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A new look at Microsoft’s startup story, with insights for today: Microsoft @ 50, Chapter 2
- Microsoft's decision to focus on software rather than producing its own PC defined its business in the early years. Margaret O’Mara, a University of Washington historian, described its decision as savvy, making its market equal to the world of personal computers. At that point, it had grown to around 50 people since moving to Bellevue, Washington, and the IBM Personal Computer was a year away from hitting the market.
- Microsoft was scrambling to come with a 16-bit operating system for what would become its defining PC product. Publicly, Microsoft's vision was to have 'A PC on every desk and in every home,' running Microsoft software inside. The company has expanded into hardware, such as modern-day Microsoft Surface computers, but its early focus on software set it apart.
- Microsoft's first annual profit hovered around $2-3m, on about $5m in revenue. Its first outside investor, Technology Venture Investors (TVI), invested $1m for a 5% stake, when it had a $20m valuation - relatively tiny compared to the company's $3.1tn value today.
- David Marquardt, Microsoft's first outside investor, had a background in mechanical engineering. His partnership with TVI later invested $1m in Microsoft in 1981, as the company faced skepticism from partners who avoided backing software startups. It was the case believing the cost of producing a copy of a software program was zero, driving profits to zero, too.
- Paul Allen and Bill Gates made a complementary dreamer/doer and hacker/hustler duo. As educated programmers, and young entrepreneurs with innate abilities to code and deep understanding of technology, Gates applied his ambitions to business, too. Microsoft's hard-charging, at times argumentative culture, contributed to gender biases and homogeneity in the tech industry, which legacy the market felt and continues to feel.
- Location was critical for Microsoft from the beginning - its decision to locate in Albuquerque near MITS and later in the Seattle region where Allen and Gates grew up. The move allowed the company to tap into the pool of engineering talent emerging from the UW.
- At times, it seemed like the company had to bring the market into existence by sheer force of will, demonstrated by Gates' landmark “Open Letter to Hobbyists.” This mindset translated into Microsoft's larger approach, which ultimately contributed to the business activities that led to the landmark U.S. antitrust case against the company.
- Throughout its history, Microsoft has seen its greatest success when it has taken advantage of discontinuities in technology, starting with the rise of the personal computer. It has figured out how to increase productivity from early days.
- In 1986, as Microsoft prepared for its initial public offering, the company's IPO prospectus signaled another disruption on the way - describing the recent release of a 'graphical operating environment that runs on the Microsoft MS-DOS operating systems.'
- In sum, Microsoft's success can be attributed to a focus on software, taking advantage of discontinuities in technology, strategic and fruitful partnerships in product development, and a strong sense of place.
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