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Altos was competing with Kleiner Perkins for a hotly contested deal, and John Doerr was the hardest investor in the world to compete against. Han, Altos's co-founder, was in the room with the founder when Doerr locked the door and brought in some food. Nobody was leaving the office until a deal got done, and it felt like being held hostage. By the end of the evening, the term sheet was signed.
The company had everything going for it. Frank Quattrone put in his own money, maybe $5 million, and a roster of famous names backed it. It did not make it out. In the dot-com crash, even the better companies that did go public lost Altos money before their lockups ended.
Why did Kleiner Perkins win so many deals?
Eugene Kleiner and Tom Perkins founded the firm in 1972, and its early investments included Genentech and Tandem Computers. John Doerr joined in 1980 and later backed Amazon and Google. A record of picking and building famous companies gave Kleiner an edge, since founders wanted the firm's name on their cap table. Winning against Kleiner meant offering something its reputation could not.
How did the dot-com crash hit new public companies?
After an IPO, insiders and early investors are normally barred from selling for a lockup period, which typically lasts 180 days. If the stock falls during that window, investors cannot sell until it ends. The Nasdaq Composite fell about 78 percent from its March 2000 peak to its October 2002 low. Many companies that went public at the height of the boom lost most of their value before their lockups ended.
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