On Nov. 13, 1998, Stephan Paternot and partner Todd Krizelman made Wall Street history when shares of their start-up company, theglobe.com, bolted to 97 after it debuted on the Nasdaq. It was the largest one-day advance in stock history. The partners were instant multimillionaires. Two years later, the stock plummeted to $2 a share.

When Paternot and Krizelman resigned in August 2000, theglobe.com was trading at $10 a share. Holding 2 million shares, Paternot’s net worth was $20 million. But not for long. Out of loyalty to his company, he held onto them. When the market buried Internet stocks a year later, he was left with about $300,000.

Perhaps it’s not quite a riches-to-rags story, but it dramatically describes how a fortune was made and lost. The saga of the rapid ascent and fall of theglobe.com is a striking snapshot of a historic period when Internet companies were the darlings of Wall Street only to become every investor’s nightmare two years later.

Paternot captures the frenetic pace of the Internet revolution in his recently published book, A Very Public Offering: A Rebel’s Story of Business Excess, Success, and Reckoning (John Wiley, $19.56). The book is clumsily written and amateurish, but it’s also a fast-paced account of the dot-com era’s halcyon days.

My intent is not to review Paternot’s book but to capture the excitement of a once-in-a-lifetime era and spotlight two of its players. If you entertain fantasies of building the next eBay or Amazon.com, I’d suggest learning from Paternot and Krizelman’s experience.

The rise and fall of theglobe.com
The genesis of theglobe.com began in 1994 at Cornell University, when Paternot and Krizelman, both 20 and in their junior year, conceived the idea of building a Web site that hosted discussion groups and home pages. The foundation of their friendship was a shared passion for technology.

Once Paternot and Krizelman crystallized the concept behind theglobe.com, they moved at Internet speed. Hardly a year after launching their company, they captured a $20-million investment from former Alamo Rent-A-Car CEO Michael Egan. As more investment dollars poured in, the partners were catapulted into the big time.

What went wrong with theglobe.com? “Critics insisted it was our age and inexperience,” Paternot asserted. “But it was a market that went haywire. Nokia, Motorola, and Hewlett-Packard were run by much older CEOs, and their stocks also tumbled.”

“Everything about the Internet came inextricably woven with stock mania,” Paternot said. “The rules of the game changed as soon as we went public. It was not about developing our business model but increasing shareholder value. We were doing well if our stock went up and badly if it went down.” As theglobe.com’s shares fell, the press savagely attacked Paternot and Krizelman.

There were other reasons for theglobe.com’s downfall, said Steve Baldwin, coauthor of Net Slaves: True Tales of Working The Web (McGraw-Hill, $7.98) and president of Netslaves.com, a Web site chronicling deceased dot coms. “They made all the classic dot-com mistakes,” he said. “They weren’t focused and jumped from one business to another.”

A weak management team didn’t help theglobe.com either, not to mention that Paternot and Krizelman were thrust into a game they didn’t know how to play.

There is nothing complicated about why so many dot coms failed, according to Robert J. Lambert, managing director of the technology and venture practice at Christian & Timbers, an executive search firm in Cleveland. “It always boils down to better people and a better mousetrap,” he said. “But timing is everything.”

Paternot experienced a sense of relief when he quit. The relentless anxiety and sleepless nights were over. If he were to replay the past, he said he’d keep his company private. “Going public is a great way to raise money,” he said. “At the height of Internet mania, everyone expected you to go public. But the trade-off was having people watch every move you make. I’d rather grow slowly and have more control and freedom.”

Lambert agreed, advising that in this type of market, “I would hold out [going public] as long as possible. These are pretty crazy times….You have to be prepared to go the IPO route. Most people have no idea what they’re getting into and how much preparation it takes.”

Do you have dot-com death stories to learn from?

Were you privy to a dot-com meltdown? What advice or lessons learned would you share with the dot coms that are left? Join the discussion below or send the editor an e-mail.