PowerPoint

Acquired returns with a classic, delving into Microsoft’s first acquisition ever: Forethought Inc, the makers of PowerPoint. Hate it or love it, you can’t deny the combined companies’ impact: by the early 90’s PowerPoint had transformed the way businesses, educators and governments communicate, ensuring job security for pointy-haired Dilbert bosses everywhere. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Links: Robert Gaskins’ definitive history of building PowerPoint: Sweating Bullets https://www.robertgaskins.com/powerpoint-history/sweating-bullets/gaskins-sweating-bullets-webpdf-isbn-9780985142414.pdfAbsolute Powerpoint http://www.physics.ohio-state.edu/~wilkins/group/powerpt.html by Ian Parker Carve Outs: Ben: Mindfulness in Plain English https://www.amazon.com/dp/B003XF1LKW/ and discussion on Hacker News https://news.ycombinator.com/item?id=16842630David: The Birds have landed… https://www.nytimes.com/2018/04/20/technology/electric-scooters-are-causing-havoc-this-man-is-shrugging-it-off.html

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Rosenthal?

  Now my video is taking up half the screen and your video is taking up half the screen.

• 0:04Ben Gilbert?

  Good. How do you even, can you snap it? Oh, there we go. That's kind of cool. Can I make your video small? That's kind of like, what is the use case for this? I'm looking at an enormous version of myself and you're small in the corner now. It's Skype for narcissists.

• 0:32Ben Gilbert?

  Welcome to season two, episode seven of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:40David Rosenthal?

  I'm David Rosenthal.

• 0:41Ben Gilbert?

  And we are your hosts. Today, we are digging into the historical archives to cover the acquisition of a company you've probably never heard of, but a product that you absolutely have used, probably hundreds or maybe thousands, or maybe you've even gotten your 10,000 hours on this piece of software.

• 1:01David Rosenthal?

  I feel sorry for you if you have.

• 1:03Ben Gilbert?

  I think I may have. I think I may have.

• 1:05David Rosenthal?

  I definitely have. Investment banking.

• 1:08Ben Gilbert?

  All right, listeners, today we are covering Microsoft's 1987 acquisition of Forthought Incorporated, the makers of PowerPoint.

• 1:17David Rosenthal?

  This has the honor, I was going to say dubious honor, but this really is an honor. This was Microsoft's first acquisition and Apple's first investment in another company, first strategic investment.

• 1:31Ben Gilbert?

  Not only that, they were within like three months of each other.

• 1:35David Rosenthal?

  I know.

• 1:36Ben Gilbert?

  Most people don't even know that PowerPoint wasn't homegrown. I mean, Word and Excel were homegrown applications, but PowerPoint was an acquisition.

• 1:45David Rosenthal?

  Yep, an acquisition. Not just an acquisition, a completely separate business line, as we will get into, which is not to say that that is necessarily how we will categorize it on acquisition category, but Microsoft kept it as a business line separately based in Silicon Valley, actually on Sand Hill Road in Silicon Valley, was where PowerPoint was developed.

• 2:06Ben Gilbert?

  It all comes full circle. All right, we will dive in more, but before we do that, listeners, if you like the show, if you've been listening for a while, if you're new and you happen to like this episode, either way, we would love a review on Apple Podcasts. It helps us grow the show and it helps us create more great content. So please take a moment. You can, in fact, you could even pause right now and do it. We don't mind, seriously. If you are new to the show, you can check out our Slack at acquired.fm. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:51David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote "shadow AI" running with no security review at all.

• 3:12Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 3:33David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:52Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A.com/acquired for $1,000 off, and just tell them that Ben and David sent you. So David, we had much teasing of the plot ahead in the intro. Do you want to take us in? How did, how did forethought get started? How did Microsoft buy it? How was PowerPoint the essential part of Microsoft Office today?

• 4:34Ben Gilbert?

  Or actually, you know, Office 365, a part of the Microsoft Cloud Strategy? How did it all get started?

• 4:41David Rosenthal?

  Well, like so many other things, like, like basically everything in modern computing. The origins of PowerPoint can be traced back to Steve Jobs' historic visit, his raid, some might say, on Xerox PARC headquarters in late 1979, after Xerox had made a small investment in Apple Computer. And Steve got to peek behind the kimono famously and go see the Palo Alto Research Center of Xerox, where they were developing prototypes of their vision of the office computing environment of the future.

• 5:24David Rosenthal?

  And that was famously, PARC was where the graphical user interface was developed, the mouse, the idea of networking, which of course would lead to the internet and podcasting and us recording on Skype and this moment right now.

• 5:39Ben Gilbert?

  The most important thing created out of the internet, podcasting.

• 5:46David Rosenthal?

  All comes back there. But no, so how does this relate to PowerPoint? So, once Steve had seen the future of the graphical user interface, he brought it back to Apple and basically decreed that this was the direction the company was going in. But of course, Apple had been around for many years before then. There were other product lines in Apple, other computers they made that were command line interface, like DOS before Windows. And those product groups, you know, didn't just shut down, they kept going. There was the Apple II and the Apple III that were both being, continued to be.

• 6:25Ben Gilbert?

  But David, why join the Navy when you could be a pirate?

• 6:28David Rosenthal?

  Exactly, exactly. You're referring, of course, to the, the famous Mac group that Steve starts within Apple, where he flies the pirate flag in the building. People who were working on the Apple II and the Apple III were talented people. They sort of saw the writing on the wall, too, that Apple was going in the direction of the graphical user interface and first the Lisa and then the Mac. But also, they themselves realized that not just was Apple going in this direction, the whole industry was eventually going to go in this direction. And in particular, two folks, the product marketing manager for the Apple III, Taylor Pullman, and the software marketing manager for the Apple II, Rob Campbell, they see this

• 7:11David Rosenthal?

  feature and they decide to leave Apple and start a startup to pursue this graphical user interface future because they know it's not on the products they're currently working on.

• 7:24Ben Gilbert?

  You know, when we first start doing our research and we start on Wikipedia or we start reading, you know, the comprehensive history of this company, you always see the name of the founders, but very rarely do they actually go back before they were the founders of that company. And it seems like without fail, when we start to dig in, and particularly, David, when you start doing your research, like, who were these people before? They were ex-Apple, they were ex-General Magic, or they were at Stanford Research. You know, there's a very small number of places they could have come from. And it's amazing, you know, where technology and the whole field is today. The world was just not that big. There were not that many institutions or companies, like, everybody spun out of the same few places.

• 8:03David Rosenthal?

  There really weren't. I mean, there were, the number was in the thousands of people who worked in the technology industry, or at least the software industry. It just wasn't that many people and there weren't that many companies back in the day. So Taylor and Rob, they leave and they see the power of the future of, you know, the Xerox PARC vision, the graphical user interface, interacting with applications that business users are working with directly instead of separate, you know, computer divisions with punch cards and whatnot. But they think that the Mac and Apple, maybe they're a little bitter because Steve kind of kneecapped their products, but they think that the Mac is not the future. They think the future is bringing the graphical user interface to the massive numbers of

• 8:45David Rosenthal?

  IBM PC clones that are out there already and shipping in the enterprise. And it turns out that they were right about that. It just wasn't forethought, the company that they founded that would do that.

• 8:59David Rosenthal?

  So they leave Apple.

• 9:00Ben Gilbert?

  It's the hard part about being a venture investor, David. You can be right about everything, but if you, you know, pick the wrong horse, pick the wrong timing, pick the wrong specific nuance.

• 9:09David Rosenthal?

  You end up with PowerPoint.

• 9:14David Rosenthal?

  It's a nice consolation prize. Usually you don't get the consolation prize. So Robin Taylor, the end of 1982, they leave, they start this company. They call it forethought. This is foreshadowing the graphical user interface to come. The vision is they are going to develop an operating system that is going to, like I said, bring a graphical approach, almost a Windows-like approach, some might say, to IBM clone PCs. So they raise $700,000 right after they leave. There's a lot of people that are really excited about this. Shortly thereafter, they raise another $2.5 million from VCs. They attract some great folks, new enterprise associates, NEA invests, Dick Kramlich, who was one of the founders of NEA, very well-known VC at the time.

• 10:00David Rosenthal?

  He invests, he joins the board. Also, as an independent board member, they get Bob Metcalfe, who was the inventor of Ethernet at Xerox PARC. And by that point in time, he was the chairman of 3Com. So he's their independent board member, literally like Bob Metcalfe of Metcalfe's Law, is the independent board member of this company.

• 10:19Ben Gilbert?

  There were like 11 people in technology. Like, this is incredible.

• 10:23David Rosenthal?

  It's totally incredible. So high-flying, huge vision. There's just one problem that a year later, Microsoft announces Windows. While this is now the fall of 1983, they've been working on this for a year. And while Windows wouldn't actually ship for Windows 1.0, I believe, until 1985.

• 10:44Ben Gilbert?

  It still doesn't seem like a good bet. What do you do, right?

• 10:48David Rosenthal?

  What do you do? And in particular, in the case of forethought, it's not just that the 800-pound gorilla just stepped into the ring with you and is definitely going to crush you, even if you could compete. Apparently, development is really not going well and it's kind of a mess. And the Foundation was the name of the operating system that they were building. It wouldn't even come. Pile, they couldn't demonstrate it. It was just in development hell. So at this point, they've burned through about $2 million of the $3 million, just over $3 million that they had raised. They made no meaningful progress. They have no prospects. The VCs and the board, basically, they issue an ultimatum. They say, you have to, this is now the spring of 1984. We're going to schedule essentially a demo day.

• 11:31David Rosenthal?

  You are going to demonstrate this operating system that you are building. We are going to evaluate it. We're going to bring in outside experts. And we're going to see if there's anything here that we can use. Those VCs, and they really, they really hold your feet to the fire. They do the demo day. There's, there's nothing. But there is, there is some tiny, tiny flicker of good news. And exactly how this happens, even though he wrote a whole book on, on the topic, I'm still not entirely clear. But somehow, there's a guy who doesn't even work at the company named Robert Gaskins. And he's a mid-level manager at Bell Northern Research, which is sort of the California division of, of Bell.

• 12:09Ben Gilbert?

  It's one of the five companies in technology in this area.

• 12:11David Rosenthal?

  One of the five companies in technology. He gets connected with the folks at, at Forthought. And again, he's not, he's like a mid-level manager. He's not part of the company. But he's really excited also about the future of the graphical user interface. And he wants to join the company. So even though, you know, the market for the company has just been completely swooped in by, by Microsoft and, and the coming Windows product. The product is in development hell. He, he wants to join. And he has a vision for what he thinks can be a sort of a quote unquote restart of the company. The term pivot wasn't, wasn't around yet, but that he wants to bring to the company.

• 12:51Ben Gilbert?

  And this is a good time to say to Bob, thank you so much for being super gracious and emailing with us to, to help us research this episode. For, for folks who haven't read it, and I would imagine if you are as surprised as I was when I first found out that PowerPoint was an acquisition, you probably haven't read it. But Bob wrote a fantastic book about how this all went down. And kind of PowerPoint as a case study and really Forthought as a case study. And has, gave us some really great quotes that, that we'll pull out later in the, the narrative. So if you're interested in what we're talking about here, definitely check out Bob's book.

• 13:22David Rosenthal?

  Yeah, we'll link to all of it. It's, I love the title. It's called Sweating Bullets. And it's So good. The definitive history of building PowerPoint. And Bob is just, well, he's, a few more words about Bob, because he's a pretty interesting guy. He had been a grad student at Berkeley, and he was doing an interdisciplinary PhD in English, Linguistics, and Computer Science, which is quite the combination. He ends up dropping out to join Bell Northern Research, because he wants to go work in industry and in computer science. This is the mid 70s. He knows this is going to be the future. It's sort of like Massey, and when he met with the, of SoftBank, when he met with the head of McDonald's, and said, "Go work in, go work in technology." This was actually at Berkeley, kind of right around the same time.

• 14:08David Rosenthal?

  And then after PowerPoint, he'd go and he retired. He becomes sort of like the world historical expert in the concertina, which is a musical instrument that was developed in England in the 1800s. He's really like a Renaissance man. So, big thank you to Bob for writing this book and all the blogs that, all of this, all of this material for this episode comes from him, and it's all primary source from him. So, thank you. So, Dick Kramlich, who, as I mentioned, of NEA, was on the board. And he says, you know, "I can totally empathize with this, with this being in a VC at a company that, you know, is going nowhere, but there's something and there's someone who wants to do something interesting." He says, "Yeah, sure." You know, this guy Bob, like, he may not be the most accomplished manager,

• 14:52David Rosenthal?

  or has the best resume, but like, he's got some sort of vision to do something, and like, rather than just taking the $1 million that's left in the company back, like, "Let's see what you can do." The board makes the decision to hire Bob in, and they give him 5% of the company. And they basically turn him loose on creating his vision for what an application for the graphical user interface could be. But there's just one, one kind of twist to that, which is that Rob Campbell, who was one of the original founders and was the CEO, He doesn't leave. He remains the CEO of the company of Forthought. And Rob basically goes and builds a wholly separate company doing software publishing.

• 15:35David Rosenthal?

  Because remember, this is back in the day when to actually distribute software, it wasn't just like you developed it and then you like put it on the internet or in the App Store and anyone could buy it. You had to actually, you know, market it.

• 15:47Ben Gilbert?

  Literally ship it.

• 15:48David Rosenthal?

  You had literally had to, you had to get discs manufactured, put in boxes with paper manuals and shipped to computer stores. And so there was actually a publishing industry, just like there's a publishing industry for, you know, authors and books to do all this. So Rob goes and he starts a publishing division of Forthought. Now, the idea was that the company would build up the muscle in software publishing by publishing other developers' software so that by the time the application that Bob Gaskins was working on was ready, they would be able to publish it themselves without having to have a third-party publisher. That was the idea. So Rob goes, he gets a couple developers

• 16:31David Rosenthal?

  that he's going to publish their software. The first two don't really work out. And then he signs up a database program for DOS called Nutshell that they were going to repurpose and redistribute for the Mac. And they decided to come up with the name for it of FileMaker.

• 16:47Ben Gilbert?

  FileMaker. And for any longtime Apple nerds out there, you're, this should be a name that's come across your desk a few times.

• 16:54David Rosenthal?

  If you go to FileMaker.com today, it still exists. The website informs you that it is FileMaker, an Apple subsidiary. FileMaker is now owned by Apple.

• 17:04Ben Gilbert?

  One of the very few Apple subsidiaries and a long, long time subsidiary. It's kind of incredible. They keep it a subsidiary and run it under its own brand. Like this is like this weird corner of Apple that you never hear about when you think about their, you know, four products and three sizes that are neatly shrink wrapped and well-understood.

• 17:23David Rosenthal?

  Four products, three sizes, plus FileMaker.

• 17:27David Rosenthal?

  And so the history on FileMaker, I mean, this is kind of incredible that within one roof, now, the developers of FileMaker were always a third-party company and Forthought was just publishing the software. But FileMaker would go on to be acquired by Claris, which was the spin-out from Apple that was run by Bill Campbell, the coach Bill Campbell, who is one of the most legendary figures in the valley. Again, it all comes, there weren't even thousands of people. There were probably like 10 people working in technology at this point in time. Bill would then acquire the developer of FileMaker and FileMaker into Apple a few years, actually, I think, within a year of when Microsoft acquired PowerPoint and Forthought. But that is a story for another day. For today, back to the application side

• 18:11David Rosenthal?

  of Forthought. So it turns out that Bob was not just had, you know, any vision for the company. He actually had the right vision for the company. So what he saw was that everybody knew that graphical operating systems, graphical user interfaces and operating systems were coming, but this was going to enable essentially a huge wave that would wash across the whole technology industry. And you would be able to, on top of that, build applications that were enabled by now having a graphical computing environment that you couldn't do before. And the vision of what application to build that he comes up with is business presentations. Up until this point, when you made a business presentation,

• 18:55David Rosenthal?

  you would do it using, you know, slides, literally photo slides, like overhead projector, you know, put the slides in, like the scene in Mad Men with the Kodak carousel. You had an art department, a corporate art department, that would make presentation slides, and then you would put it in your Kodak projector, and like, that's how you would lead a meeting. It's nostalgia, David. It's nostalgia. The carousel. It might be the best scene in television, like, flat out. It's so good. It's so good. But Bob, so he sees this and he says, "The carousel is going the way of Mad Men. This is going to be the future.

• 19:34David Rosenthal?

  People are going to make these presentations themselves, enable the business user who's the... It feels weird even to describe this in that there was once another way of doing this. Like, if you are the presenter, you are making the presentation, you can actually now make it yourself and present it yourself when you used to have an art department have to do it for you.

• 19:54Ben Gilbert?

  There's this thing called Absolute PowerPoint by Ian Parker. It's like a super old website floating around. Or did you find the thing at all about Whitfield Diffie?

• 20:06David Rosenthal?

  No.

• 20:06Ben Gilbert?

  Okay, so there's a guy named Whitfield Diffie, and I believe he was in the Bell Northern Research Center. Folks who have studied computer science may know Diffie from Diffie Hellman encryption. I'm gonna probably get the details wrong, but if I remember right, it was a precursor to the RSA encryption, which is the sort of basis of most secure transactions that happen today. But there's a great, great excerpt from this piece. "At Bell Northern, Diffie was researching the security of telephone systems. In 1981, preparing to give a presentation with 35mm slides, he wrote a little program, tinkering with some of the graphics software designed by a BNR colleague that allowed you to draw a black frame on a piece of paper."

• 20:49Ben Gilbert?

  And then it goes on to point out, "With a few days of effort, Diffie had pointed the way to PowerPoint." And it was incredibly at Bell Northern Research, sort of coming up with this concept of, "Maybe software can help us do this thing that we have to do manually right now and use a little bit of software to get there."

• 21:08David Rosenthal?

  Wow. I can't believe I missed that in all the research, because that is literally... I mean, Gaskins comes from BNR. That's the germ of the idea right there. So, the first thing Gaskins does, the board basically... He's not the CEO, but he's basically given CEO-like oversight of the core part of the development part of the company, the non-publishing part of the company. He fires everyone, except for one person, because all the engineers that they have, they're all systems engineers that are all coding in machine language, trying to build up this operating system. He keeps one, and then he hires a really great developer that he knew, that he had tried to recruit into BNR, named Dennis Austin.

• 21:50David Rosenthal?

  And then Dennis and Bob go on to the two of them, basically in like a previewing the modern like lean startup team, like they basically build PowerPoint together with, with Bob as the PM and Dennis as the engineer. Dennis, at the time, was actually working at another NEA portfolio company that had just shut down. Dick wasn't on the board, one of his partners was on the board. And this, this tells you about the prospects for Forthought and what NEA thought of the company. The board member at the other company that had just shut down that Dennis was working at, tried to stop Dennis from going to Forthought because he was like, "That is a sinking ship. You don't want to join that. Our firm has no faith in this company. You're throwing your career away."

• 22:34David Rosenthal?

  But Gaskins was still able to recruit him. And he writes about this because he was able to do it because there just weren't that many companies out there that were working on applications for graphical user interface operating systems. So if you believe that was the future, you know, your only bet. And Bob also talks about this is why he joined Forthought himself, despite it being a sinking ship. There just really weren't that many opportunities to do this. It was like when the iOS, you know, App Store launched and you needed, there were only like three places where you could write, you know, iOS apps.

• 23:07Ben Gilbert?

  Which, there kind of were, like, there was Craig Hockenberry at the Icon Factory, you know, there was like, actually just a few people that, there was whoever made Super Monkey Ball.

• 23:18David Rosenthal?

  Yeah, Super Monkey Ball. Which was, that was a port from consoles, I think, actually.

• 23:23Ben Gilbert?

  Ah, I didn't know.

• 23:26David Rosenthal?

  Yeah, I wonder what, it'd be fun to go back and see like what the first like native companies and apps for iOS were.

• 23:33Ben Gilbert?

  You know, you know why Twitterific came out so early? The Icon Factory Twitter client?

• 23:38David Rosenthal?

  No, what?

• 23:39Ben Gilbert?

  So Craig Hockenberry, when Apple announced their sweet solution for developers to be able to build web apps and there not being an App Store, Craig was one of the people who basically cracked open the iPhone and figured out how to reverse engineer the API surface and know what the Apple engineers were doing to build the native apps. And he wrote Twitterific as a jailbroken app. So then he was sort of all ready, because when they released the SDK, I mean, it was a much more-

• 24:09David Rosenthal?

  So he had already been essentially building iOS apps before the SDK comes out.

• 24:13Ben Gilbert?

  They just had to rebuild it on public documented APIs.

• 24:18David Rosenthal?

  That's awesome.

• 24:19Ben Gilbert?

  Yeah, yeah, yeah.

• 24:21David Rosenthal?

  What would be the equivalent today? I mean, I guess that's the billion dollar question.

• 24:25Ben Gilbert?

  I mean, it depends if you're long crypto or not.

• 24:28David Rosenthal?

  Good question.

• 24:29Ben Gilbert?

  Yeah.

• 24:29David Rosenthal?

  Probably also a topic for another episode.

• 24:33David Rosenthal?

  We definitely have to find some crypto transactions to cover. That'd be a fun one.

• 24:38Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 24:52David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 25:06Ben Gilbert?

  Exactly, and the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 25:16David Rosenthal?

  Yep, AI control tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 25:34Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 25:50David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 26:06Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 26:16David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. All right, back to the PowerPoint story. So it takes them about three years to develop PowerPoint within Forethought, beginning with just Bob and Dennis, and then eventually growing the team over time. But because they're doing this in a startup, you would think they're also publishing FileMaker. A FileMaker becomes a very successful software on the Mac. But unfortunately, they don't have a really great deal with FileMaker. They're actually losing money on it, and they're losing money on the other on the other software they're publishing, too. Not good deals. They keep having to raise money all along.

• 27:00David Rosenthal?

  So from NEA and their existing investors, new investors, they're basically constantly pitching. Bob is spending his time either laying off people, pitching for money, or building PowerPoint, probably in that order.

• 27:13Ben Gilbert?

  Wow, do you know how much money they raised?

• 27:15David Rosenthal?

  I actually don't know the total amount that they raised, but when they do finally sell the company to Microsoft, the total price of the sale is 14 million, and the VCs get 12 million. So only 2 million goes to common. I don't think that was all 12 million of liquidation preference. Like, there was probably some participation in there, too. But you have to imagine they raised at least 6 million if if not more, if they're going to get 12 million in a preference.

• 27:43Ben Gilbert?

  Or quickly catapulting toward, I wonder what they they raised from Apple's Strategic Investment Group.

• 27:49David Rosenthal?

  Well, right. So they're raising money. They're talking with Apple all along because Apple is starting to launch the Strategic Investment Group. But Apple's worried that they're not going to be able to actually ship the product. So they don't want to invest unless they're actually going to ship this strategic product for Mac. So they keep waiting and waiting. And Apple actually only finally ends up investing just about, I think, two or three months before Microsoft acquires the company.

• 28:14Ben Gilbert?

  Yeah, it's in January of 87.

• 28:17David Rosenthal?

  January of 87, they ship the product in February of 87. And then the acquisition happens over the summer.

• 28:24Ben Gilbert?

  Really, really believing in them, Apple, until it's absolutely clear that they are literally printing floppy disks and shipping them in one month. That's when we will invest in you.

• 28:37David Rosenthal?

  Sounds like most VCs, right?

• 28:39Ben Gilbert?

  Yeah, I mean, at that point, it's impressive that they managed to get there without getting the check.

• 28:44David Rosenthal?

  Yeah.

• 28:45Ben Gilbert?

  And I guess they took the check on, you know, we'll need to ramp production after this first run.

• 28:50David Rosenthal?

  Well, it's also like, are you really going to turn down Apple?

• 28:53Ben Gilbert?

  No.

• 28:53David Rosenthal?

  Which is, at that point in time, the only platform that you are shipping your software for, because developing for Windows is a nightmare, especially at that day and age. So, Apple invests, January 87, February of 1987, they do a big launch event, they're finally ready to ship what was initially Presenter, was the name for the project over the past few years, but then they had a trademark issue right before they were about to ship, so they changed the name to PowerPoint.

• 29:21Ben Gilbert?

  Shocking that you pick a term as generic as Presenter and expect that to skate through trademark review.

• 29:28David Rosenthal?

  But it's again, it's like, you know, back to, back to the early days of iOS apps, remember like Camera Plus and like all the, you know, super basic named apps? So, they changed the name to PowerPoint right before they shipped the product. So, February 1987, they do a launch event, they haven't actually shipped it yet. Microsoft and Bill Gates get wind of the momentum that's building behind this product, and they actually reach out and very explicitly say they want to acquire the company even before the product ships.

• 30:00Ben Gilbert?

  And to be clear, what the product is at this point, like, we say when the product ships, it's software that allows you to make black and white printouts on transparencies so that you can put them on overhead projectors.

• 30:13David Rosenthal?

  Yes.

• 30:13Ben Gilbert?

  Like, the PowerPoint you're envisioning is very different than this PowerPoint. Like, we talked about 35mm slides, they're not even there yet, they're not even in color yet, like, this is a program that helps you lay out your transparencies for overhead projectors.

• 30:28David Rosenthal?

  Yes, but apparently, up until this point in time, Microsoft and Bill Gates, of course, knew that software applications for graphical user interface operating systems were going to be a huge market, they were working on many of them internally, like Word and Excel. Bill Gates also knew that presentations was going to be a big market. His vision for how Microsoft was going to attack it was they were going to add the option to print an outline to Word.

• 30:58David Rosenthal?

  In Word.

• 30:59Ben Gilbert?

  It's so great. So Jeff Rakes is the executive at Microsoft. And there's a great excerpt here that Jeff Rakes wrote. He goes, I thought software to do overheads, that's a great idea. I came back to see Bill. I said, Bill, I really think we ought to do this. And Bill said, no, no, no, no, that's just a feature of Microsoft Word. Just put it into Word. And I kept saying, Bill, no, it's not just a feature of Microsoft Word. It's a whole genre of how people do these presentations. And to his credit, he listened to me and ultimately decided to go forward and buy this company in Silicon Valley called Forethought for the product known as PowerPoint. And here we are today. It's like, it's how freaking businesses communicate internally. Like, that's how every, that's

• 31:40Ben Gilbert?

  how the military communicates. It's how, like, it is the de facto way for people to get ideas across to other people. You can hate that. You can love that. It can be your tool of choice, or you can be your nemesis in an organization. You know, it's not that long ago. Like, it's, it's the late 80s, and the belief was, eh, that's, that's a feature of a word processor.

• 31:59David Rosenthal?

  It's a feature of Word. Yeah. Well, it's so, I was gonna save this till, till the end. I think it's like, the most fun idea to this whole thing. Forethought has, is this like, tragic history of a company. They're always perpetually raising money. They're doing bridge round after bridge round after bridge round. It's impossible to raise money. The irony is that because of PowerPoint, like PowerPoint becomes the vehicle by which more money is raised in the history of humankind over the next 30 years than has ever been raised in, you know, in mankind's history until that point. And the irony is the company

• 32:38David Rosenthal?

  that made it could not raise money. So great. But it also reminds me of, of the Dropbox episode and, you know, Steve Jobs telling Drew Halston that, you know, it's a feature, not a product.

• 32:50Ben Gilbert?

  $10 billion feature.

• 32:52David Rosenthal?

  I guess there was no Jeff Rakes around in Apple in whenever it was 2010 to tell Steve that no, this is a product, not a feature.

• 33:00Ben Gilbert?

  No, no, no. Did your research get into the talks that Microsoft was having with another potential company?

• 33:09David Rosenthal?

  Only a little bit. Supposedly, there were two other companies that they were evaluating once Jeff Rakes had convinced Bill Gates that this actually needed to be a product within the suite of applications that Microsoft, productivity applications, Microsoft would make for Windows. But they evaluated that PowerPoint was the best.

• 33:27Ben Gilbert?

  So apparently, Dave Weiner had a company called More, capital M-O-R-E. And Microsoft actually issued a letter of intent to purchase them and ended up walking that back. They basically took it back the same day that they gave Forthought their offer to acquire them. And basically, on April 28, 1987, this is right after Forthought had shipped the first run of PowerPoint, a group of Microsoft senior execs went and spent a day at Forthought to hear about the initial PowerPoint sales on Macintosh and what their plans for Windows were. And that day, as soon as they all got back to Redmond, that next day, they sent the letter withdrawing their earlier letter of intent to purchase, which is-

• 34:07David Rosenthal?

  Interesting, interesting.

• 34:08Ben Gilbert?

  Totally crazy.

• 34:09David Rosenthal?

  Well, that makes sense, because what I did research was the back and forth on the acquisition from the Forthought side. So this was end of February, Microsoft reaches out to Forthought, says, "We want to get into this market. We want to buy you. We want to do this fast." Couple of weeks later, in mid-March, Jeff Rakes and John Shirley, who was then the president of Microsoft, come down to Silicon Valley. Forthought is based in Sunnyvale at this point. And they have dinner. They offer 5.3 million to buy the company in cash. The Forthought board meets and decides, they haven't shipped the product yet. This is still a couple of days before they shipped the product, and decides, you know, that's not that much money. The VCs have probably put at least that much

• 34:54David Rosenthal?

  money into the company. They're like, "We'll roll the dice. We'll ship the product." They shipped the product in mid-March, and it's a huge success. It sells $1 million in its first month.

• 35:04Ben Gilbert?

  They instantly sold out all 10,000 they had printed.

• 35:08David Rosenthal?

  Which is, it's just so crazy to be literally sold out of software.

• 35:11Ben Gilbert?

  Sorry, you can't get the bits anymore. They're sold out.

• 35:14David Rosenthal?

  Can't get the bits anymore. They're sold out. Only so many bits.

• 35:20David Rosenthal?

  So then after that, that's when Microsoft comes back down and meets with them in April. And then immediately after that, I guess they cancel the LOI that they had with more to acquire them. They decide PowerPoint is what they've been looking for. They need to acquire Forthought and then they come back with a much improved offer.

• 35:41Ben Gilbert?

  Can you imagine like being Dave Weiner in that situation? What a bummer.

• 35:46David Rosenthal?

  Oh, total bummer.

• 35:50David Rosenthal?

  What could have been, what would have happened otherwise? So interestingly though, the offer that they come back with, this is, you know, VCs sometimes do things to hurt themselves. They come back with an offer to acquire Forthought for $12 million, but in Microsoft's stock. The board is happy with the offer, but they believe that Microsoft's stock is overvalued because it was up 6X in the past year and they didn't want to take Microsoft's stock. They wanted cash.

• 36:20Ben Gilbert?

  Now, were they public?

• 36:21David Rosenthal?

  Yeah, Microsoft had gone public the year before.

• 36:22Ben Gilbert?

  You could just sell the stock. Like, what's the big deal?

• 36:24David Rosenthal?

  Of course, of course you could sell the stock or you could hold the stock and make billions of dollars, but you know, there we are, VCs.

• 36:33Ben Gilbert?

  Cash is king, David. Cash is king.

• 36:35David Rosenthal?

  Cash is king. Cash is king. So the board says, no, we don't want this billions of dollars of upside in Microsoft's stock. And they call themselves venture capitalists. There also were a bunch of other weird terms in there, like they particularly, they wanted the whole company to move up to Redmond and join Microsoft in Redmond in Seattle. The team didn't want to do that. They wanted to stay in Silicon Valley. So they go back to Microsoft, they have the boards negotiate, because there's still VCs on the Microsoft board at this point in time. And Microsoft comes back with 14 million in cash and the acquisition gets done in early summer. And in particular, the company and Forthought, as part of the negotiation, they get to stay

• 37:16David Rosenthal?

  in Silicon Valley, not just keep developing PowerPoint themselves there, but they get made into a whole official business unit of Microsoft, the graphics business unit of the applications division. They have a mandate to hire and build and run that whole division out of Silicon Valley. So after the acquisition closes, as we mentioned at the top of the show, they move the company from Sunnyvale up to Sand Hill Road, to Tony Sand Hill Road, where all the venture capitalists are, right next to Stanford. And they move into the Quadress complex on Sand Hill Road, take over the whole complex. That then is the complex after Microsoft leaves,

• 37:58David Rosenthal?

  where Benchmark has their, I think their first and longtime office. Shasta's there, many other VC, August Capital is there. And August Capital was the VC investor in Microsoft are all there in that complex. It had been something else before Microsoft moved in, but Microsoft made it into a tech complex.

• 38:20Ben Gilbert?

  Wow, wow. And there's a big lesson in here. I mean, this is, this is one of the great quotes from Bob that he sent over. I don't think I'm spoiling anything here in this opening line. I think you guys know the end of the story, but PowerPoint has been so very successful after its acquisition, and mostly as far as I can see, because Microsoft in 1987 lacked any technology or experience to try to manage us, manage its first distant location, and so accidentally avoided smothering its new product while providing what was really vital to us, money, industry clout, strategic tips from Bill Gates and Mike Maples Sr. during confusing times for Windows developers.

• 39:00David Rosenthal?

  And was it ever. Yeah, we have to say once again, thank you, thank you, Bob, for your email to us and writing the book about this. You listeners, you can tell we're geeking out over this because it's so cool to have such primary sources for acquired. So yeah, that's, that's what happens. I mean, Microsoft really does leave PowerPoint alone. It's the original Facebook style acquisition. And even though PowerPoint would ultimately come to be in 1990 with the launch of Windows 3.0, the Office bundle is introduced and PowerPoint comes to be bundled with Word and Excel and sold together as a set.

• 39:40Ben Gilbert?

  Which actually was launched first for the Mac in 1989. The three were bundled together. Yes, PowerPoint became a component of the Office suite for Mac, and then in 1990 for Windows.

• 39:52David Rosenthal?

  Ah, interesting. Well, that was because Windows 3.0 didn't launch until 1990. Bob also talked about, this is really getting into the weeds of both history and technology here, but before Windows 3.0, it was impossible to develop for Windows. Like, it was, nobody outside of Microsoft essentially could write applications for it. It was so buggy. And so the PowerPoint group, again, being independent, refused to ship a version of PowerPoint for Windows until a stable version of Windows came out. So you could get Word and Excel on Windows 2.0, but you couldn't get PowerPoint, simply because Bob and the whole group was like, "No, we're not shipping for this piece of crap operating system."

• 40:32Ben Gilbert?

  And the amazing thing is, it took a while to get it, to get it all integrated. So you had Word and Excel that felt very similar, but then you had PowerPoint 4 that was starting to actually converge, but it still looked quite different from the, you know, the original Word and Excel on Windows. And it wasn't actually until PowerPoint 95, which used the version number of PowerPoint 7.0, where they actually totally converged and used the same version number. And the reason it went from 4 to 7 was to catch up with the Excel and Word version numbers. So there was never a PowerPoint 5 or 6.

• 41:08David Rosenthal?

  5 and 6.

• 41:09Ben Gilbert?

  Yeah, it's the Windows 9 of PowerPoint.

• 41:14David Rosenthal?

  The iPhone 10.

• 41:15Ben Gilbert?

  The iPhone 9.

• 41:16David Rosenthal?

  The iPhone 9.

• 41:17Ben Gilbert?

  Yeah.

• 41:19David Rosenthal?

  Oh, boy.

• 41:20Ben Gilbert?

  Yeah.

• 41:21David Rosenthal?

  Well, that is the story, more or less, of PowerPoint.

• 41:25Ben Gilbert?

  And I'll throw out a few numbers just to, just to, like, understand the ramp here a little bit. So PowerPoint has been phenomenally received since day one. So it was overhead projectors, and then it was 35mm slides, and it was in color. And then they started to actually find a way to, to, you know, make it, I think it was actually, it was like a video, basically, that was projected out. Let's see, "The third version for Windows and Mac in 1992 introduced video output of virtual slideshows to digital projectors, which would over time, of course, completely replace physical transparencies and slides." But the sales number- Are quite staggering. So that first 10,000 at 100 bucks a pop sold out right away. That was in 87.

• 42:08David Rosenthal?

  Eighty seven.

• 42:09Ben Gilbert?

  And then it comes.

• 42:10David Rosenthal?

  And only for Mac.

• 42:11Ben Gilbert?

  And only for Mac. It comes out in Office in 89 and then for Windows in 1990. By the last six months of 1992, PowerPoint revenue alone, not Office bundled, was running at a rate of over $100 million annually. Incredibly fast growing business. In 1997, there's a couple more great stats here. So fast forward another five years, there's over 20 million copies of PowerPoint in use. And that the total revenues from PowerPoint over its first decade from 87 to 96 was over a billion dollars. I'm going to stop before we get to a cloud world because that's when the accounting gets a little funky inside of Microsoft. But in 2009, there was a group called MBD,

• 42:52Ben Gilbert?

  which was Microsoft Business Division, I believe, which included Dynamics CRM, but that was a smaller group, did 18.9 billion in revenue and 12 billion in operating income. So, you know, enormous behemoth. It's a, it's a freaking Windows sized business for Microsoft, having Office all up.

• 43:12David Rosenthal?

  This is the power of if you recognize a massive wave like this, which is like the deployment of a fundamentally new, you know, technology mode of interaction and what that can enable. You can build enormous businesses as an application on top of it. I mean, this is the same story as Uber, right? This is the same story as Instagram. It's just in an office environment and with PCs.

• 43:39Ben Gilbert?

  It's incredible that there was instant product market fit, even as the product changed so dramatically. The world wanted exactly what PowerPoint was the first, second and third times. And it just, it just, it occupies, not only was the niche enormous, the market for digital presentations, but PowerPoint right now owns 95% of that market.

• 44:03Ben Gilbert?

  That is unreal.

• 44:06David Rosenthal?

  Which is funny, like in tech, we think like, oh, you know, lots of people use keynote now. And like, you know, keynote's great, like we use keynote at Wave, but like, we're such a small piece of the overall market.

• 44:17Ben Gilbert?

  Yeah. And, you know, it's funny, while I love keynote and while I've dabbled in Google Slides, I end up using PowerPoint more often than anything else because I know that if I'm working on a deck and somebody else is going to come in and work on it too, they probably have a history of using and understanding PowerPoint. I don't want to throw them into a new toolset. I mean, it is just, it is the power of lock-in and network effects and standards and it's just hard to shake.

• 44:46David Rosenthal?

  Yep. If you send it to someone else as a PowerPoint file, not as a PDF, like you know that they're going to have PowerPoint installed on their machines. One, one quick thing I want to say, just on the, the idea of this massive wave coming and then building, conceiving and building an application to ride that wave, really, really recommend everyone go read Bob's book, the Sweating Bullets book. It's just, it's so good and so fun from a history perspective, but he also goes into great detail and he kept detailed notes throughout the development of PowerPoint, you know, about his, how the idea came together, how he did market research for it, how they basically feature prioritized, why they thought

• 45:27David Rosenthal?

  that they could beat competition. And it's really a great example of how to think about, you know, really a business plan for, for a new application product in a, in a new technology paradigm. So really great case study.

• 45:40Ben Gilbert?

  Yeah.

• 45:40David Rosenthal?

  Worth reading.

• 45:41Ben Gilbert?

  Seconded. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 45:56David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Legora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 46:12Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 46:27David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 46:51Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 47:10David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 47:40Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you.

• 48:05David Rosenthal?

  Should we move on to category?

• 48:07Ben Gilbert?

  So I have this as a product. It was its own business unit and it was a self sustaining, or I don't know about sustaining, but it was a product that they were selling and was selling well. And you know, they had the whole channel to sell it. Ultimately, Microsoft was going to figure out a way to integrate this into every other piece of their business and just make it a product that used the Microsoft sales channel, the Microsoft sort of distribution, relationships. It only took them a couple of years to really build the ultimate bundle in Microsoft Office out of it. My assessment is product.

• 48:44David Rosenthal?

  Yeah, 100% like it's a artifact of history that it was officially a business line for a number of years. A cool one, given all the externalities it produced in, on Sand Hill Road and in Silicon Valley. But 100% of product. Also, we didn't talk about this in the history, but this is a good point for it. We joke on this show about the old quote that like, there's two ways to make money in business, you know, bundling and unbundling. The bundling of Word, Excel and PowerPoint into Office was one of the best and most genius business decisions of all time, because when they did it, each of those products was selling separately for $500. So you would have had to pay $1,500 to buy all three.

• 49:29David Rosenthal?

  All three of them had competitors in each of their, you know, word processing presentations and spreadsheets that sold for about the same price. But when Microsoft bundled all three of them, they sold the three of them together for $1,000. And there was no user who needed one of those, but not the others. Like if you were an Office user, you needed all three of them. So now you had the choice of you could pay $1,000 for all three of them from the, you know, made by the company that also made your operating system. Or you could buy inferior versions separately for 1,500. And they just completely mopped up the whole market.

• 50:06Ben Gilbert?

  And there's a great Bill Gates quote here that is complete with an ultimatum. So here's an internal memo by Bill Gates announcing the plan to integrate the applications themselves. And this is in February of 1991, at the end of PowerPoint 3.0 development, as they're starting to shift toward working on a sort of integrated platform. "Another important question is what portion of our application sales over time will be a set of applications versus a single product? Please assume that we stay ahead in integrating our family together in evaluating our future strategies. The product teams will deliver on this. I believe that we should position the office as our most important application." Boom. And I'm not just, I'm not just justifying my career here because I, I served,

• 50:51Ben Gilbert?

  when I was at Microsoft, both in my internship and in my first job, I served on a shared team. So we basically built shared components across the web apps and then later the iPad and Mac apps. But the notion of, of sharing between the products to promote the business, the, the business of selling a bundled product group dates back to 1991.

• 51:11David Rosenthal?

  Well, that is the sound of many other mid 90s software companies and startups going out of business.

• 51:19Ben Gilbert?

  And, and as one of my managers at Microsoft said, "In the 90s, there were 747s flying cash to Redmond. It was just full of cash."

• 51:30David Rosenthal?

  Oh, man. It's, it's so funny. Like, it seems like such a different world. It is like, that is a totally different world from the world we live in today. But it was not all that long ago. Like, I remember all that. You worked there, you know?

• 51:44Ben Gilbert?

  Yeah. And there's still, you know, I haven't worked there in five-ish years now or four years. But, you know, there, there was still a very strong culture of, of memory around that and of, of wounds from the Department of Justice days. And the cultures that are created by these things and the, the memory of tapping that incredible product market fit well and, and just knowing what that feels like and, and feeling like you're invincible, they last for two decades, three decades.

• 52:11David Rosenthal?

  Unfortunately, they tend to outlast their useful life.

• 52:16Ben Gilbert?

  Yeah, culture is a hard thing to shake.

• 52:18David Rosenthal?

  Yeah. Well, should we do what would have happened otherwise?

• 52:22Ben Gilbert?

  Yeah. Yeah. So I've got three of them. We've basically covered them, but Jeff Rakes's team, before they identified Moore and before they identified PowerPoint, they were working on an internal version of this. And it wasn't, you know, I don't, it certainly wasn't exactly this, but they had a thesis around sort of graphics-based presentation computing that they were going to do no matter what. When Jeff was heading the marketing for the application division, they sort of put pen to paper on what would a presentation product look like? And that's, that's sort of when they started looking around to acquire. So it could have been built internally. Who knows if it would have been as successful? I'm not sure how

• 53:04Ben Gilbert?

  much nuance there was to nailing the exact right product at this point because I just don't think there were that many products in the market. So I think had they built it internally, they probably would have still been able to define the market.

• 53:18David Rosenthal?

  Yeah, there were no other products in the market. By the time PowerPoint shipped with Windows 3.0 in 1990, they were still, it was the first, this is incredible, like the first graphical presentation software for Windows. What were the other people in the market doing?

• 53:35Ben Gilbert?

  Yeah, now there'd be three other venture-backed companies, somebody doing it on blockchain and like 150 knockoff Chinese clones by the time like you wake up the next morning and you're like, oh my God.

• 53:47David Rosenthal?

  Oh, that's so true. That's so true.

• 53:50Ben Gilbert?

  My other two, yeah, they could have built it into Word and they could have bought Dave Weiner's Moore. It seems like there was no way that Microsoft wasn't going to attack the market at this point.

• 54:01David Rosenthal?

  Who knows? Right. But I don't think history would have been any different really, whether they had acquired PowerPoint or not, or taken any of those paths. Like, they would have ended up, one way or another, with the right product in market. They would have bundled it with Word and Excel, or it would have been a part of Word or whatever. Like, Microsoft was going to own business productivity application software on top of Windows. Like, that was going to happen regardless.

• 54:28Ben Gilbert?

  Yeah, I think so. I mean, the biggest difference is it probably wouldn't be called PowerPoint.

• 54:33David Rosenthal?

  I mean, maybe there's a world where it wouldn't be a separate application and then maybe slide culture and PowerPoint culture wouldn't have grown up in quite the same way, but

• 54:43Ben Gilbert?

  The question is if they built it into Word, is there any way that somebody else would have come out with this format and had it become dominant and large? Like, there just weren't enough companies capable of making and distributing software at that point. I think Microsoft could have like screwed around for a couple more years and then nailed it by either acquisition.

• 55:05David Rosenthal?

  Well, this is, I mean, this is why Bob and Dennis, despite having plenty of career prospects and opportunities, other places went to forethought, was like, if you wanted to do this kind of stuff, there just weren't many places to do it. So you move into tech themes?

• 55:22Ben Gilbert?

  Yeah, yeah. So, I mean, we talked about it a little bit, but keep any companies separate to make them more successful. I think that's a huge one here. Avoid smothering. So provide the resources that are helpful. Don't trample and then figure out when bundling makes sense. You sort of see the same thing with Instagram, bundling the ad units to advertisers between Facebook and Instagram.

• 55:44David Rosenthal?

  And the network too. Like, I mean, Instagram bootstrapped the social connection network off of Twitter initially, but then when it became part of Facebook and like, Facebook started pumping it into the newsfeed and then both bidirectionally of like Instagram appearing in the newsfeed and on Instagram, like, oh, your Facebook here, you know, connects with your Facebook friends. You know, that's a huge example to me too of that bundling.

• 56:11Ben Gilbert?

  Yeah, it's interesting. I think we're starting to identify a trend of like, keep the development team separate, pour resources on, allow sort of separate cultures, at least for a time, but figure out how to bundle to customers. And ultimately, you need to do more integration with the product teams in order to get there. So you're not sort of shipping your org chart in weird ways, but I think that's important. Are there other good examples of making an acquisition, keeping the team separate, keeping the product separate and bundling for customers? Amazon and Audible is a decent one. The Audible team's still entirely separate,

• 56:52Ben Gilbert?

  and yet you can buy your Audible books sort of through the Amazon product page.

• 56:57David Rosenthal?

  Yep. I'm having a hard time thinking of really successful instances of this outside of Instagram, PowerPoint. You could argue maybe Lucasfilm by keeping Lucasfilm completely separate creatively, but providing the, both the resources to make more films and more content, and then the distribution that Lucasfilm didn't have on its own.

• 57:26Ben Gilbert?

  It's almost like there's different levels of this, like the, they keep them separate and pour the right resources on and share the right learnings is like table stakes, but it's like this total home run scenario if you could figure out how to bundle the front end to customers. Like, have you, have you noticed if you're a Prime subscriber now, you become a Twitch Prime subscriber and you have one subscription to a, to a streamer that comes with that? Sort of an interesting example. Although they're cross pollinating the teams a lot more than, well, it's a few years in now, so it's not so different than this. I think we should keep an eye out for that in future episodes, though.

• 57:58David Rosenthal?

  You know, the only other theme that I have is one that, that Bob mentions in his, in his blog posts and in, in the book. The quote that he has is, "A year or two is an eternity in a rapidly exploding market." And that's so true. Like, the amount of time that passes in between, like throughout this history is, is fairly short. And the, the time that the window is open to create a PowerPoint-like product, or to create a, you know, Uber-like product, or an Instagram-like product, is very, very short. Like, these windows don't come along very often. When they do, like, you need to be delivering the product. Product into market like in that window or if you're too early like the market's not going

• 58:43David Rosenthal?

  to be ready to adopt. It really was Windows 3.0 shipping, getting mass adoption and having PowerPoint ready and shipping with that. Like before that, forethought probably would have been fine and PowerPoint would have been okay if it were just on Mac. But like whoever shipped first with the first mass adopted version of Windows was gonna win. You know, and similarly, you know, with the iPhone and Android, like, you know, when you were the first application that just worked, that was a major new, you know, category enabled by the computing paradigm, that was the time to win.

• 59:20Ben Gilbert?

  Yeah. And as I'm reflecting on it a little bit in starting companies and trying to make bets on these platform waves, you sort of have to believe two things. You have to believe that that platform is going to become super dominant and that, you know, it's going to be totally pervasive and change consumer behavior and have incredible, um, just sort of traction in the market. But you also have to believe that you can build a standalone venture scale business by just being on that platform and by being an app on that platform. And like for Windows 3.0, there was tons of money to be made by, or even 3.1. Like if you're the first to market on that

• 1:00:02Ben Gilbert?

  incredibly pervasive, expanding platform, you also have to have the faith that Microsoft is going to allow you to monetize on their platform enough so you can be a venture scale business. You know, the Instagram's a kind of a bad example of that because they weren't monetizing when they sold to Facebook. But it's the question we ask, ask ourselves a lot when we're trying to make a bet on a new emerging platform is, is it going to be huge? And are we going to be able to singularly be here and build a big business? And I think those are the two questions you have to ask about VR. I remember when the Apple TV developer platform came out probably three years ago, I was considering making a bet there. I don't think it sort of changed consumer behavior or became dominant enough. But we were thinking, is this a new, is this a new app store?

• 1:00:47Ben Gilbert?

  Or is this a new iOS? And it's, it's hard to know when those two characteristics are, are present. And I think, you know, that's why they call them bets. You gotta, you gotta put your, your chips down a little.

• 1:00:59David Rosenthal?

  Well, what's, what's interesting about this though, is like this wave and then mobile and then potentially, you know, VR, or even blockchain in the future are the same in that like, it was back in 1982, 83, 84, when people knew, people in the tech world knew that the graphical user interface was the next wave. But it wasn't until 1990, when Windows 3.0 shipped, that that was the right window to be hitting the market, you know? So like, that's a six to eight year gap there. And I feel like VR is kind of like in the same point. Like, everybody who's, you know, used VR, who's been in rec room, you know, knows that this is the future, right?

• 1:01:42David Rosenthal?

  But like, we're now like, maybe we're in like 1986, you know, or 87. But there was that article that just came out this past weekend that Apple is working on a VR and AR headset, scheduled to ship in 2020 currently. Like, maybe that's the point. Maybe that's the Windows 3.0 of AR and VR. Like, we know it's coming, but the window is not yet ripe to build the, you know, to realize the massive opportunity.

• 1:02:07Ben Gilbert?

  You know, as we work on companies at PSL, one of the ways to think about, do we know enough about the space yet to start a company? We've seen it come to fruition a few times where one characteristic to prioritize in the early stage is ability to adapt to change, rather than certainty about your, your plan and making it a good plan. Because there's a few times where we've seen a company that just needed to get into market to both learn about the market and sort of develop that sixth sense about a trend of where they need to be in a year or two, that you really wouldn't be without operating in the space. And so it's, can I only raise a little money? Can I stay super lean and nimble?

• 1:02:48Ben Gilbert?

  And can I be first to jump onto new opportunities when they, they emerge and there's a sea change in the market? With, with forethought, I think they felt around in the dark for a while to kind of get there. And then it wasn't that great of a venture outcome, or it was a terrible venture outcome. But, you know, it, it does speak to like,

• 1:03:04David Rosenthal?

  Well, it would, no, it was, it was like an okay venture outcome. I mean, remember, this was 1987.

• 1:03:08Ben Gilbert?

  They more than returned capital.

• 1:03:10David Rosenthal?

  Was a lot more than, yeah.

• 1:03:12Ben Gilbert?

  Yeah.

• 1:03:13David Rosenthal?

  It was an okay.

• 1:03:14Ben Gilbert?

  But I think it does speak to the merits of if you're already loosely operating there and you have the agility to sort of move around to where the market is going, you're in an amazing place to catch on to one of these rocket ship platforms as they're taking off.

• 1:03:29David Rosenthal?

  Where you want to be is, is where PowerPoint was, was having enough experience in the market to have the product right.

• 1:03:37Ben Gilbert?

  Yes.

• 1:03:38David Rosenthal?

  And still be able to hang on until the window open. And then when the window open, opens just shoot through it.

• 1:03:44Ben Gilbert?

  It's a delicate art. I've got one more before we get to grading on tech themes. Listeners who haven't heard us talk about this acquired started because David and I were getting drinks and we would, we would like get drinks and catch up maybe every other month or so. And we wanted, partially wanted a reason to just hang out and talk more. But the other part of it was, we were sitting there and I, David, I pitched you on two podcast ideas. One was like, we should cover acquisitions that actually went well because the trope is that none of them ever go well and they implode. The other one was, why don't we do a podcast series where every episode is about the rare company that manages to have a billion dollar plus innovation twice?

• 1:04:28David Rosenthal?

  That's right. I remember that. And we decided not to do that because there just weren't that many. It would be a very short, very short podcast.

• 1:04:37Ben Gilbert?

  Yeah. And I think our thesis was basically like companies have the magic moment just, just once because they're so rare that they find that product market fit, the monetization, where like just everything works. And then after that, companies keep finding ways to grow and expand that thing, but they generally fail to find a second complete one of those. And particularly one that works under the same roof and doesn't interfere with the other main business. Microsoft did it. Like, they're one of the few in the world. So let's look at like 2009, 2010, because it's the last time that the business was kind of cleanly broken out where you could see Office and you could see Windows and they didn't have insane ways of grouping

• 1:05:21Ben Gilbert?

  and reporting the financials for these divisions. But both of them were doing 18 to 20 billion dollars a year. Yes, they built each other up. And yes, there's reasons why the Department of Justice intervened because they were propping each other up and Windows was using Office to create lock-in and Office was creating a big moat for Windows. But in a lot of ways, you know, these were two completely separate multi, multi, multi-billion dollar businesses. Office, as I was trying to do some of the math, they've probably done over 300 billion dollars of revenue since the beginning of Office and just Office.

• 1:06:01David Rosenthal?

  Not including Windows.

• 1:06:03Ben Gilbert?

  Not including Windows.

• 1:06:04David Rosenthal?

  Wow.

• 1:06:04Ben Gilbert?

  And that's just completely mind blowing. Like, that is better than the vast majority of companies could ever hope to do alone. And this was just shipping a really incredible bundle. I don't think it would be where it is today without having PowerPoint. I mean, it is so de facto the way that people communicate. We'd be missing an entire paradigm of the way that people communicate ideas. And that's a huge piece of what Office is all about.

• 1:06:32David Rosenthal?

  Yeah, and I'm glad you brought that up before, right before grading.

• 1:06:36Ben Gilbert?

  Not to load it or anything.

• 1:06:39David Rosenthal?

  Not to load it or anything, but, uh, well, okay, should we go into grading?

• 1:06:43Ben Gilbert?

  Yeah, let's do it.

• 1:06:44David Rosenthal?

  Okay, I'm gonna go first with what I was gonna do before hearing that argument. I was gonna give this a B+, which is funny. We say we need to stop giving B+. B+ is like the standard grade on acquired, B+, A-, because like, yeah, it was great, like, super good execution, like, you know. PowerPoint was the right thing to do, buying it versus building it was the right thing to do. But like, like we talked about a minute ago, this would have happened anyway, I think. But what if it hadn't happened anyway? Like, what if, you know, what if Bill Gates hadn't listened to Jeff Rakes and like, had shipped a feature in Word and this whole A

• 1:07:28David Rosenthal?

  paradigm wouldn't have been created. But like, having the three products and being able to bundle them as three was key to winning. Like, if it were only two, if it were only Word and Excel, competitors, they wouldn't have been able to reduce the price of the bundle enough that competitors to those products also wouldn't have been able to reduce their prices. And so by like, having the three of them and literally knocking the price of a full product off of the bundle of the three of them, like, no competitor could keep up.

• 1:08:02Ben Gilbert?

  Well, no competitor could keep up anyway, because no one else owned the platform. Lotus had its time, but, I mean, they were making such ridiculous margins on these things that, that, and they were selling so many that the fixed costs were completely de minimis. I don't think it was like, we lowered our prices so much by having a third app that we could put the other guys out of business because our prices were so low. I think it was like, we had every competitive advantage in the world because everyone was using it on our operating system. And we had all of the sales channels and we invented enterprise software.

• 1:08:34David Rosenthal?

  That's true. But like, WordPerfect had enormous market share in the DOS era.

• 1:08:39Ben Gilbert?

  Yep.

• 1:08:39David Rosenthal?

  And brought a lot of that market share into the Windows era.

• 1:08:43Ben Gilbert?

  And it's true. It's very true. And the feature checkboxes wars, where, you know, it was Lotus and WordPerfect and Office all against each other. And it was who could add more buttons on their toolbars.

• 1:08:54David Rosenthal?

  Yep. Yep. All right. I'm gonna go, I'm gonna rest my pen at B+.

• 1:09:01Ben Gilbert?

  You're so harsh. This is an A. This is so clearly an A. They turned $14 million into hundreds of billions.

• 1:09:09David Rosenthal?

  Wait, you were just arguing against the...

• 1:09:11Ben Gilbert?

  Let's say a hundred billion.

• 1:09:12David Rosenthal?

  I was arguing your case a minute ago, and now you're arguing my case.

• 1:09:15Ben Gilbert?

  Look, I'm gonna play devil's advocate, no matter what, but...

• 1:09:20Ben Gilbert?

  I see why it's a B+, because when I was thinking through it, the question is in our grading, should we consider not only the opportunity cost of the capital? Like, so if you consider they turned 14 million into 100 billion over a 25, 30-year lifespan, whatever it is, like, holy crap, how's that not an A+? The only reason why I would knock it down a little bit is it wasn't actually the insight of buying this particular company and bringing in this particular team and product. It was, it was a incredible insight that this was just a puzzle piece of. In the same way that when we did the Siri acquisition, when we did the Soundjam acquisition,

• 1:10:02Ben Gilbert?

  it looks actually a lot more like an Apple acquisition where this was a thing they were going to do anyway, and then this was a building block on which they sort of shaped it into their vision. Now, I don't know if Bob would agree with us, and maybe there was a lot more to PowerPoint and how PowerPoint actually ended up shaping the, the unique and special thing that was the, the large-scale successful PowerPoint. But I'm going to go A, not A+, because it wasn't a thing that they wouldn't have been able to do without buying it.

• 1:10:33David Rosenthal?

  There we have it. All right, some divergence, finally. No, it was great. We need some, we need some more divergence, for no other reason than to keep it interesting. There we have it. Should we move on to carve-outs?

• 1:10:46Ben Gilbert?

  Let's do it. You want to go first?

• 1:10:49David Rosenthal?

  No, you, by all means.

• 1:10:51Ben Gilbert?

  All right. I read a really great Hacker News thread a couple of weeks ago. Well, I feel like it's like 2008 or '09. I read a really great Hacker News thread.

• 1:11:02David Rosenthal?

  This is a throwback episode, anyway, so.

• 1:11:05Ben Gilbert?

  We'll link to both the comment that I'm going to describe and the, the other comment that recommends the book, but there's two comments in this, this thread that are amazing. One recommends the book mindfulness in plain English. I'm a complete and total novice to this, and I would claim no, no wisdom or, or serious practice, but I'm, I'm very interested in the topic and looking for more resources of. Mindfulness and meditation, and it is a book that explains the Vipassana meditation in a way that is completely non woo woo. It is very much like how you can wrap your logical mind around this process. And let's say you don't, you don't want to hear any of the sentences that leave you staring off into space and go, I have no idea what they just said, and I find that completely

• 1:11:50Ben Gilbert?

  meaningless, though it sounds cool. This book doesn't have any of that, and it's got a lot of really great sort of, if you're an engineer or, or type A or analytical person who listens to this show and you've thought about meditation, like this is a really, really cool and interesting book.

• 1:12:06David Rosenthal?

  So basically, probably 100% of our audience.

• 1:12:09Ben Gilbert?

  Yeah, yeah. And then the, the other piece in that, in that thread was somebody who was describing, and this is another analytical engineering type person, describing their experience with meditation and, and sort of what the process is in the terms of an audio engineer. And he basically said that meditation is like turning down the gain knob, because when you're truly sort of silencing your mind and keeping your thoughts focused, really crazy things are going to happen and you can't have that happen to you when you're outside in the world, when the sort of gain knob is all the way up, or you could basically blow out your speakers. It's, it's too intense.

• 1:12:52Ben Gilbert?

  And so why you, why you meditate is to sort of turn down the game knob or the volume knob, so you can experience all this crazy stuff in a really controlled, quiet experience. But then the goal is, as you become more of a master of this, to, to turn it up over time and be able to be mindful in real world settings without sort of the danger of quote unquote, blowing out your speakers. And I thought that was like the coolest way to think about it. And the first time that this sort of arena of, of thought and practice made sense to my, my analytical brain.

• 1:13:23David Rosenthal?

  Hmm. What a cool analogy. I like that a lot.

• 1:13:27Ben Gilbert?

  Yeah, I thought so, too.

• 1:13:28David Rosenthal?

  That's really cool.

• 1:13:28Ben Gilbert?

  So we'll link both of those in the, in the show notes. You can check it out for yourself because there's a, there's a few more paragraphs in there about the, the metaphor that I'm not doing justice to.

• 1:13:37David Rosenthal?

  Wow. Well, that's a deep and noble carve out. Mine, well, on the surface, mine is going to be completely the opposite of that, but fits in with the theme of the show with, you know, waves and applications coming to the waves. Ben, have you been riding electric scooters over the past few weeks?

• 1:13:59Ben Gilbert?

  I haven't. They're, they're not up in Seattle. I've been riding, riding a lot of the bikes.

• 1:14:03David Rosenthal?

  You gotta buy one. So many of the electric scooter sharing companies are now in San Francisco. This is the phenomenon that started about eight months ago in LA, in Santa Monica with Bird and is sharing, just like, you know, bike sharing companies like OFO and Limebike and the companies in China that do bike sharing, but for electric scooters that are literally like razor scooters with batteries in them and electric motors in the wheels. And these things are amazing. You can, you know, ride it around the city, get where you're going. You just leave it on the sidewalk. Somebody else in the app finds them with GPS location, goes, picks it up, rides it to wherever they're going, leaves it where, where it is. Okay.

• 1:14:46David Rosenthal?

  So cities are up in arms about this because there's like litter of, you know, electric skateboards or electric, electric scooters all over the sidewalks. But that aside, this is like the most amazing transportation innovation I think that I've seen, you know, since Uber. It's so cool. Like the form factor is perfect. They just nailed it. It's the Windows 3.0 of light electric vehicles. And it's great because like, unlike an electric skateboard where like you're on a skateboard, you have to know how to ride a skateboard. And even if you know how to ride a skateboard, like you still can feel a little out of control on it. With a scooter, you've got the handlebars. So you have a lot more control. And at the same time, it only takes up the space of a skateboard and is collapsible and is lightweight

• 1:15:31David Rosenthal?

  and portable. It's great. I've been riding all over the city on these things and so So I actually bought my own.

• 1:15:37Ben Gilbert?

  Do you have one?

• 1:15:37David Rosenthal?

  I bought my own, yes. So on Amazon, Amazon Prime, delivered in two days, you can get a nine bot electric scooter, ES1 electric scooter. This thing goes 13 miles an hour, has about a 15, well, depending on how much you weigh, because that can have a big impact on it, 10 to 15 mile range on a charge. It's great.

• 1:15:58Ben Gilbert?

  Is this the one you'd recommend? Should we?

• 1:16:01David Rosenthal?

  I would highly recommend it. $2.99 on Amazon, delivered free, you know, Prime. And it's great. Like, I basically don't use my car or my bike anymore.

• 1:16:11Ben Gilbert?

  Wow. And listeners can't even see all the weight you've gained.

• 1:16:18David Rosenthal?

  Well, maybe I'll have to do some, you know, meditation and mindfulness to think about exercising.

• 1:16:25Ben Gilbert?

  Oh, that's cool. Yeah.

• 1:16:27David Rosenthal?

  In Seattle, I don't know if it'll work as well as San Francisco, because what you, the one time you don't want to be riding these things is in the rain.

• 1:16:35Ben Gilbert?

  Yeah. Well, they could be huge in the summer.

• 1:16:39David Rosenthal?

  It's still pretty cool. Like, even on the hills of San Francisco, like, there's enough torque in these things that, like, you can, with the really steep hills, you have to kick a little bit in addition to the motor, but you can go up hills, like, it's pretty cool.

• 1:16:53Ben Gilbert?

  What's the magic here? Like, like, we've had sort of e-bikes and scooters and stuff forever. Like, is there something now where mass production is, is cheap and better for certain parts? Is it lithium ion batteries? Like, why now with the scooters?

• 1:17:10David Rosenthal?

  I think it's a couple of things. It's batteries and range at a certain minimum acceptable power and torque that you can deliver. It's the hub electric motors in the wheels. So these things don't have traditional electric motors. They have literally like very tiny motors built into the small seven or eight inch wheels on these things. So that keeps the size and weight down. And then I think it's also just like figuring out that this is the form factor, that once you hit those minimum requirements, like, it's so much better than a bicycle, because it's so much smaller. So like, when you're riding it, you only take up the width of a human being, you know, and you're then the like, mass of a human being plus like 15 pounds.

• 1:17:53David Rosenthal?

  Whereas when you're on a bike, like, a bike is big, it's bulky, you can't fold it up and bring it inside. You know, you got to ride in bike lanes, like, all this stuff. Whereas a scooter, it's literally, it's just like making the human more efficient.

• 1:18:04Ben Gilbert?

  Bionic man.

• 1:18:05David Rosenthal?

  Indeed. It's like a bicycle for a bicycle.

• 1:18:12David Rosenthal?

  All right, on that note.

• 1:18:15David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:18:21Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:18:32David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:18:52Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:19:05David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:19:16Ben Gilbert?

  All right, listeners. If you are not subscribed and you want to hear more, you can subscribe from your favorite podcast client. If you feel so inclined, we'd love a review on Apple Podcasts or a comment on Breaker or a tweet or a whatever the kids are doing these days. We appreciate listening and hope you enjoy the show.

• 1:19:36David Rosenthal?

  We'll talk to you soon.