Microsoft's 1986 IPO

Interesting article but I&#x27;m not sure some of the statements chime with how things looked at the time (IME ofc).<p>I got involved in IT as a profession in 1995 and even then Lotus 1-2-3 and Wordperfect were going pretty well, so the idea stated in the article that :-<p>&quot;a monopoly in operating systems and office suites was inevitable before 1990 was over.&quot;<p>seems a little overdone.<p>My memory of what really tipped it for Microsoft in the office suite market (at least in the UK) was that they started giving away a full office suite with every new PC. So even though competitors might have better functionality, it was a tough sell to get past the price of &quot;free&quot;.<p>Definitely in the SMEs I worked in this was the reason that Office became the defacto option for office applications.

&gt; Today’s entrepreneurs would do well to note that Microsoft made minimal use of venture capital. Microsoft’s only VC only owned 6.2 percent of the company. Gates didn’t trust them.<p>While the article touches on it here, Microsoft was able to avoid venture capital because it was highly profitable from its very early days. They turned their first profit in 1975, the same year they were founded.<p>It seems like more companies spend longer amounts of time being unprofitable and growing. How much of that is a zero interest rate phenomenon or the new normal?

Something I find interesting about early technology IPOs is how early they IPO-ed compared to more recent tech companies and how much of their growth and value creation happened post-IPO.<p>- Microsoft IPOed in 11years, profitable and at a ~$800M valuation. They hit a ~$1T valuation in 2000. During the 90s, their stock roughly doubled each year, for a 1000x growth.<p>- Amazon IPOed in ~3 years, unprofitable and at ~$300M valuation. Their stock has 2200x since then.<p>- Google IPOed in ~6 years, proftiable and at a $25B valuation. Their stock has ~80x since then.<p>- Facebook IPOed in ~8 years, profitable and at $100B valuation. Their stock has 20x since then.<p>I think the ZIRP era led many companies to avoid going public, either because of access to easy money or because their financial didn&#x27;t need to be disciplined enough. The high levels of pre-IPO funding also has led to many&#x2F;most of them underperforming in the public markets.

Before the dotcom boom there was a rule of thumb in the Valley: &quot;in order to go public you have to have 5 consecutive quarters of profit&quot;<p>These days that&#x27;s all gone out the window, but you can see why back then companies that did go public were more likely to succeed

Microsoft&#x27;s IPO did not lead to the dotcom bubble.<p>It was Netscape&#x27;s IPO that did that.<p>Microsoft and Intel&#x27;s stocks were a big deal in the 90&#x27;s. But they were solid businesses.<p>To my memory, the idea of getting rich overnight simply by being tied to the Internet started with the Netscape IPO.

People play up Bill Gates’ connections, sure, but next to no 16-year-olds could program BASIC in assembly.<p>Microsoft’s success was as much to do with them being a programming languages company <i>first</i>. DOS, Windows 3.1, and even Windows 95 shipped with an interpreter and compiler for their BASIC and C, respectively. This empowered developers to use and write code for the OS out-of-the-box.

&gt; Today’s entrepreneurs would do well to note that Microsoft made minimal use of venture capital. Microsoft’s only VC only owned 6.2 percent of the company. Gates didn’t trust them.<p>&gt; If you’re thinking of trying your hand at being the next Bill Gates, keep that in mind.<p>Keep what in mind? Sure so try to build a company now w&#x2F;o VC money and potentially complete with others who have taken that money? Microsoft obviously had an advantage of a completely new industry AND literaly very little VC money (and in vastly tighter amounts) funding competitors.

Some analysis here that I just don’t agree with.<p>&gt; [summarized] Amazon didn’t turn a profit until 2003<p>That was 100% <i>by design</i>. Why make profits when you can grow? Profits are taxed. Reinvesting in growth is generally not taxed, and you are rewarded by the market as it projects out how long your growth could continue and reflects that in your stock price.<p>To be fair, the idea that you might buy a stock for something other than its likely dividend and that this wouldn’t just be a momentum trade is an idea that was finally cemented somewhere in the dotcom 1&#x2F;dotcom 2 era. Still.

Why doesn&#x27;t this apply to Stripe with its 8,500 employees?<p>&gt; The reason Microsoft had to go public in 1986 was because Bill Gates had been using stock to attract talent. Microsoft projected that by sometime in 1987, they would have 500 shareholders, which would require Microsoft to register with the Securities and Exchange Commission, effectively turning them into a publicly traded company, but without the benefits of going public in the conventional way.<p>&gt; Backed into this corner, Gates agreed in late 1985 to pursue an IPO.

It’s interesting how much of the company Paul Allen owned at the time without being any longer involved with the company. I suspect that in 2025 he would have been bought out or pressured to return equity by that point