That year Gold formed Lifeboat Associates in the basement of his partner's apartment house (which he called "the dungeon") and set out to rectify the situation by distributing nonproprietary software. Lifeboat's early life wasn't promising. The Manhattan Yellow Pages, for instance, still lists Lifeboat Associates under "Marine Equipment & Supplies." Gold persisted, however, and his company now has a catalog of more than 200 programs for personal computers and has begun to produce some of its own programs to fill in the gaps. In 1981, Lifeboat Associates had revenues of around $10 million and offices in six countries, including Japan.
The last element of the industry -- the popular application program -- didn't begin to fall into place until a meeting occurred between Dan Bricklin and Dan Fylstra in Boston in 1978. Bricklin, who was working on an M.B.A. at Harvard Business School, had an idea for a program to make financial analyses easier. His professor told him to show it to Dan Fylstra, who was already running a company, out of his apartment, called Personal Software Inc., which sold a computer-chess program.
Fylstra thought Bricklin's idea might work as a home-budgeting program and encouraged him to write it for the Apple computer. Bricklin got together with an old friend, Bob Frankston, who knew more about programming, and the two started a company called Software Arts Inc. (See "Software Arts wrote the first best-seller," page 71.)
The program, which they named VisiCalc and introduced in October 1979, turned into the best-selling application program in history, with about 200,000 copies sold to date. "VisiCalc may well be the most important program to have appeared since FORTRAN," wrote Datamation magazine recently, "because it sells otherwise unapproachable computers to people without any technical training."
In the last year, as VisiCalc's unit sales topped 100,000 and as observers began to realize that the program was actually selling machines to nontechnical people, the software business really turned into a business. All the elements had dropped into place, the media began to notice the exponential growth, and serious money started to pour in. And the seven founders plus another dozen or so entrepreneurs found themselves sitting on top of an explosive industry wondering how they were going to stay there. "It's still a crapshoot," says Fred Gibbons, who founded Software Publishing Corp. in Mountain View, Calif., with $250,000 in venture capital in 1980. He recently sold 35,000 copies of his first program, PFS (Personal Filing System), to Apple Computer to use for a special promotion.
It's the lack of history that makes this business and the people in it so fascinating. While the computer business has been around in various forms for 30 years, it has never been a consumer business. By definition, personal computers appeal to a consumer market, although it's the business segment that's hottest right now. All of a sudden, there are programs whose potential customers number in the millions; there are some 4,000 stores selling just computers; and there are dozens of computer magazines with a collective circulation reaching well above 2 million. The whole thing is growing by leaps and bounds.
What kind of company is going to survive? What kind of people will run those companies? Will the market always be trying to catch up with new products, meaning that the successful companies have to focus on product development? Will the industry be constantly spewing out products to meet still-unrecognized needs, meaning that the companies have to focus on marketing strategies? Or will the hardware manufacturers and book publishers make it all academic by publishing their own software and forcing out the independent companies?
These are life-and-death questions for the entrepreneurs struggling to establish themselves as future industry leaders. They have the opportunity to build truly important companies, but they won't have it for long at the rate the market is growing. So they have to decide now, without any history to base their decisions on, how to structure their companies, what products to make, and how to sell those products.
On one side of that crucial decision are the marketing people, the ones who think that the selling of the product is more critical than the making of the product. "The companies that become really big businesses won't be generating their own software for the most part; they'll package and distribute it. Those who create software will remain a cottage industry," says Adam Osborne, an industry expert who recently introduced his own low-priced, portable computer.
"Programming is one of the few things in life that cannot be automated," says Paul Lutus, who wrote the popular Apple Writer word-processing program in a plywood cabin atop a mountain in Oregon some 23 miles from the nearest town. (He had to string up a 1,300-foot extension cord to get electricity to run his computer.) "It's hard to get good programmers to sit in a factory atmosphere and have them be truly creative on demand."
On the other side of the question are the product people, the ones who think that the making of the product is more important than the selling of it. "I'm like George Lucas, bringing together a creative team that will come up with a unique, well-crafted product," says Mitch Kapor, who founded Micro Finance Systems Inc. in his Watertown, Mass., apartment after he bought an Apple computer on impulse, decided to forget about his Ph.D. in psychology and started programming computers instead. He recently sold his VisiPlot/VisiTrend program to Personal Software for more than $1 million, and used the money to start a new software development firm called Lotus Development Co.
The costs of team development range from $250,000 to $500,000, says Kapor, so fewer independent authors will be able to compete. "A number of pioneers in this industry," he says, "have gotten rich in the past few years by being merely competent and very lucky."
Sitting solidly on the fence are the entrepreneurs who will likely turn out to be right. "It's not as simple as authors and publishers," says Dan Fylstra of Personal Software." You have to bring together under one management the whole process: the concept, development, documentation, marketing, and technical support. It's the control and determination of standards that's important. That's what we're doing, and it's the direction the industry must take."
Although most of the companies in this business will survive whatever decisions their founders make now, mere survival is not what these people are dreaming about. That's the crux of this question: Just surviving in a business growing so fast really amounts to failure. When the industry shakes out in the next few years, as all new industries do, these entrepreneurs want to be on top of the rubble, not under it.
