and able to accept a company that didn't have three quarters of profitability is that the growth trajectory was quite high. People got that the market opportunity was quite high, and the management team had all the elements of being the kind of stuff that people liked.
Not that there isn't skepticism.
CURRIE: Remember, Netscape gave away the beta version of the browser. In the financial world, that got translated into "You're giving all your stuff away free." There was one guy from Wellington, and I loved the way he characterized it. He had a New England accent and he said, "I'm trying to figure out if you are a Roman candle, a wave runner, or a hardy perennial."
QUATTRONE: Morgan Stanley, which had not yet acquired Dean Witter, was not a retail shop. And what I heard from the salespeople was that the number of incoming phone calls was so great that they had to install an additional PBX to handle the volume. The closest thing to it that Morgan Stanley had seen was Apple's IPO in 1980. Everyone wanted this one. It was a trophy, the thing you had to get to be able to talk at cocktail parties. No one wanted to tell their grandchildren that they missed out on this one.
Netscape goes public on Aug. 9. Its frenzied first day of trading foreshadows the market mania that will follow. (That day also brings a sad event: Grateful Dead leader Jerry Garcia dies. The next morning's San Jose Mercury News played both stories on the front page; Garcia got much more space.)
CURRIE: This might have been a mistake that Jim and I made, but we had the opportunity to price the stock higher. We knew there was institutional interest, we knew there was retail interest. We didn't have hard, factual, analytical data about who was willing to buy at what price. Our fear—naive, as it turned out—was that if we pushed too much, we were being greedy. So we said $28 a share. Now, what turned out the next morning was they couldn't open the stock. The order imbalance came about because retail investors—and these turned out to be Netscape browser users—were putting in orders with their brokers for the stock, and they weren't market-limit orders. So these were presumably people who were naive about the capital markets, and they just said, "I want to buy the stock," without saying at what price.
QUATTRONE: Despite how groundbreaking a transaction this was, it wasn't the largest deal in Morgan Stanley that week. Morgan Stanley was doing a deal for J.I. Case, the tractor company, raising, I don't know, $200, $400, $500 million. It was much bigger than the Netscape IPO. And they were having a tough time getting that sold. So even though this event was maybe one of the most important events in the history of the technology industry, at Morgan Stanley it wasn't even the most important offering that day. It was, "Yeah, that one is easy, so let's get it out. What we really need to focus on is selling tractors, baby."
Back in California, the employees, all of whom have stock options, wait.
SANDS: We had doughnuts and bagels laid out that morning, and we all knew that stocks started trading at 6:30 in the morning California time, and so a bunch of people showed up early. We sat around for an hour or an hour and a half, and nothing was happening. We didn't know what to make of it. So we all just went back to work. Someone grabbed me during the day and said, "Dial Charles Schwab, 1-800-SCHWAB," and a voice said, "Welcome to Charles Schwab. If you're interested in the Netscape IPO, press one." That was when it was clear to me that this was really a big deal.
DOERR: The stock started trading while I was driving to my office. It was a warm day in California, but when I checked the price, I was numb. I had to walk around the building.
ANDREESSEN: I woke up at about nine, logged in to find out how the stock had performed, and went back to sleep. My view was that we could not let ourselves be distracted by the euphoria. It's a temporary phenomenon. It could be gone tomorrow. We either deliver or we don't. It's probably a Midwestern kind of thing.
CHRIS HEMPEL: When the stock opened, it was $71 a share. People were giddy with excitement and dazed, walking around the parking lot. I was in the PR department and I thought, "This is going to be total mayhem. I've got to get back to my desk." There was this eerie silence for an hour, and then all hell broke loose. All the local stations were in the parking lot, running around trying to interview people as they left the building. How do you control something like that?
BARKSDALE: I'd made a rule that no one would discuss the stock price at work—which had been the rule at Federal Express. But when I came in that morning, my own secretary had set up a stock ticker above her desk. I said, "What on earth are you doing?" And she said, "I thought you were joking." I told her to take it down.
CLARK: My 20% stake in Netscape was worth $663 million on the day of the IPO. I remember because later I needed to come up with a tail number for an airplane I bought. I told them to use 663, because that meant something to me.
The big celebration was that night.
TREUHAFT: We went down to Sunnyvale, to a bar, for an event planned for that night, good or bad. John Doerr was there and Jim and Marc and Jim Barksdale. It was surreal. Everybody was just walking around. The guy who wrote the server software, Rob McCool, basically dropped out of college, and he would show up for work in shorts and tube socks and a Megadeth T-shirt. We all think of it as just the way the Valley is now. But I'd been in the Valley for a while, and I hadn't seen that. At SGI, which wasn't a buttoned-up place, we had quirky people, but this was a whole different level of surrealness. And fun—I mean, you just had perma-smile. Some people went out and bought $2,000 suits and started dressing up nice. And other people just put on their tube socks and Megadeth T-shirts and kept going.
RULON-MILLER: I was on vacation in Lake Tahoe, and I got a phone call at seven in the morning from one of my friends saying, "Netscape didn't open." I said, "Oh, shit, what happened?" And he said, "They can't get the first price." I said, "Well, what's that mean?" He said the bids are overwhelming the asks, and it's going up.
There was no Internet that could tell you online stock prices at the time. So I got phone calls during the day from friends. I remember my wife saying, "What's going on?" and I just muted myself and said, "Nothing." I ended that day at 58 bucks a share times my stock pile, and I looked in the mirror and said, "I wish my mom and dad were alive. They wouldn't believe this."
BINA: The day that we went public I was not there. My daughter was due to be born. [But] oh, yes, they did make me rich. That's why I can comfortably be a stay-at-home dad. I left Netscape when AOL bought the business, and quit programming cold turkey. I'm very big into gardening. I got into rose breeding.
Netscape and the Internet supercharged each other. Thousands of websites emerged in 1996; by October users had downloaded 45 million Netscape browsers. The hottest real estate in cyberspace was the Netscape home page, which automatically appeared onscreen when you launched the browser. "Everybody wanted to be in Netscape," recalls engineer Giannandrea. "It gave you a business advantage." Netscape's revenue soared from $85 million in 1995 to $346 million in 1996, and then to $534 million the next year. But the stock never surpassed its December 1995 peak of $171 a share.
If the IPO was the beginning, it was also the beginning of the end. Netscape's businesspeople and engineers often seemed on different planets as the company wrestled with runaway growth and the vertigo of overnight wealth. Just weeks after the IPO, a popular trade publication attributed to Marc Andreessen the boast that Netscape would reduce Microsoft's Windows operating system to a "mundane collection of not entirely debugged device drivers." That helped further sensitize Microsoft to the Netscape threat as well as to the potential of the Internet, and touched off what would become the browser wars. (To this day Netscapees debate what went wrong. To hear Netscape technology chief Eric Hahn, investor Roger McNamee, and others reminisce about the company's post-IPO travails, check out fortune.com.)
In August 1996, Microsoft launched Internet Explorer 3.0, a free browser that not only was a technological match to Navigator but also was bundled with every new Windows PC. (A federal court labeled the tactic monopolistic in a case that was ultimately settled.) The onslaught crippled Netscape, which that year suffered operating losses of $132 million. Although the dot-com boom roared on, and although AOL acquired Netscape in March 1999 for an impressive $4 billion in stock (the deal was worth $10 billion by the time it closed), Netscape was already well on its way to becoming a ghost.
Reporter associates: Oliver Ryan and Patricia Neering
This story is from the July 25, 2005 issue of Fortune.