“The laws and regulations were set up to make this kind of thing very difficult,” he says. “But I had a strong feeling that we should do this.”

He sold shares at two prices. Some went to his customers, who, in a startling reversal, got a better deal than Wall Street insiders: $15 a share for the customers, versus $20 for those who bought at the opening price in a public offering run by Goldman Sachs.

Mr. Koch recalls the horrified reaction of one irate fund manager. “So I’m going to buy shares for $20 while you’re selling them to these cat-and-dog investors for $15?”, the man sputtered. “I always get the lower price. You’ve turned things upside down.”

Mr. Koch says that when he asked the manager whether he drank much beer, the man replied: “Not really, I’m mostly a wine drinker.” To which Mr. Koch responded: “That proves my point. I care about beer drinkers, not wine-drinking fund managers. You don’t really matter to me.”

Securities and Exchange Commission rules required Mr. Koch to indicate in advance how many shares he would sell directly to customers, he says. He came up with an estimate of 30,000 buyers — but it was only a guess, and it turned out to be way too low. Instead, he says, more than 100,000 would-be shareholders sent in checks. He used a lottery to select 30,000, sending the rest of the checks back. “If I’d had any idea how much interest there would be, I could have sold all the shares directly to customers,” he says now. “But I just didn’t know. Nobody had done this before.”

To help sell stock directly to customers, Mr. Koch brought in a like-minded banker, William R. Hambrecht, a prominent Silicon Valley venture capitalist who was determined to improve the I.P.O. process. “I thought Jim was really onto something,” Mr. Hambrecht recalled in a telephone interview. “It got me thinking that we ought to be able to come up with a better way to do this.”

Based on that experience, Mr. Hambrecht says, he went on to develop the model for modified Dutch auction I.P.O.’s. These were made famous by Google in 2004 and adapted by Morningstar in 2005 and later by other companies. In structure, they are descending price auctions, aimed at determining the highest bid that would clear a market open to all investors and not just insiders.