Q: Can you still strike it rich in software? A: Back in 1975, when Paul Allen and I were college kids, the two of us cooked up the first software program for a microcomputer. Paul showed me a Popular Electronics story about the 'era of the computer in every home' and the two of us decided that software was the future. This was the start of Microsoft. Communication was simple: just Paul and me talking over Cokes and pizza. Things have changed. I still enjoy junk food, but I also spend two hours a day reading and answering e-mail from Microsoft's 15,000 employees. The trouble is, I can spend my days answering outside e-mail and giving speeches, or I can run my company. I try to do both, but I don't communicate enough to broad groups and a lot of my e-mail goes unanswered. Think of this monthly column as my e-mail to you.
Not all questions come to me through e-mail. Sometimes people stop me at an airport, or a would-be entrepreneur corners me at a computer show or a college kid sends me a letter. One student recently asked if it was too late for him to get into the software industry, build a company and get rich? I'm often asked this, and my answer is always the same: this is a great time to be in software. I won't say you can build another Microsoft, but you can shoot for $2 million a year in sales by selling 10,000 copies of a $200 product.
Small software companies begin with a guy (or gal) who has an idea. He or she gets together some friends who know how to program, and they build a product. Usually they make the product for one customer and, because it's good, they find other buyers. If you want to start a company, finding a niche is a strong strategy. Forget about creating a word processor for writing, a spreadsheet for financial analysis or any other major product that has entrenched competition. Instead, create a product that helps people do something specific or gives practical information in areas such as medicine, insurance, accounting, architecture or governmental processes. Software like this will make many small fortunes.
If you're not satisfied with a small fortune, you'll have to get in on a generational change. This is expensive and risky. Every few years one generation of technology gives way to another. In the early 1980s, Microsoft bet that the IBM PC would be important and created the MS-DOS operating system for it. The result was Microsoft's leadership in operating-system software. Nobody had heard of Lotus until it brilliantly capitalised on the generational change with its spreadsheet Lotus 1-2-3. Apple's Macintosh and Microsoft Windows were winners later, when the world embraced graphical computing. To win big, you have to spot a generational change that players are ignoring. The bet can be expensive. Recently some entrepreneurs gambled that software to let people scribble instead of type would lead to a new generation of word processors and spreadsheets. They were wrong. What would I advise a college kid looking to become a software entrepreneur? Learn the ropes at an established software company. Find your niche, line up the venture capital and find smart people.
Ask Bill Gates questions: firstname.lastname@example.org.