I
On Saturday, January 23, 1993, at seven twenty-one in the morning, the following message appeared on several Internet bulletin boards:
By the power vested in me by nobody in particular, alpha/beta version of 0.5 of NCSA’s Motif-based information systems and World Wide Web browser, X Mosaic, is hereby released,
Cheers,
Marc1
Marc was Marc Andreessen, a twenty-one-year-old computer science major at the University of Illinois in Urbana-Champaign. NCSA was the National Center for Supercomputing Applications, where Andreessen had been working part-time as a software programmer. Mosaic (the X was later dropped) was the first Web browser that was easy to use, easy to install, and able to work on a variety of operating systems, including Microsoft Windows and Apple Macintosh. Ten minutes after Andreessen posted a copy of Mosaic on the supercomputing center’s Internet site somebody downloaded it. After half an hour, a hundred copies had been downloaded. Thereafter Mosaic “spread like a virus,” to use Andreessen’s own words. Nobody kept exact count, but by the summer of 1993 hundreds of thousands of people were using Mosaic to surf the World Wide Web—and the numbers were getting bigger all the time.
Before Mosaic, navigating the Internet was a trial. Many casual users connected to the network via online communities, such as the Well in Northern California and Echo in New York. For ten or twenty dollars a month, these services allowed people to sign up with their newsgroups and chat rooms. Once online, the intrepid surfer could also strike out on his or her own, but to do this he or she had to be familiar with the Unix operating system and the TCP/IP communications protocols. There was no central directory of Internet addresses, and many sites were difficult to access. Getting onto the World Wide Web was even harder. The browser that Berners-Lee released with his www protocols displayed text a line at a time, like a teletype machine, and it ran only on NeXT workstations. Most computer professionals used Unix-based machines, and most ordinary people used Microsoft Windows or Apple Macintosh. During 1992, three different sets of scientists (at Helsinki University of Technology, Berkeley, and Stanford) developed Web browsers for Unix, called, respectively, “Erwise,” “Viola,” and “Midas.” Each one of these browsers was an improvement over Berners-Lee’s version, but they all had shortcomings. Viola, for example, was notoriously difficult to install.
When Mosaic appeared, less than 1 percent of Internet traffic was on the World Wide Web. Two years later, the Web was the most popular thing on the Internet, accounting for about a quarter of all traffic. Mosaic was responsible for the transformation. The new browser displayed Web pages inside a window, which made users of Microsoft Windows and Apple Macintosh feel at home. There were familiar scroll bars, buttons, and pull-down menus. On each Web page some of the text was highlighted. Clicking on this text caused another page to appear. “Back” and “Forward” buttons made it easy to move to and fro. Mosaic also allowed users to create their own Web pages. And, most important of all, it allowed graphic images to be displayed alongside words. What hitherto had been a dry, text-based medium was suddenly transformed into a bright, colorful place.
It was Andreessen who came up with the idea of building a user-friendly Web browser. A native of New Lisbon, Wisconsin (population 1,491), he was tall (six four), thin, antsy, and he sported a shock of blond hair. Andreessen hailed from a modest background: his father was a seed salesman, his mother a shipping clerk. Growing up, he hated sports, preferring to spend his time learning the BASIC programming language from a library book. At high school, he favored math and computing, but he also had wider interests. “Say we were talking about God or something,” a classmate told Fortune magazine. “He would talk about it in a more complete way, with more than one view. And we’d sit back on our heels and say, ‘Wow, oh yeah.’ ”2 After high school, Andreessen chose the University of Illinois at Urbana-Champaign, which was only a four-hour drive from New Lisbon and boasted a world-class computer science department, as well as the NCSA. He thought about majoring in electrical engineering, but eventually he settled on computer science.
Like many computer buffs, Andreessen was fascinated by the World Wide Web but frustrated with how difficult it was to use. None of the prototype Web browsers had the point-and-click capability that had been popularized by Apple. Andreessen suspected that many of the scientists using the Web were happy to keep things as they were. “There was a definite element of not wanting to make it easier, of actually wanting to keep the riffraff out,” he said in 1995.3 The supercomputing center, where Andreessen wrote three-dimensional graphics programs after class for $6.85 an hour, also left him cold. “It had a very large established budget—many millions of dollars a year—and a fairly large staff and, frankly, not enough to do,” he would later recall.4 Andreessen had a point. Supercomputing had had its day. The PC workstations that firms like Sun Microsystems and Silicon Graphics were building could do many of the same things that a supercomputer could do.
Andreessen thought it would be fun to create a graphics-based browser for the Web, and he tried to interest Eric Bina, a full-time programmer at the supercomputing center, in his idea. Bina said he was too busy, but Andreessen persisted. Eventually, Bina caved in, and his boss, Joseph Hardin, approved the project. Starting in late 1992, Andreessen and Bina worked around the clock for two months. They made a good team. Andreessen, brash and voluble, was the ideas man. Bina, a reserved and punctilious programmer, wrote most of the 9,000 lines of code using a Unix-based tool kit called Motifs. As the work progressed, Andreessen and Bina recruited others to write versions of the new Web browser for Microsoft and Apple. Jon Mittelhauser, a graduate student, took on the Microsoft job, with the help of a friend, Chris Wilson. Aleks Totic, a Yugoslav known as “Mac Daddy,” agreed to write the Apple code along with another student, Mike McCool.
Andreessen argued that Mosaic should have the capacity to incorporate images alongside text. Bina was initially against the idea. Graphics files are a lot bigger than text files, and he feared that people would abuse them, choking up the Internet with frivolous images. Andreessen, who spent a lot of time in Internet chat rooms, was insistent. Users would love the pictures, he argued. Even if the network did get overloaded for a while, then its transmission capacity could easily be increased. The other members of the programming team sided with Andreessen. The idea of adding a color photograph to a Web page just for the sake of it made eminent sense to them because, as Mittelhauser explained, “Face it, they made pages look cool.”5 Looking back a couple of years later, Bina could see both sides of the argument: “I was right,” he said. “People abused it horribly. . . . But Marc was also right. As a result of the glitz and glitter, thousands of people wasted time to put pretty pictures and valuable information on the Web, and millions of people use it.”6
Mosaic wasn’t perfect—it had a tendency to crash—but even unsophisticated users could learn how to operate it in an hour or two. As Bina noted, many people used it to create personal “home pages,” featuring pictures of themselves and their families. Pornographic images also proliferated. Berners-Lee, who saw his creation primarily as a research tool, disliked these developments. In the summer of 1993 he met Andreessen at a conference and “Tim bawled me out . . . for adding visual images to the thing,” Andreessen later recalled.7 But Berners-Lee was no longer in control of the Web, and he couldn’t prevent it from being transformed into a popular medium. Nobody could. As more and more material was posted on the Web, more and more people were attracted to the network, which, in turn, encouraged the development of new sites. Berners-Lee’s creation was benefiting from a positive feedback mechanism that arises on all networks, from the Bell telephone system to the airline routing system. Put simply, a network’s usefulness increases with size. With only two airports in the country, an airline is of limited value. With dozens of airports, air travel is indispensable. The same applies to the phone system. If just one person has a phone it is useless, but when two people have one the network comes alive. As the number of people connected increases, the number of ways to communicate grows exponentially. With three people, there are 6 possibilities. (A talks to B; B talks to A; A talks to C; C talks to A; B talks to C; C talks to B.) With four people on the network, there are 12 possible connections; with twenty people there are 380. And so on.
As Web usage increased, firms from all over the country called up the NCSA with inquiries about Mosaic. Some of them wanted to install the new Web browser on their internal computer systems. Others wanted to buy the distribution rights and sell Mosaic to the public. The computer code was the property of the supercomputing center. There was nothing to prevent Andreessen and his colleagues from quitting the university, incorporating themselves, and licensing Mosaic from their former employer, but such an idea seemed outlandish. This was rural Illinois, not Silicon Valley. “There’s no infrastructure at all in Illinois for a start-up company,” Andreessen told Robert Reid, the author Architects of the Web. “It’s not there. No one does it.”8
Having created Mosaic, Andreessen and his colleagues were forced into the background while the officials who ran the NCSA decided what to do with it. Tensions grew between the two sides, especially when, in December 1993, John Markoff, the computer correspondent of The New York Times, published an article on Mosaic in which he said it was “so different and so obviously useful” that it could possibly “create a new industry from scratch.”9 The person Markoff quoted most was Larry Smarr, the NCSA’s director. Andreessen and his fellow programmers weren’t even mentioned.
Andreessen was understandably embittered. The same month that the Times piece appeared he graduated and moved to Silicon Valley, where he tried to forget about Mosaic and took a job at a small software company, Enterprise Integration Technologies. He had been in California for a couple of months when he received an e-mail:
Marc. You may not know me, but I’m the founder and former chairman of Silicon Graphics. As you may have read in the press lately, I’m leaving SGI. I plan to form a new company. I would like to discuss the possibility of your joining me. Jim Clark.10
II
Jim Clark was born into a poor family in Plainview, Texas, in 1942. After dropping out of high school he joined the navy, where he discovered that he had a gift for mathematics and electronics. After four years in the service, he went back to high school, then on to the University of New Orleans, where he picked up a master’s in physics, and to the University of Utah, where he did his Ph.D. in computer science. In 1981, when Clark was working at Stanford as an associate professor of electrical engineering, he borrowed $25,000 and created Silicon Graphics. The firm’s personal computer workstations, which could perform many tasks that had previously demanded a mainframe, proved popular with engineers, financial firms, and film producers. (Universal Pictures used them to create Jurassic Park.) Clark got rich, but he didn’t get lazy. He was far too driven for that. As well as being an engineer and an entrepreneur, he was a pilot, a sailor, a biker, a driver of fast cars, and an all-round piece of work. “Along with its brother, impatience, irritability was the sensation Clark felt most keenly,” the journalist Michael Lewis wrote in The New New Thing, his entertaining book about Clark and Silicon Valley that was published in 1999. “He was rarely irritated by machines, but he was often irritated by people, especially when they stood between him and what he was after. His face would redden, and his mouth would twist up into a mouth-of-the-volcano pucker as if it were trying to suppress the inevitable lava.”11
Eventually, even Silicon Graphics annoyed Clark. Ed McCracken, the firm’s chief executive, drove him to distraction. (“Fucking Ed McCracken,” he called him.) In January 1994, Clark resigned as chairman of Silicon Graphics and announced that he was going to create a new firm, where he would be free of McCracken. For a while, it wasn’t clear, least of all to Clark, what the new firm would be. His first thought was to build some sort of online network. Speaking at a conference in 1992, Clark had said that within four or five years “high-speed computer systems” would be able to deliver “audio and movies on demand, virtual reality games, digital forms of daily newspapers, weekly and monthly magazines, libraries, encyclopedias and interactive books.” It was he who got Silicon Graphics involved in Time Warner’s abortive Full Service Network in Orlando, Florida, and despite the problems that project faced he was still fascinated by the idea of an information superhighway.
In early February, while Clark was deciding what to do next, Bill Foss, an associate of his, gave him a copy of the Mosaic browser to play with. Serious businessmen like Clark and Foss still tended to look on the Internet as a curiosity, but when Foss had first used Mosaic he had been mightily impressed. “This is an information superhighway,” he said to himself.12 Clark was equally fascinated by the new gizmo, and he decided to get in touch with Andreessen. Even if nothing else happened, he needed some bright engineers. Andreessen replied to Clark’s e-mail almost immediately, and the pair agreed to meet the next day. They had breakfast at Caffe Verona, a restaurant in Palo Alto, and talked about Clark’s plans. Andreessen was still seething about his experience in Illinois. “I’m finished with all that Mosaic shit,” he told Clark.13
Clark didn’t press matters, but he invited Andreessen to join an informal group of advisers that he had put together. Over the next few weeks, Andreessen and Clark worked on an abortive plan to create an online Nintendo network. Then, one night after dinner, Andreessen said to Clark: “Well, we could always build a Mosaic killer.”14 Clark’s interest perked up. During the previous few weeks, he had been thinking a lot about the Internet. Like many in Silicon Valley, he originally viewed it as a chaotic place, where it was impossible to make money because everything was free. But the startling growth of the World Wide Web prompted Clark to reassess his views. During 1993 traffic on the Web had increased by 341,631 percent. “How could anybody make money on the Internet?” he later recalled. “I didn’t have a specific answer to that yet, but I figured that with the Web-and-Mosaic-enabled Internet already growing exponentially, you couldn’t help but make money. It was just the law of large numbers at work—even a small amount of money per user would yield a big business.”15 After a short discussion, Clark made Andreessen an offer: “If you can hire the entire Mosaic team to do this I’ll invest in it. Screw the business plan and the conventional investors.”16
A few days later, Andreessen sent an e-mail to his former colleagues in Urbana-Champaign saying that he and Clark would be coming to town. When they got there, Clark told the programmers that he could make them rich if they built a commercial browser to replace Mosaic. Seven members of the group that had created Mosaic—including Bina, Mittelhauser, and Totic—agreed to join the new firm. Clark took out his laptop and wrote their employment contracts, which included generous ownership stakes. Then everybody went out and celebrated in a local bar. Clark committed about $3 million to the venture, about a fifth of his net worth. On April 4, 1994, Mosaic Communications was officially incorporated. When it opened for business in Mountain View, a nondescript town south of Palo Alto, there was already a potential competitor on the horizon. After Andreessen left Illinois, the NCSA had licensed the Mosaic code to a new company called Spyglass. Clark wasn’t too worried. He had faith in his engineers.
Throughout the spring and summer, Andreessen and the others, along with some Silicon Graphics veterans recruited by Clark, rebuilt Mosaic from scratch. For legal reasons, they couldn’t use any of the original code. The programmers worked in three teams: one for Unix, one for Macintosh, and one for Microsoft. For the Mosaic team it was like old times, with people working through the night fortified by pizza and soda. Somebody created a big paper lizard, called it Mozilla, and hung it on the wall. The reptile served as the company’s mascot and provided a nickname for the new browser. Andreessen started out in a hands-on role but quickly shifted aside to become the firm’s strategist, cheerleader, and spokesman. One of Clark’s first moves was to hire a press person, Rosanne Siino. “We had this twenty-two-year-old kid who was pretty damn interesting, and I thought, ‘There’s a story right there,’ ” Siino later recalled. “And we had this crew of kids who had come out from Illinois and I thought, ‘There’s a story there too.’ ”17 Andreessen was somewhat shy, but he realized the value of publicity. “If you get more visibility, it would count as advertising,” he said. “And it doesn’t cost anything.” The press coverage of Mosaic Communications provided an early indication of how the media would promote the Internet boom. Most journalists that visited Mountain View were happy to puff the firm despite the fact that it didn’t yet have a product or a business plan, let alone any profits. “He’s Young, He’s Hot, and He’s Here,” one newspaper claimed of Andreessen. In July, Fortune picked Mosaic Communications as one of its “25 Cool Companies.”
III
For the first few months, Mosaic Communications subsisted on Clark’s $3 million. Clark was reluctant to bring in outside investors. “When you ask people for millions of dollars, you have to at least rationalize what the hell you’re doing, and at that point I wasn’t really rational,” he explained. “My only rationale was a cold, gut feeling.”18 By the early summer of 1994, Clark had a better idea of what he was doing, and he also needed money to hire more workers. Fortunately, he could tap into the unique ecosystem that existed in Silicon Valley to support new enterprises. It was an ecosystem that had turned the thirty-mile stretch of land between San Francisco International Airport and San Jose into a major industrial center, the headquarters of firms like Intel, Hewlett-Packard, 3Com, and Clark’s own Silicon Graphics.
Capitalism is, in large part, a process of experimentation and discovery. At any one time, there are thousands, perhaps millions, of business ideas out there that might, or might not, make money. The traditional way for these ideas to be developed is for established firms to invest in them and then try out the resulting products on the public. With Sony’s PlayStation and Pfizer’s Viagra the tryouts proved wildly successful; with Classic Coke and high-definition television the results were disastrous. But some ideas are just too risky or revolutionary for existing corporations to finance, because they threaten to cannibalize the firms’ other products. It wouldn’t make much commercial sense, for example, for General Motors to develop a family sedan that did 500,000 miles before breaking down, because if it did, families wouldn’t need a new car every three years. Products like these—“disruptive technologies” in the phrase of Clayton Christiansen, a professor at Harvard Business School—have to be developed outside the system, and that is where Silicon Valley comes in. In the past forty years or so, an alternative economic system has developed there that is based on starting up companies to challenge existing ways of doing things.
The scientific research institutes attached to and surrounding Stanford University act as the fulcrum for this system, but the fuel that keeps the levers turning is provided by venture capitalists—investment firms that give money to hopeful entrepreneurs in return for stakes in their companies. Arthur Rock, a transplanted New York investment banker, is usually credited with setting up the first Silicon Valley venture capital firm in the 1960s. Rock helped to finance Fairchild Semiconductor and Intel, two firms that helped to create Silicon Valley. By 1974, the region was home to more than 150 venture capitalists, or “VCs,” many of whom were technology entrepreneurs in their own right, such as Eugene Kleiner, a founding partner of Fairchild Semiconductor, and Tom Perkins, a former Hewlett-Packard executive. In 1972, Kleiner and Perkins set up Kleiner Perkins Caulfield & Byers, which went on to become the leading venture capital firm in the country.
By the middle of the 1990s, there were dozens of venture capital firms in Silicon Valley, many of them headquartered on Sand Hill Road in Menlo Park. Buttoned-down MBAs had largely replaced the old-style entrepreneur VCs, but the legal structure of the indus-try remained the same as it had been in the 1970s. Most of the firms were partnerships, with the general partners—the VCs—charging the limited partners—the investors—an annual management fee of 2 or 3 percent, as well as taking 25 or 30 percent of the profits. The investors included wealthy individuals, pension funds, and other institutional investors, such as the Harvard and Stanford endowments. Some venture capital funds were as large as $250 million, and the management fees on this money ensured generous salaries for the VCs even before they made any investments. Despite the punitive fees involved, investing in venture capital funds was often extremely profitable, with average annual returns topping 20 percent. As a result, tens of billions of dollars poured into the industry.
The presence of such a large pool of risk capital was a key reason for Silicon Valley’s growth. In her 1996 book Regional Advantage, Annalee Saxenian, a professor of geography at Berkeley, compared the Silicon Valley VCs to their more conservative brethren in Massachusetts, which is also a world-class center of science and technology. “When I started Convergent I got commitments for $2.5 million in twenty minutes from three people over lunch who saw me write the business plan on the back of a napkin,” a Silicon Valley engineer told Saxenian. “They believed in me. In Boston, you can’t do that. It’s much more formal. People in New England would rather invest in a tennis court than high technology.”19 According to Saxenian, the stultified nature of the Massachusetts venture capital community hastened the demise of the high-technology industry that surrounded Route 128. In Silicon Valley, by contrast, the venture capital firms were the “financial engine” of the entrepreneurial process, providing business start-ups with expert advice and operating experience, as well as hard cash.20
In deciding whether to invest in a project the Silicon Valley VCs tended to look at three things: the size of the potential market, the originality of the idea, and the smartness of the people proposing to carry it out. Mosaic Communications satisfied all of these conditions, but that didn’t mean a deal was automatic. The problem was Clark, who took a much dimmer view of VCs than Saxenian did. To him, they were “velociraptors,” financial predators that bought entrepreneurs’ ideas on the cheap and kept most of the rewards. Clark based this view on his own experience. When he set up Silicon Graphics, he had been forced to give away most of his company to the VCs who financed him—at least that is how he saw it. With Mosaic Communications, he vowed, things would be different. He would eventually allow the VCs to invest in Mosaic Communications—he had little choice—but only on two conditions: that he would retain 25 percent of the company: and that the buyer would have to pay three times as much for its shares as he had paid for his.
These terms caused consternation on Sand Hill Road. The VCs were accustomed to dictating to entrepreneurs, not vice versa. Two firms, New Enterprise Associates and the Mayfield Fund, had refused to give Clark any money when he went to see John Doerr, a partner at Kleiner Perkins. At forty-six, Doerr was already well known in Silicon Valley. Born and raised in St. Louis, he had a master’s degree in electrical engineering from Rice University and an MBA from Harvard. In the 1970s, Doerr worked at Intel. He went on to co-found a chip company that was eventually sold for $125 million. He joined Kleiner Perkins in 1980 and was responsible for investing in a number of spectacularly successful companies, including Lotus, the creator of the spreadsheet, Compaq Computer, the world’s largest PC manufacturer, and Sun Microsystems, which pioneered PC workstations. But in the early 1990s Doerr’s luck changed. He backed GO, a company that lost a lot of money trying to market pen computers, and he became involved in the abortive attempt to build the information superhighway. Doerr was badly in need of another big success when Clark, whom he had known for many years, walked in the door.
In some ways, the two men couldn’t have been more different. Clark is six feet two, with broad shoulders, a sailor’s vocabulary, and a hot temper. Doerr is short, thin, and intense. He wears plastic-framed glasses and speaks in business-school jargon. A profile by John Heileman in The New Yorker described him as “a highly caffeinated Clark Kent.”22 But Clark and Doerr did have some things in common. They were both engineers; they both knew technology could create vastly profitable enterprises from nothing; and they were both impressed by the popularity of Mosaic. (In the summer of 1994, more than a million copies were in use.) Bill Joy, the chief scientist at Sun Microsystems, demonstrated Mosaic to Doerr, saying, “This is so big the only thing to do is dive right in.”21 Doerr took Joy’s advice. Without further ado, he agreed to give Clark $5 million on the terms he demanded. Clark would remain the largest shareholder in Mosaic Communications, and Kleiner Perkins would become the second biggest. If the Mosaic replacement proved as successful as Doerr hoped, Kleiner Perkins would do very well; but Clark would do even better.
The irascible engineer had got the deal he wanted, and he had also shifted the balance of power in Silicon Valley. From now on, the VCs would have to pay the entrepreneurs what they demanded. A couple of decades earlier, the same thing had happened in the film industry, with power shifting away from the financiers (the studios) and toward the talent (the actors and directors). The consequences in Hollywood were soon apparent—vast sums invested in increasingly dubious ventures. Before long the pattern would be repeated in Silicon Valley.
IV
In the summer of 1994, Time ran the first of its many cover stories on the Internet, describing it as “the nearest thing to a working prototype of the information superhighway,” and adding that it was “growing faster than O. J. Simpson’s legal bills.”23 By the time the story appeared Mosaic Communications was starting to look like a real company. Work on the new Web browser was going well, and more employees were being hired. They weren’t all software writers who slept under their desks. Some were marketers, some were support staff, some even had titles like Executive Vice President. In September, Mosaic Communications did its first deal, with MCI, the long-distance telephone company, agreeing to provide the software for an online shopping mall. Greg Sands, a marketing hire, was asked to come up with a name for the firm’s main product, (“Mozilla” was considered too lighthearted.) After soliciting ideas from the engineers—“info-suck” and “info-nipple” were two of their helpful suggestions—Sands came up with one of his own that stuck: Mosaic Netscape.24
The next task was to decide how much to charge for the new browser. Mike Homer, a former Apple Computer executive who was head of marketing, wanted to charge $99 for each copy. Andreessen disagreed vehemently. He knew that people expected things to be free on the Internet, but that wasn’t his only consideration. He had been studying the history of Microsoft, the most profitable firm in the computer industry, which had always priced its software cheaply to build market share. Andreessen believed that for Mosaic Netscape to take over the Web browser market from rivals like Spyglass it would have to give its browser away for nothing, or close to nothing, and make money elsewhere. “It’s basically a Microsoft lesson, right?” he explained. “If you get ubiquity you have a lot of options, a lot of ways to benefit from that. You can get paid by the product that you are ubiquitous on, but you can also get paid on products that benefit as a result. One of the fundamental lessons is that market share now equals revenue later, and if you don’t have market share now, you are not going to have revenue later.”25 In the end, Andreessen and Homer settled on a compromise. Netscape would be “free but not free.” Students and educators would be allowed to download the browser for nothing. Everybody else would get a ninety-day free trial, after which they would supposedly pay $39. Mosaic Communications would also try to make money from the specialized software, known as server software, that it sold to people who wanted to set up their own Web sites. It was a new version of an old business strategy made famous by Gillette: give away the razors but charge for the blades.
On October 13, 1994, Mosaic Communications posted the beta version of Mosaic Netscape on its Web site. The unveiling turned into a repeat of what had taken place twenty-one months earlier in Illinois. The first person to download Mosaic Netscape was in Japan. Within the hours, thousands of computer users all around the world were trying to download it. After that, the demand never slackened. Mosaic Netscape looked similar to its elder sibling, but it was faster, fancier, and less prone to crashing. It also supported more complicated page layouts, and it allowed users to exchange encrypted messages, such as credit card numbers, which was crucial for the future development of online commerce. The media reviews were generally positive. “It blew us all away,” Business Week quoted a user as saying.26 The same article argued that software like Mosaic Netscape could “make the Internet a mass medium for home shopping, banking, and a host of other services.” The only hiccup came when the University of Illinois threatened to sue, claiming it deserved a licensing fee for each copy of Mosaic Netscape. Clark and Andreessen insisted that the code was completely new, but after a couple of months of legal wrangling, they agreed to pay $1 million to the university and to change the name of their company to Netscape Communications Corporation in order to settle the dispute.
In December 1994, Netscape released the alpha version of Netscape Navigator 1.0. During the following three months, more than 3 million copies were distributed, making it one of the most popular pieces of software ever launched. Most of these browsers were given away free, but some were sold. Companies inundated Netscape with requests to license the new Web browser and the server software that accompanied it. By March 1995, Netscape had governed revenues of about $7 million. Meanwhile, the extraordinary growth of the Web continued. According to a Business Week survey published in early 1995, there were now more than 27,000 Web sites, and the number was doubling every two months. At that rate of growth, by the end of the year there would be more than a million Web sites. Even the old media companies, which had been fixated on the information superhighway, were forced to sit up and take notice. In February 1995, a group of them that included Hearst, Times Mirror, and TCI bought an 11 percent stake in Netscape Communications for $17 million, valuing the entire company at more than $150 million.
A month later, with demand for the Netscape Navigator still increasing, Clark gave an interview to The New York Times in which he said: “I’m astonished. I’ve never seen anything like this in my life.”27 Clark’s surprise was probably genuine, but he had good reason to play up the Netscape phenomenon. Although his company was less than a year old, he was already thinking about floating it on the stock market.