Season 2, Episode 7 PowerPoint

In season two, episode seven of Acquired, hosts Ben Gilbert and David Rosenthal explore Microsoft's first-ever acquisition, Forethought Inc., the creators of PowerPoint. They delve into the history and significance of the acquisition, highlighting that while PowerPoint is ubiquitous today, many are unaware it was not a Microsoft original but an acquisition. The episode illuminates how Forethought, initially struggling with its own operating system, pivoted to create the revolutionary presentation software. The hosts also discuss the strategic investments by Microsoft and Apple in Forethought, just before its acquisition in 1987 for $14 million. Additionally, they touch on the broader impact of PowerPoint as a tool that transformed business communication and presentation, becoming a key component of the Microsoft Office Suite.

• Ben Gilbert and David Rosenthal introduce the episode.
• They emphasize the significance of the software they are discussing, which is widely used and integral to many users' professional lives.
• They express their personal experiences with the software, indicating heavy use in the context of investment banking.

"Welcome to season two, episode seven of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenthal, and we are your hosts."

This quote introduces the podcast and its hosts, setting the stage for the episode's focus on technology acquisitions and IPOs.

"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."

This quote highlights the episode's focus on a significant but perhaps not widely known acquisition involving a highly utilized piece of software.

• The episode discusses Microsoft's first acquisition: Forethought Incorporated, the makers of PowerPoint.
• This acquisition also marked Apple's first strategic investment in another company.
• PowerPoint was developed separately from Microsoft's other applications like Word and Excel, and was based in Silicon Valley.

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

This quote introduces the main topic of the episode, the acquisition of Forethought Incorporated by Microsoft.

"This was Microsoft's first acquisition and Apple's first investment in another company. First strategic investment."

This quote underscores the historical significance of the acquisition, being the first for both Microsoft and Apple in their respective contexts.

"Not just an acquisition. A completely separate business line, as we will get into, which is not to say that is necessarily how we will categorize it on acquisition category. But Microsoft kept it as a business line separately based in Silicon Valley."

This quote explains that PowerPoint was kept as a separate business line within Microsoft, highlighting the unique nature of the acquisition.

• Pilot is introduced as a sponsor, offering accounting, tax, and bookkeeping services to startups and growth companies.
• Pilot is identified as the largest startup-focused accounting firm in the US, with backing from major investors.
• The importance of outsourcing non-core activities like accounting to focus on product and customer experience is emphasized.

"Our next sponsor for this episode is one of our favorite companies and longtime acquired partner Pilot for startups and growth companies of all kinds."

This quote introduces Pilot as a sponsor and outlines their services aimed at startups and growth companies.

"Pilot both sets up and operates your company's entire financial stack. So finance, accounting, tax, even CFO services like investor reporting from your general ledger all the way up to budgeting and financial sections of board decks."

This quote details the comprehensive financial services offered by Pilot, highlighting their role in supporting companies' financial operations.

• The origins of PowerPoint trace back to Steve Jobs's visit to Xerox PARC.
• Apple's focus on graphical user interfaces influenced others in the industry.
• Forethought was founded by former Apple employees Taylor Pullman and Rob Campbell, aiming to bring graphical user interfaces to IBM PC clones.
• Forethought's initial project faced competition from Microsoft Windows and development challenges.

"Well, like so many other things, basically everything in modern computing, the origins of PowerPoint can be traced back to Steve Jobs historic visit."

This quote connects the development of PowerPoint to a pivotal moment in computing history involving Steve Jobs and Xerox PARC.

"They think the future is bringing the graphical user interface to the massive numbers of IBM PC clones that are out there already and shipping in the enterprise."

This quote explains the initial vision of Forethought's founders to integrate graphical user interfaces with the prevalent IBM PC clones in the enterprise sector.

"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, it still doesn't seem like a good bet. What do you do? Right?"

This quote outlines the challenge Forethought faced with Microsoft entering the graphical operating system market, creating a direct competitor to their project.

• Robert Gaskins, a manager at Bell Northern Research, joins Forethought with a vision for a new direction.
• Gaskins's vision focuses on building applications enabled by graphical user interfaces, specifically for business presentations.
• Despite challenges, the board decides to hire Gaskins and allows him to pursue his application vision.

"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. He gets connected with the folks at Forethought and he's really excited also about the future of the graphical user interface and he wants to join the company."

This quote introduces Robert Gaskins, who would play a crucial role in pivoting Forethought towards developing PowerPoint.

"He has a vision for what he thinks can be a sort of quote-unquote restart of the company. The term pivot wasn't around yet, but that he wants to bring to the company."

This quote describes Gaskins's proposal to shift the company's focus, which would eventually lead to the creation of PowerPoint.

• Forethought develops PowerPoint, targeting the need for graphical business presentations.
• The software addresses the limitations of using photo slides for presentations.
• The episode discusses the broader impact of graphical user interfaces on technology and the success of PowerPoint as a case study.

"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."

This quote captures Gaskins's foresight in recognizing the potential of graphical user interfaces to revolutionize software applications, leading to the development of PowerPoint.

• Presentation technology has evolved from using overhead projectors and 35mm slides to modern software solutions.
• The transition from physical slides to digital presentations was seen as the future of business meetings.
• Bob Gaskins foresaw the decline of traditional slide projectors and envisioned a future where presenters would create their own digital presentations.

"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 that's how you would lead a meeting."

This quote highlights the traditional method of creating and delivering presentations before the advent of digital presentation software, emphasizing the labor-intensive process that required a corporate art department.

• Whitfield Diffie, known for Diffie-Hellman encryption, created a program that allowed users to draw a black frame on paper, pointing the way to PowerPoint.
• Bob Gaskins from Bell Northern Research (BNR) recognized the potential for presentation software and began developing PowerPoint.
• Gaskins retained only one engineer from the original team and hired Dennis Austin from another NEA portfolio company to help build PowerPoint.

"With a few days of effort, Diffie had pointed the way to PowerPoint."

This quote underscores the significance of Whitfield Diffie's early work at Bell Northern Research, which laid the conceptual groundwork for what would become PowerPoint.

• Bob Gaskins and Dennis Austin formed a lean startup team to develop PowerPoint, with Gaskins as the Product Manager (PM) and Austin as the engineer.
• Despite skepticism about Forethought, the company developing PowerPoint, they were able to attract talent due to limited opportunities in graphical user interface (GUI) application development.
• The initial version of PowerPoint was designed for black and white printouts on transparencies for overhead projectors, not in color or for 35mm slides.

"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."

This quote describes the formation of the core team behind PowerPoint and highlights the circumstances that led to their collaboration.

• Forethought, the company behind PowerPoint, faced financial difficulties and had to constantly raise funds.
• Despite successful products like FileMaker, Forethought had unfavorable deals that led to financial losses.
• PowerPoint sold a million dollars worth of software in its first month, immediately selling out the initial 10,000 copies printed.

"Bob is spending his time either laying off people, pitching for money, or building PowerPoint, probably in that order."

This quote illustrates the challenging environment in which PowerPoint was developed, with the team balancing product development with the ongoing need to secure funding.

• Microsoft, seeing the potential of PowerPoint, wanted to enter the market and made an initial offer to buy Forethought.
• Forethought's board rejected Microsoft's initial offer of $5.3 million in cash, believing the product would be more valuable post-launch.
• After shipping PowerPoint and proving its success, Microsoft returned with an improved offer of $14 million in cash, which was accepted.

"Microsoft reaches out to Forethought, says, we want to get into this market. We want to buy you."

This quote captures the moment when Microsoft recognized the value of PowerPoint and initiated the acquisition process.

• After acquiring Forethought, Microsoft allowed the PowerPoint team to remain in Silicon Valley and form the graphics business unit of the applications division.
• Microsoft's lack of experience in managing distant locations inadvertently benefited PowerPoint, providing autonomy and resources without stifling innovation.
• PowerPoint was later bundled with Word and Excel to form the Microsoft Office suite, first for Mac in 1989 and then for Windows in 1990.

"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 its first distant location and so accidentally avoided smothering its new product."

This quote reflects on the successful integration of PowerPoint into Microsoft, attributing part of its success to the hands-off approach that allowed the product to flourish.

• Despite the difficulty Forethought faced in raising funds, PowerPoint became a tool that facilitated the raising of vast amounts of money in the business world.
• The irony lies in the fact that the company that created a tool instrumental in fundraising was itself struggling to secure investments.

"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 mankind."

This quote emphasizes the profound impact that PowerPoint had on the business and financial world, contrasting with the initial fundraising struggles of its creator, Forethought.

• Forethought, the original developer of PowerPoint, was cautious about releasing PowerPoint for unstable platforms.
• PowerPoint was initially unavailable on Windows 2.0 due to stability concerns.
• Integration with other Microsoft Office applications was gradual, with PowerPoint 4 beginning to converge with Word and Excel.
• PowerPoint 95 marked the full integration, aligning with Word and Excel by jumping to version 7.0, skipping versions 5 and 6 to match their version numbers.

"Pendent, refused to ship a version of PowerPoint for Windows until a stable version of Windows came out." This quote highlights the strategic decision by Forethought to ensure PowerPoint was associated with a stable platform, which likely contributed to its positive reception and long-term success.

"But 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." This quote explains the point at which PowerPoint achieved full integration with the rest of the Microsoft Office suite, a significant milestone in its development.

• PowerPoint saw immediate market success, replacing overhead projectors and 35mm slides.
• The third version introduced video output to digital projectors, signaling a shift in presentation technology.
• Sales numbers were impressive, with the first 10,000 units selling out immediately in 1987, and by the last six months of 1992, PowerPoint's revenue reached over $100 million annually.
• By 1997, over 20 million copies of PowerPoint were in use, and its first decade generated over a billion dollars in revenue.
• Microsoft Business Division, which included PowerPoint, reported $18.9 billion in revenue and $12 billion in operating income by 2009.

"By the last six months of 1992, PowerPoint revenue alone, not office bundled, was running at a rate of over $100 million annually." This quote signifies the rapid growth and financial success of PowerPoint as a standalone product before it became part of the broader Office suite.

• Recognizing and capitalizing on technological waves can lead to the creation of massive businesses.
• PowerPoint's adoption and integration into the office environment is compared to the success of companies like Uber and Instagram, which also capitalized on emerging technology trends.
• The discussion emphasizes the importance of timing and market readiness for new products.

"This is the power of, if you recognize a massive wave like this, which is like the deployment of a fundamentally know technology mode of interaction and what that can enable, you can build enormous businesses as an application on top of it." This quote underscores the idea that recognizing and leveraging new technological trends is crucial for building successful businesses.

• PowerPoint holds 95% of the digital presentation market.
• Despite the popularity of alternatives like Keynote and Google Slides, PowerPoint remains the standard due to its widespread adoption and familiarity among users.
• The concept of "lock-in" and network effects is discussed, highlighting the challenges of displacing an entrenched market leader.

"PowerPoint right now owns 95% of that market. That is unreal." This quote emphasizes PowerPoint's overwhelming market dominance and its near-monopoly in digital presentation software.

• The detailed planning and market research that went into PowerPoint's development are highlighted as exemplary.
• The recommendation to read Bob Gaskins' book, "Sweating Bullets," is made to gain insight into the meticulous process of creating a successful application product in a new technology paradigm.

"But he also goes into great detail and he kept detailed notes throughout the development of know about how the idea came together, how he did market research for it, how they basically feature prioritized why they thought that they could beat competition." This quote emphasizes the importance of thorough planning and research in the development of a successful technology product.

• The discussion touches on how Microsoft managed the integration of acquired products like PowerPoint into its existing offerings.
• The importance of maintaining separate development teams while providing resources and avoiding smothering the product's potential is noted.
• The strategic decision to bundle Word, Excel, and PowerPoint into Microsoft Office is cited as a genius business move.

"The bundling of Word Excel and PowerPoint into Office was one of the best and most genius business decisions of all time..." This quote reflects on the impact of Microsoft's decision to bundle its productivity applications, which significantly influenced the market.

• The culture created by Microsoft's success in the '90s is discussed, with reflections on the lasting impact of that era within the company.
• The importance of seizing market opportunities quickly and the fleeting nature of these windows are emphasized.
• The conversation suggests that Microsoft would have dominated the business productivity software market regardless of the specific path taken.

"The amount of time that passes in between throughout this history is fairly short. And the time that the window is open to create a PowerPoint like product, or to create a uber like product or an Instagram like product is very short." This quote highlights the brief and critical periods during which companies must act to capitalize on new market opportunities.

• The decision to invest in new emerging platforms involves assessing their potential to be huge and the ability to build a significant business on them.
• VR and the Apple TV developer platform are examples where such considerations have been made.
• It's challenging to predict which platforms will possess the critical characteristics of widespread adoption and commercial viability.

"Is it going to be huge and are we going to be able to singularly be here and build a big business?"

This quote underlines the two fundamental questions investors ask when evaluating the potential of a new platform: its size and the unique opportunity it presents for business growth.

• Historical examples demonstrate that there can be a significant gap between the recognition of a new technology and its market readiness.
• The graphical user interface (GUI) was recognized as the future in the early 1980s, but it wasn't until Windows 3.0 in 1990 that the market was ready for it.
• VR is compared to the GUI in terms of its potential, with anticipation that something like Apple's rumored VR and AR headset could be a catalyst.

"But it wasn't until 1990 when Windows 3.0 shipped that that was the right window to be hitting the market."

This quote emphasizes the importance of timing in the tech industry, illustrating how a significant time gap can exist between the initial development of a technology and the right moment for it to reach the market.

• Early-stage companies should prioritize adaptability over having a fixed plan due to the changing nature of markets.
• It's beneficial for companies to enter the market early to learn and develop a sense of where trends are heading.
• Companies that can stay lean and quickly adapt to new opportunities are well-positioned to leverage emerging platforms.

"One characteristic to prioritize in the early stage is ability to adapt, to change rather than certainty about your plan and making it a good plan."

This quote highlights the value of flexibility and the readiness to pivot in the early stages of a company, suggesting that a rigid plan may not be as valuable as the ability to respond to market changes.

• Microsoft's ability to innovate with both Office and Windows is discussed as a rare example of a company achieving billion-dollar success with multiple products.
• The bundling of Office applications, particularly PowerPoint, is considered a key factor in Microsoft's dominance.
• The discussion reflects on the strategic importance of bundling and the competitive advantages Microsoft held.

"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."

This quote points out the exceptional achievement of Microsoft in creating two separate, highly successful business divisions, which is a rarity in the tech industry.

• The hosts discuss the difficulty in grading tech themes and the nuances involved in evaluating strategic decisions.
• They debate the merits of Microsoft's acquisition of PowerPoint and whether it was a crucial piece or just one part of a larger strategic vision.
• The conversation explores the balance between recognizing a good acquisition and acknowledging the broader ecosystem that contributes to success.

"I'm going to go first with what I was going to do. Before hearing that argument. I was going to give this a b plus."

The quote captures the speaker's initial uncertainty and the complexity of grading tech themes, reflecting the subjective nature of evaluating historical tech decisions.

• The discussion shifts to personal development topics, specifically mindfulness and meditation.
• A book recommendation, "Mindfulness in Plain English," is given for its logical and non-mystical approach to Vipassana meditation.
• An analogy is shared comparing meditation to an audio engineer's experience of turning down the gain knob to manage intense experiences.

"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."

This quote provides an accessible analogy for understanding meditation, suggesting that it helps manage the intensity of experiences by allowing for controlled focus.

• The hosts discuss the rise of electric scooters as a significant transportation innovation.
• They consider the practicality and efficiency of scooters compared to other forms of transportation.
• The conversation touches on the potential for electric scooters to transform urban mobility.

"It's the windows 3.0 of light electric vehicles."

This quote draws a parallel between the impact of Windows 3.0 on personal computing and the potential impact of electric scooters on personal transportation, suggesting a significant shift in how people move around cities.

• Crusoe is highlighted as a clean compute cloud provider specializing in AI workloads.
• The company's partnership with Nvidia and its use of wasted, stranded, or clean energy for power is emphasized.
• The environmental and cost benefits of Crusoe's approach to AI infrastructure are discussed.

"Crusoe's cloud is purpose built for AI and run on wasted, stranded, or clean energy, they can provide significantly better performance per dollar than traditional cloud providers."

This quote explains the unique selling proposition of Crusoe, emphasizing its focus on AI and the use of alternative energy sources to offer better value for customers.

• The hosts share the origin story of their podcast, "Acquired," and the ideas that led to its creation.
• They reflect on the concept of covering business acquisitions and the rarity of companies achieving a billion-dollar innovation twice.
• The conversation explores the dynamics of company growth and the challenges of finding new avenues for success.

"We should cover acquisitions. That actually went well, because the trope is that none of them ever go well and they implode."

This quote provides insight into the thought process behind the podcast's focus on acquisitions and the common perception that many such endeavors fail, setting the stage for the podcast's thematic exploration.