No Better Time

by Molly Knight Raskin

  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}