IN JUNE 1999, after six months in business, Akamai had no profitability and a deficit of $10.8 million. It did have revenues of around $400,000, but 89 percent of it came from just two customers, Apple and Yahoo (75 percent from Apple, and 14 percent from Yahoo).{54} But at the time, no one really cared—the markets were in the grips of irrational exuberance. “The valuations have never been this outlandish, the participation quite this democratic, or the market quite so resistant to what always used to work,” wrote financial reporter Pete Barlas for Investor’s Business Daily.{55} In 1998, Internet IPOs raised $1.3 billion. By the end of 1999, that number had risen to a record $16.9 billion from 214 Internet companies, more or less at the rate of one IPO a day.{56}

By the summer of 1999, despite the fact that Akamai had only been in existence for less than a year, market watchers were busy predicting the timing of its IPO. Rumors abounded that the company had filed a registration statement with the Securities and Exchange Commission (SEC). The message boards of The Motley Fool featured lengthy discussion threads under the heading: “Akamai IPO?”

Even a year earlier, no one would have been talking about taking a tiny, largely unproven Internet infrastructure company like Akamai public so soon after its inception. Against the backdrop of a market that was experiencing frequent gains of more than 100 percent from IPO investing, however, the time frame from when a company got its first venture-capital financing to when it launched an IPO dramatically decreased.{57} Bankers were racing to sell deals as soon as they could pull them together, and the pace would continue as long as the market allowed. The shrinking timetable made some investors, and some of the executives at Akamai, slightly anxious. To push toward an IPO with no profits seemed almost reckless, but Akamai had a story to sell; a compelling one. “It’s true that the company had very little revenue,” said Todd Dagres of Battery. “But they convinced Wall Street that they were a unique company, a leader in a new category, and that they had the potential for huge growth. It was a sexy story.”

That summer, the big banks started to court Akamai. In a series of back-to-back, hour-long meetings commonly referred to in the industry as the “bake off” or “beauty contest,” Akamai met with teams from twenty investment banks, each vying to lead the IPO. One in particular stood out, largely because of its leader. Chris Pasko, a thirty-four-year-old Harvard MBA, had moved to Boston in 1996 to open a new office for Morgan Stanley Dean Witter (now just Morgan Stanley) to target the region’s tech boom. Pasko said he didn’t love the technology per se, but he loved entrepreneurs. Likening his job to a pro football coach scouting college players for the NFL, Pasko said he met with several hundred up-and-comers every year—one after another promising big ideas and big gains. Of them, he had an eye for the best; he’d worked at Morgan Stanley early in the decade and saw the potential in companies like AOL when it had just 100,000 subscribers. Pasko had been flirting with Akamai since the start of the year, when he first met with Lewin and Leighton. After that, he spent as much time as possible with the two of them in an effort to understand how Akamai worked. “It was the most complex technology I had ever seen,” said Pasko. Of all the companies he scouted that year, Pasko and his team would take approximately five public, and they were determined to make Akamai one of them. The Akamai “bake off” took place over two days in July. By the time Pasko and his team made their pitch, Akamai’s executives had sat through about twenty hours of pitches from twenty prominent banks including Goldman Sachs and Credit Suisse. Pasko knew he needed to do something to stand out. “No matter how good you are, there’s always the chance that you’ll get lost in the shuffle,” Pasko said. The day of the meeting, he made a snap choice that could have backfired in a room full of techies and businessmen; Pasko went out and bought Hawaiian shirts for his team members, instructing all eight of them to wear them instead of suits. Pasko said he knew the shirts were a hit the minute he walked into the conference room and saw everyone grinning. “They were a loud, larger-than-life group, and they loved the shirts,” Pasko said. They also loved the presentation, which reflected a profound understanding not only of Akamai’s technology, but also of its market potential. It was a winning combination of quirkiness and intelligence; Akamai chose Pasko and his team at Morgan Stanley Dean Witter to lead the IPO, which was co-managed by Donaldson, Lufkin & Jenrette (now defunct), Solomon Smith Barney (now part of Morgan Stanley), and Thomas Weisel Partners LLC.

The next step in the IPO process is one of the most tedious—the drafting of the prospectus, a document mandated by the SEC that contains all the facts necessary for prospective investors. The drafting took days, a job Pasko said is usually left to the bankers and company financial officers. Much to Pasko’s surprise, Lewin and Leighton wanted to be a part of the process, even though they’d never read a prospectus and had no idea how to write one. “Danny obsessed over that document,” said Pasko. “He read dozens of prospectuses and became an expert; I’ve never seen a company founder get so involved.”

With the prospectus complete, Pasko’s team took Akamai on what’s called the “road show,” two weeks of traveling around the country and abroad to pitch the company’s stock to financial institutions before its public offering. Again, Lewin took Pasko by surprise by insisting that he join the road show. “You don’t typically see a scientist without an MBA or business experience out on the road show, but Danny was out there with us, giving the pitch,” Pasko said. “It was unique, and incredibly powerful.”

Like most road shows, Akamai’s tour was grueling—involving full days of meetings in more than a dozen cities. But it was also a smashing success. After meeting with more than 200 financial institutions, Akamai had an order book, or a record of investors’ demands for available shares, that was at least thirty times oversubscribed. In addition, every one of the sixty accounts the group met with in person put in an order for shares, making what’s called the “one-on-one hit rate” 100 percent, which is exceptional. “It happens, but even then it was exceedingly rare,” said Pasko.

In the weeks leading up to the IPO, Pasko and his team worked with Lewin, Leighton, and the rest of Akamai’s executives to price the stock for an initial offering of ten million shares. Pricing an IPO is as much art as it is science. The basic elements are supply and demand. And in normal times, when the markets are steady, banks usually factor in a discount to protect the company of about ten to twelve percent. But these were not normal times, and even to sharp bankers like Pasko, none of the regular rules made sense. His goal, shared by Akamai, was to have the stock trade upwards, sending the message that it was hot. Pasko led Akamai through what he still considers the script for a successful IPO process, always careful to remind everyone involved that the script didn’t guarantee a high-flying IPO. “Very few companies that did this back then made it long-term,” Pasko said. “They all got big pops in price, but they didn’t have viable business plans, and in the long haul, many of them died.”

During the discussions over pricing, Leighton and Lewin asked countless questions. As mathematicians, they were frustrated by what they perceived as a lack of logic. If all the large banks were in for ten percent, couldn’t they use basic math to price the stock? Pasko reminded them of the risk of flipping: if everyone flips their shares, he told them, then the stock can tumble as much as eighty percent. (In 2012, this fate befell Facebook, which suffered a catastrophic IPO when Morgan Stanley priced its shares too high and sold too many.) “There’s really no math in it,” stated Pasko.

On the eve of the IPO, the Akamai team traveled to New York to set the final price of the stock, which had the Street buzzing with anticipation. That week, Forbes magazine speculated that Akamai would make history, calling it “poised to become one of this year’s [1999] most explosive startups.” By 5:00 p.m. the night before the IPO, they finished, settling on an opening price of $26 a share. In keeping with tradition, Pasko extended an invitation to everyone from Akamai to stay overnight and stand on the trading floor to ring the opening bell on the exchange and watch the first orders for Akamai’s stock trade. Pasko was surprised when they declined, instead deciding to return to Cambridge and “get back to work.” So Pasko traveled with them and helped arrange for a live satellite hookup in Akamai’s conference room where they could watch the trades. It was the first time in Pasko’s career that a company had opted not to be at Morgan Stanley or the NASDAQ to celebrate the first trade of their shares.

On the morning of Friday, October 29, 1999, more than one hundred employees gathered in Akamai’s conference room to watch company history unfold. Anne Lewin and Bonnie Berger joined the crowd. At Lewin’s urging, Pasko stood on a chair to talk everyone through the process as it happened. This was also a first for Pasko, who couldn’t help but think that, at a time when most people would be focused on just how much they would soon be worth, Lewin mainly wanted to know exactly how the IPO worked. “I kept thinking, ‘You’re going to be really rich in about ten minutes,’ but Danny saw it as another teaching moment,” said Pasko.

Around 12:00 p.m., Akamai’s stock (NASDAQ: AKAM) opened at $26 a share. The first trade was over $100 a share. From there, it continued to explode. Over $1 million shares were traded that day.

Cheers erupted, and glasses of champagne clinked. Lewin leapt around with excitement, while Leighton sat completely stunned, jaw agape as he watched the price continue to rise. “He was utterly shocked,” said Berger.

On its first day of trading, Akamai’s shares closed at $145.1875, up $119.1875, or 458 percent. That valued the company at $13.12 billion, based on the 90.4 million shares outstanding. It was the fourth-biggest percentage gain ever for an IPO.

The aftershocks of the astronomical IPO were felt far and wide. At the grillroom of the Four Season’s Hotel in New York, angel investors Art Bilger, Jan Wenner, and Peter Morton had lunch to celebrate the IPO. When they got word of the first few trades, Wenner was so thrilled that he let out a yelp.

In Jerusalem, Lewin’s family watched the stock trade online. They gave thanks to Danny, who had generously given them all family shares that would make them wealthy, too.

In California, Eric Lehman, Lewin’s friend and classmate at MIT, saw the news of Akamai’s IPO and remembered an official “friends of the company” letter he’d received months earlier from Lewin granting him some shares. He hadn’t thought much of it and stuffed it in a dresser drawer. That day, he dug it up and quickly ran the math. His shares were worth over $1 million.

Akamai’s public offering didn’t just make history for its astronomical gains; it also created one of the most eclectic groups of overnight millionaires ever known up to that point.{58} A professor of theoretical computer science and MIT students, both full-time and part-time at Akamai, were suddenly worth more on paper than executives of blue chip companies. MIT itself reaped the rewards. Having agreed to license the technology Leighton and Lewin created at the university in exchange for 494,000 shares of Akamai, MIT held a stake worth over $90 million.{59}

The biggest beneficiaries of it all, of course, were the co-founders: Professor Leighton and his former student, Danny Lewin. On paper, Leighton, 42, and Lewin, 29, were each worth more than $1.8 billion.{60}

Marco Greenberg, who traveled to Cambridge for the day, easily recalled the euphoria of that moment—for him, Lewin, and everyone at Akamai. “Danny knew they had fired one shot and it hit the mark—boom, like a rifle,” he said. “It was a magical time. We were right there at the heart of the Internet revolution.” And they were rich—crazy rich.

Lewin didn’t spend much time reveling in it. Almost as soon as the crowd filtered out of the conference room, he was busy telling people to get back to work. Greenberg remembered stopping in Lewin’s office before returning to New York. Lewin was already back at his desk but paused to share one of the congratulatory e-mails he’d just received. It was from Randall Kaplan, who applauded Lewin and noted that he had worked hard. Greenberg said Lewin, still angry with Kaplan for cashing out of Akamai so early, couldn’t resist sending back the following: “You’re right. I worked hard.”

Then, in true fashion, he attended to business. A few days later, though, Lewin expressed a hint of regret for not taking more time to revel in the IPO. In an e-mail to Greenberg, Lewin wrote, “What a day Friday was … Thanks for coming to Akamai, and I’m sorry that I didn’t have more time.”

In the two months after the IPO, Akamai’s fortunes just kept on rising. By Thanksgiving, the stock had climbed to $201 a share. Akamai doubled its customer base for FreeFlow to two hundred companies, including Bloomberg.com, CNET, Jobs.com, and Williams-Sonoma.com.{61} Greenberg was being inundated with press requests for interviews with Lewin, who declined in the IPO’s aftermath. An article in the December 3, 1999, edition of the Israeli newspaper Haaretz called Lewin “one of the richest Israelis in the world.” The paper also printed a comment issued by Lewin for the country’s media outlets, stating, “I wouldn’t hesitate to describe myself as a proud Israeli, who is on an extended shlichut (mission) abroad. So while I am convinced I will return to Israel one day, currently I am devoting my time and energy to building Akamai Technologies into a global high-tech power that we hope will have a big impact on the Internet.”

Lewin also hinted at a future for Akamai in Israel, noting: “I would not be surprised if one day the company considers opening an R&D facility in Israel to take advantage of the country’s brainpower.”{62}

At the end of the year, making good on his bet with Galleher over the sales challenge, Sagan stood up in front of the company’s management team at a meeting held at the Residence Inn in Cambridge and danced in a hula outfit (grass skirt, coconut top), which he changed in and out of in the men’s room. Akamai closed out 1999 with a New Year’s Day stock price of $327. It made no sense, even to Pasko. It was wealth beyond anyone’s wildest imagination.

 

With the perspective that comes with the turn of a new year, and in this case, the turn of a century, most people involved with Akamai took what little time they had over the holidays to look back on 1999 and wonder exactly what had happened. In less than one year, a tiny startup out of MIT had grown to a company with a market valuation greater than that of General Motors. What’s more, it looked to most industry experts like Akamai had staying power at a time when the majority of dot-coms were already starting to report losses.

On January 3, 2000, the New York Times ran a column called the “Year in Markets.” “In a year of Internet frenzy, paper millionaires were minted almost daily as companies without profits and often no sales issued stock to the public and watched it soar.” The piece went on to say that the “most likely route to riches seemed to be creating a company that would provide services to other companies exploiting the Web. Akamai Technologies hit it right with a process to speed up delivery of content over the Internet.”{63} And The New York Post, in its characteristically less serious style, published a feature on January 2 listing its annual predictions for the business world in a column called “The Bull’s Eye.” Granted, the piece made such comments as “The market goes up, the market goes down,” and “Once a week, like clockwork, an Internet company nobody has ever heard of buys another Internet company nobody has ever heard of for a sum equal to the GDP of Denmark.” Yet, notably, it also said the following: “Shares of…Akamai Technologies continue to rise, even though nobody has any idea what [it] does.”

Everyone at Akamai lived by the stock ticker, watching their fortunes rise and fall as the markets began to froth. Those who held insider shares were bound by a lockup (no-sell) period of six months, or 180 days, during which they were prohibited from selling their shares by the SEC. Lockups are standard procedure on Wall Street, carried out to protect investors from the instability that mass selling can create. Until the lockup expired, the riches of Akamai’s employees were held captive.

Akamai had fought its way to the top of content delivery—once a niche industry—and had been crowned “kings of caching” by the media and the market watchers. Its blockbuster IPO was widely viewed as a positive predictor of Akamai’s long-term viability. But to anyone familiar with the dark side of dot-com wealth, there was also the risk that a rise as spectacular as Akamai’s could also be too much of a good thing. “I don’t think anyone really wanted to hear this, but I actually raised the idea at the time that it could actually cause tremendous problems,” recalled early Akamai investor and board member Art Bilger. “I remember saying that day stocks, at least in the world I come from, don’t trade like this. And the worst thing that could happen was for people inside the company to think that it was real. I don’t mean the company being real, I mean the stock.” Bilger had good reason to voice caution. Having seen his fair share of over-valued, over-hyped companies crash and burn, Bilger also advised Akamai’s decision-makers to “make sure no one goes out and buys homes and things far beyond what they afford, because that would be terrible.”

Fortunately, the corrosive culture of greed never got a widespread grip on Akamai. There were some takers—a few employees who came in, negotiated large packages, and skipped out as soon as they could cash out. But the majority of Akamai’s employees at the time of the IPO seemed keenly aware of the ephemeral nature of sudden, admittedly absurd, wealth. In part, it was the staid culture of Cambridge and MIT that kept Akamai’s overnight millionaires and billionaires from embarking on ostentatious spending sprees, building ten-bedroom mansions, or sporting inflated egos. Unlike the Silicon Valley startups founded out of someone’s garage, Akamai had its roots at LCS, where IQ carried a lot more weight than net worth. To be sure, there was some evidence of instant fortunes—nicer cars in the parking lot, bigger homes, or vacations to tropical islands. But the majority of Akamai’s employees downplayed the riches and focused on work.

On the day of the IPO, Will Koffel joined the ranks of Akamai-made student millionaires; his stake as an engineer of 100,000 shares was worth approximately $15 million on paper. But Koffel notes that he saw the money disappear almost as fast as it came to him. “At the peak, I was worth about $35 million,” Koffel said. “But then when the stock went down, I remember standing on my futon and making my first trades with my broker. Then the government took over a million, plus my broker fees. In the end, I can tell you I don’t live that differently than most of my peers. I just have a nice retirement account.”

After the IPO, Koffel bought himself a new car and joined a group of racing hobbyists at Akamai, built largely around the collection of fast, new cars people were buying. Koffel’s was a BMW, and one of his first big purchases after the lockup period. The car was just four days old—still pristine—when he pulled out of the parking garage ramp at Akamai and heard someone shouting at him. Koffel looked to the side of the ramp and saw Lewin, who leapt onto the windshield and yelled: “Koffel, is this your car? No way is this your car, you’re a kid!”

Koffel remembered, “I was terrified. Not for myself, but for the car!”

For Lewin, of course, the money meant relief from what had been a struggle for him and Anne to foot the bills for their family of four. They bought a larger home in Brookline, Massachusetts. Lewin bought a couple of motorcycles, which he rode with other motorcycle enthusiasts at Akamai, including George Conrades and executive assistant Laura Malo. During these rides, Conrades—who had long collected and ridden motorcycles—came to admire Lewin even more although he was less than half of Conrades’s age. “It was fun to be around someone with that kind of intensity,” Conrades said. “We’d take our bikes and go call on customers sometimes—once we rode all the way to Bell Canada. Danny loved the thrill of riding, being outdoors, and being in control of something so fast.” Beyond this and his family’s newfound financial security, however, Lewin showed little interest in the material gain. He made plans to reenroll at MIT to finish his PhD, a lifelong dream he never abandoned. He continued to dress in his uniform of blue jeans and buttoned-down shirts from the Gap, and carry his papers around in a backpack.

Leighton, for his part, mostly carried on as if little had changed. He remained in the same house that he, Berger, and their two kids had lived in for years, making plans to eventually remodel when work slowed down. “Danny and Tom were never, ever about the money,” Berger still insists. “I mean, Danny didn’t want to be poor and living in graduate school housing his whole life, but they didn’t set out to make that kind of money, and they cared about the company. They wanted to see the technology work.” Berger said she noticed only one discernible change in Leighton when he became a paper billionaire. “He used to keep this really organized, line-item list of every one of our expenses,” explained Berger. “After the IPO, he stopped doing that.”

Leighton, Lewin, and many others at Akamai looked at their paper fortunes from the perspective of sound mathematics, a discipline in which reason prevails. Everyone also knew the nature of bubbles. Eventually, they burst. And when this one did, no one wanted to be the one standing in a half-finished mansion.

“The story of our lives at Akamai is that we never had much time to stop and think,” said Leighton. “Even after the IPO, we got together for an hour or so and then said, ‘Let’s get back to work.’” And they did. On the night of the IPO, Leighton remembered staying up until well after midnight e-mailing all of the company’s customers to reassure them that the wild IPO did not mean that anyone at Akamai would become lazy for one second. Lewin himself barely paused that day, barking at his colleagues that, despite the events of the day, they were still “behind!”

In the wake of the IPO, Akamai faced a daunting challenge: living up to it. The company was confronted with newer, grander expectations from analysts and brand new investors. It had to grow, and it had to do so rapidly. Before the end of January, Akamai had launched its European Operations with headquarters in Munich, Germany, and offices in London and Paris. To run it, the company hired the former general manager of BBN Europe, Wolfgang Staehle, as president of Akamai Europe. Staehle had more than two decades of experience in high-tech sales and management, leading not only BBN, but also IBM Deutschland gmbH. Akamai also opened an office in San Mateo, California, partly to be in close proximity to some of its biggest accounts, such as Apple and Yahoo, but also to tap into the talent of Silicon Valley.

Akamai also looked to become a leader in streaming media. Many streaming media companies were plagued by the same content delivery issues that brought Akamai into being: hot spots and lack of bandwidth. With its distributed architecture, Akamai was well positioned to take the lead. Its first major move in that direction was the acquisition of InterVu, Inc., a San Diego-based Internet audio and video service provider, on February 7, 2000 in a $2.8 billion stock swap. The deal turned Akamai into an instant streaming media giant with over one thousand of the Web’s most popular sites, including major television networks and Hollywood Studios.{64} Analysts immediately praised Akamai’s purchase of InterVu. Appearing on CNNFN, analyst Mark Langer of JP Morgan said, “I think it’s important at this stage in its development for Akamai to continue to grow itself by acquiring potential competitors, companies in adjacent spaces. And that’s exactly what InterVu provides them.”{65} Weeks after the InterVu purchase, Akamai entered into an alliance with RealNetworks to deliver broadband Internet broadcast service worldwide.

Akamai wasn’t done improving its foothold in streaming media, though, and it kept looking to the West Coast. InterVu wasn’t based in San Diego by chance. The streaming media business was seeing the most action in California, where companies like Napster, which allowed users to download shared music, were cropping up everywhere. One of the hottest California-based startups was Farmclub.com, the brainchild of Jimmy Iovine, co-chairman of Interscope Geffen A&M, and Doug Morris, chairman and chief executive officer of Universal Music Group. Farmclub was a Web site designed to integrate television, the Web, and record labels. Farmclub encouraged unsigned musicians to upload their songs for free to its site, where they could be downloaded and audio-streamed for free. In turn, those musicians were given the possibility of fame and stardom.

To win over Farmclub, Akamai would have to again bridge the gap between Internet science and the high-wattage world of entertainment. Media mogul and Akamai board member Gil Friesen made an introduction, inviting Lewin and a few others from Akamai out to California to meet with some of Farmclub’s team in the summer of 2000. Friesen recalled thinking just how much Lewin stuck out in Hollywood. Having invited Lewin to lunch at some Los Angeles hot spot, Friesen saw Lewin bounding in, dressed in his jeans and tennis shoes. In a gesture of thanks for Friesen’s efforts to connect Akamai with Farmclub, Lewin dropped to the ground and pretended to bow at his feet. “No one in Hollywood does that,” Friesen said.

The architect of Farmclub was Glenn Kaino, executive vice president and head of programming. Kaino was a prodigy, hired at age twenty-five by Iovine for his rare blend of sharp technological skills and artistic talent. An accomplished visual artist, Kaino also knew computer science, having studied it in college. Kaino likened his first meeting with Lewin to an arranged marriage. “It was totally forced,” said Kaino, who quickly took a liking to Lewin, despite himself. “He was stiff and earnest, but had enough natural charm and charisma. I remember thinking that he was a square, super-nice guy.” Kaino planned another meeting for Lewin, this one with Iovine.

In walked Lewin—jeans, t-shirt, a spring in his step—to a room full of California cool on the lot of Universal Studios. “Everyone in the room was like, ‘No way is this possible,’” said Kaino. “But I remember from that moment Danny got up there and started talking that it made perfect sense; he had a direct problem, and he was approaching it in an indirect way. It was like he was walking through walls.” It made sense to Kaino, but he wasn’t sure about the rest of the group. Jimmy Iovine was quiet, and halfway through the meeting, Kaino noted that Lewin started directing his pitch straight to Iovine. “If Danny was insecure, he never let anyone feel it,” Kaino remarked. “He never broke a sweat, and he just let loose on everyone in the room. Jimmy had no idea what the fuck he was talking about.”

But Iovine didn’t care. He saw something in Lewin, and he was won over. “I’m a music guy, your voice is great,” Iovine said. “I don’t care what you’re selling, I’m buying it.” Recalling that moment, Kaino said: “Jimmy was referring to the confidence, the articulation and the passion in Danny’s voice… It was amazing to watch.” A deal was soon put on the table, and, in September 2000, Akamai (along with a digital media company called Loudeye) signed on to provide streaming media services to Farmclub.com. To celebrate, Iovine invited Lewin to his house in Hollywood Hills, where Lewin rubbed shoulders with stars including the director James Cameron and rappers Dr. Dre and Eminem. “In some ways Danny was the perfect person to break into this industry—he was speaking a different language, but he believed in it,” said Freisen. And Akamai was flourishing as a result. That spring in 2000, Akamai had expanded to over 2,750 servers in more than 150 networks in 45 countries.

 

No amount of growth, however, could combat the reality of the markets on the brink of the dot-com bust. On March 10, 2000, the NASDAQ closed at 5046.86 points—double the close of exactly one year earlier. The next day, though, the freefall began. Technology shares began to plunge and, with them, went scores of the Internet companies with no earnings to their trendy names. Akamai felt the tug. Within just two days, as the technology-dominated NASDAQ fell 466 points, shares of Akamai took a hit. The media immediately seized on the drop with a report on what it all meant for CEO George Conrades. CNBC anchor Ron Insana opened his broadcast with the question “Who’s losing money on Wall Street?” The answer? “George Conrades,” Insana said. “His company’s stock was among the hard hit in the NASDAQ, falling 29.5 points. That brings his one-day loss on paper to almost one hundred and ninety-five million.”{66}

By the start of April 2000, investors began pulling money from technology stocks and moving it into old-fashioned blue-chip companies. The slide continued into April. On April 11, CNBC reported that Akamai “took it on the chin” with shares falling 19 percent to close at $107.{67}

At the end of the month, on April 26, the lockup period for Akamai’s insiders expired, making 82 million shares eligible for sale. With the market fluctuating wildly and speculation that it was heading south, every one of the primary shareholders knew it could well be their moment to cash out. If they didn’t, they could lose millions, even billions. But redeeming a bunch of shares would also flood the market with shares of Akamai, sending the wrong message to Wall Street. If the floodgates opened, the market could see an oversupply of shares, signaling distress at Akamai. With the demise of the bull market, such scenarios were becoming more common.

The trade publication IPO reporter took note of this pivotal time, running a story that highlighted the end of Akamai’s lockup: “Venture capital firms are often among the first to sell their shares when the lockup expires. That could spell trouble for stocks like Akamai, which trades at an astounding 2,700 times 1999 revenues—and that’s after plunging nearly 50% in recent weeks. Akamai’s lockup ends on April 25, when a potential 82.4 million shares could enter the market—and three VC’s hold 21 million of those shares. Based on Akamai’s average daily trading volume, it would take the market 116 days to absorb unlocked Akamai shares, according to IPOLockup.com.”{68}

Leighton and Lewin met, making what was considered a risky, unusual move—they agreed to another lockup of six months to keep insiders from dumping shares on the market. To do so, they had to ask the others who had founders stock—top management and venture capitalists—to agree to do the same, waiting to sell until at least July, when the company would report second quarter earnings. By then, they knew their net worths could be wiped out, but as Leighton said, they weren’t in it for the money. If they had been, neither of them would have ever agreed to such a drastic measure. “At the end of the day, we both lost fortunes because of the decision we made,” Leighton concluded.

Many others did, too. One by one, Leighton and Lewin called the company’s investors and asked them if they would agree to another lockup in a show of solidarity. All but one investor agreed. “It was remarkable,” Leighton said. “But it was also that culture that helped us to survive. Whether times were good, or terrible, the focus was on getting the technology out there and making a difference.”

For some, it wasn’t an easy decision. Greenberg will never forget the day Lewin called him with the request. “You’ve got to do me a favor—will you sign another lockup agreement?” Lewin asked. At the time, Greenberg had approximately 180,000 shares. Moreover, unlike some of Akamai’s other investors, he wasn’t flush with cash. Business at NYPR was good, but by no means a sure thing. He was also expecting his second child with his wife, Stacey Nelkin. Greenberg’s wealth was on paper. By signing on to another lockup, he risked loosing it all. Not sure what to make of it, Greenberg called his accountant, who told him: “You can’t do it—you’ve got a get out of jail free pass and you should use it.” But Greenberg knew he was just going through the motions. He knew he couldn’t say no to Lewin. “I wouldn’t be able to live with myself if I did,” he related. “That was truly the priceless nature of my friendship with Danny.” Greenberg called Lewin back, agreeing to another six-month lockup. With one call, Greenberg estimated that he lost approximately $25 million.

The remainder of the year was marked by ups and downs of Akamai’s stock, which recovered in June but only for a moment. Sagan made the media rounds, confidently assuring analysts and jittery investors that the company remained in good health. On July 24, Sagan appeared on CNN.

Paul Sagan: “It was an ugly day for the tech sector today. We were thrilled with our results. We beat the expectations. Our revenue went to $18 million.”

Bruce Francis, Anchor: “Paul, still the stock has been under pressure over the past few months. You’re now trading at what would be less than a third of your all-time high. What does the market not understand about this message?”

Sagan: “I don’t think the market is confused. . . . We had a, you know, really remarkable run-up in the stock, then everybody took a very sizable hair cut. Again, we don’t try to predict the markets or really explain them. We’re building a large company for the long haul.”{69}

 

Success in a speculative bubble is a funny thing. It was thrilling and intoxicating in ways the country hadn’t seen since the 1980s, or, some might argue, ever. But almost as soon as the bulk of that wealth was accumulated, speculation began as to when it would all end.

By the close of July, shares of Akamai fell twenty-one percent on concerns over an increase in marketing spending. Investors became concerned because the company, which by then had a global network of four thousand servers, said, during a conference call with analysts, that it planned to increase spending on marketing and hiring. Nitsan Hargil, an analyst at Kaufman Brothers, replied, “People are afraid that Akamai is about to turn into another one of these Internet companies that spends its way into oblivion.”{70}

 

Few customers joined, but the markets were tanking too fast to respond. At the start of September, CNNFN’s Digital Jam featured guest Andrew Barret, an analyst from Salomon Smith Barney, to talk about the “high anxiety” in the tech sector. A caller phoned in a few minutes into the show with a question, to which Barret responded.

Caller: “Hi. Thank you for taking my call. My question is Akamai. What do you see in three to six months?”

Barrett: “Well, the Akamai situation in terms of the streaming side of the equation is really, really positive. Unfortunately, nobody wants to own: a) a web based stock, and b) a name they can’t pronounce half the time. So this is really been one that’s taken a beating.”{71}

To steer the media away from their stock price, Akamai’s executives issued positive news releases. One of Greenberg’s last stories for Akamai, before leaving the company to focus on his own business, was about Akamai’s creation of Akamai Foundation, a math foundation tailored for kids and aimed at making math more interesting and fun with a “Magic of Math” program. The story noted that employees donated amounts ranging from several hundred to more than a million dollars of their own money. Leighton served as the foundation’s director.

Akamai also began preparing for the launch of EdgeSuite, its new flagship product that would enable Web sites to deliver entire pages to customers across Akamai’s network of servers.{72} EdgeSuite improved on the FreeFlow service, which mostly facilitated the delivery of large, static objects such as photos, ad banners and video. With Edgesuite, customers would have guaranteed delivery of constantly changing data such as weather and stock quotes as well as blocks of news stories. EdgeSuite was scheduled for launch in December 2000, and was already in use with beta customers including Apple, Coca-Cola, Novartis, Ticketmaster, and Victoria’s Secret. As soon as news of EdgeSuite got out, market watchers started speculating as to whether it could revitalize Akamai’s stock market presence. Conrades told reporters the company expected the service to generate $30 million in revenue in 2001, with customers paying $40,000 a month for EdgeSuite versus $8,000 a month for the FreeFlow service.

Unfortunately, no amount of fighting could prevent the continuing stream of bad news. To close out the year 2000, Internet stocks fell 75 percent after more than doubling in 1999. And, after a record-breaking 160 percent return in 1999, shares of Akamai sank 94 percent to $21.06 in 2000. The company had lost more than 150 dot-com customers, approximately 10 percent of its base, with more losses on the horizon. “We were burning cash like mad,” explained Leighton. “Our stock was clearly headed south, and the markets were tanking.”{73}