Steve Ballmer

Let's just talk through the cap table over time and how the company went public. So we talked about the partnership being 64% Gates, 36% Paul Allen. 1980, Steve Ballbar comes in and gets 8.5%, 8.75%, something like that percent of the company. So dilutes Gates and Allen down. Then in 1981, just a year later, they take the VC investment for 5% of the company from TVI.

This also, I'm guessing around 5%, trying to reverse engineer some of the numbers, they also created an option pool where they were then creating opportunity for basically rewarding management, which is how there were 10,000 millionaires created in the Seattle area from Microsoft.

This also, I'm guessing around 5%, trying to reverse engineer some of the numbers, they also created an option pool where they were then creating opportunity for basically rewarding management, which is how there were 10,000 millionaires created in the Seattle area from Microsoft.

Right. Yes. At IPO, so even with all this dilution, so you've got the Balmer dilution, the VC dilution, and the option pool dilution, Bill Gates still owned 49% of the company. Wow. I mean, that's pretty unprecedented. And he wasn't the only one with a big chunk. Paul Allen owned 28% of the company. Steve had 7.5% of the company.

Right. Yes. At IPO, so even with all this dilution, so you've got the Balmer dilution, the VC dilution, and the option pool dilution, Bill Gates still owned 49% of the company. Wow. I mean, that's pretty unprecedented. And he wasn't the only one with a big chunk. Paul Allen owned 28% of the company. Steve had 7.5% of the company.

This company was basically owned by the three more or less co-founders, a little tiny option pool, and then a VC who ended up with 6.1%. I think Dave got some more shares from being on the board. You just don't see companies that look like this anymore.

This company was basically owned by the three more or less co-founders, a little tiny option pool, and then a VC who ended up with 6.1%. I think Dave got some more shares from being on the board. You just don't see companies that look like this anymore.

Yeah, absolutely. I'm trying to figure out why they were able to be so capital efficient. Is it just that software was such an unbelievably good business model compared to everything else that existed? Like they didn't need a lot of working capital, everything was high margin, they could grow really fast, or it was just an era... before much competition.

Yeah, absolutely. I'm trying to figure out why they were able to be so capital efficient. Is it just that software was such an unbelievably good business model compared to everything else that existed? Like they didn't need a lot of working capital, everything was high margin, they could grow really fast, or it was just an era... before much competition.

And so they didn't need to out-raise their competitors. Once they got a little bit ahead, there was really no way for anybody else to close the gap, assuming that they executed well.

And so they didn't need to out-raise their competitors. Once they got a little bit ahead, there was really no way for anybody else to close the gap, assuming that they executed well.

That's so, so, so insane. And there was no one else really with the knowledge either. Even if someone else came in with a big $1 million check and gave it to a competitor, in 75, like how many people could really write these language interpreters?

That's so, so, so insane. And there was no one else really with the knowledge either. Even if someone else came in with a big $1 million check and gave it to a competitor, in 75, like how many people could really write these language interpreters?

They had an obsession and an obscure skill that turned out to be one of the most valuable in the world in an area where there was a freak law of nature in play with Moore's law that was so unintuitive that you had to think from real first principles to understand the impacts of it.

They had an obsession and an obscure skill that turned out to be one of the most valuable in the world in an area where there was a freak law of nature in play with Moore's law that was so unintuitive that you had to think from real first principles to understand the impacts of it.

Yeah, that's true. It's this like complete perfect storm that enabled them to build a highly defensible business without really any investment ever. This is the largest company in the world, the most valuable company in the world that was entirely bootstrapped.

Yeah, that's true. It's this like complete perfect storm that enabled them to build a highly defensible business without really any investment ever. This is the largest company in the world, the most valuable company in the world that was entirely bootstrapped.

No, I mean, in 86, when they actually did go public, they raised $45 million and they never spent that because they generated much more free cash flow than that that year.

No, I mean, in 86, when they actually did go public, they raised $45 million and they never spent that because they generated much more free cash flow than that that year.

And they needed to for the reason that they had been granting so many stock options from that little option pool to employees that they were going to blow the SEC's 500 shareholder cap by, they projected, 1987. So they wanted to go public on their own terms in 86, not when they sort of had to by SEC rules.