"The startup, of course, was Hotmail, a company that has become a legend among Silicon Valley entrepreneurs for its fast-forward approach to attracting customers and creating value. By Christmas 1997 (less than 18 months after its launch), Hotmail had signed up 12 million subscribers. A few days later, on December 29, founders Sabeer Bhatia and Jack Smith sold the company to Microsoft for $400 million in Microsoft stock. Today, with 50 million registered users, Hotmail is the largest Web-based email service on the planet."

"Not surprisingly, the investment in Hotmail touched off an inferno at DFJ, which has done 57 Internet deals -- more than any other independent VC outfit. "We want to invest in companies where we can light a match and start a fire," says Jurvetson. And apparently word did spread like wildfire. When DFJ recently set out to raise a new pool of money, investors offered to provide three times as much as it was looking for. It decided to limit the size of the new fund to $180 million. (Its third fund, a $50 million pool established in 1995, is now reportedly worth $760 million.)"

"n Web circles, the Hotmail story is almost as well-known as the service itself. But, like so many Internet takeoffs, Hotmail almost didn't get off the ground. Founders Bhatia and Smith had been turned down by something like 21 VC companies before they met Steve Jurvetson. Even he wasn't all that impressed by the startup team's big idea for a company called JavaSoft. But one feature of their plan -- free Web-based email -- did catch his eye. The talks Heated up, and JavaSoft became Hotmail."

"Then came a meeting with Tim Draper, 41, DFJ's founding partner. It was the first time that Draper had met with Bhatia and Smith. Draper was enthusiastic about the company, but he was adamant about one small detail: He wanted to put a hot link at the bottom of every email with a message, "P.S. I love you. Get your free Web-based email at Hotmail." Clicking on the link would bring the message recipient to Hotmail's site, and let that person sign up for the service immediately. That idea almost blew the deal apart. "The founders thought that it was like Spam," recalls Jurvetson. "And it's true: Until Hotmail tried it, the contents of email were always considered completely private."