You’ve probably seen the grainy photos. Two young guys, messy hair, oversized glasses, surrounded by clunky hardware and stacks of floppy disks. Most people think they know the answer to who was the founder of Microsoft in a heartbeat: Bill Gates. And while that’s technically true, it’s also a massive oversimplification that ignores the friction, the late-night coding sessions at Lakeside School, and the legal battles that shaped the modern world.
Microsoft wasn't just a solo act.
It was a partnership. Paul Allen and Bill Gates were the primary architects, but the way they came together—and eventually drifted apart—is way more interesting than the "college dropout makes billions" narrative we've been fed for decades.
The Lakeside connection and the birth of a giant
Before there was an office in Albuquerque, there was the Lakeside School in Seattle. This is where it actually started. Paul Allen was two years older than Gates, but they bonded over a shared obsession with the Teletype Model 33 terminal. They weren't just playing games; they were trying to break things. They famously got banned from the Computer Center Corporation (C-Cube) for exploiting bugs in the operating system to get free computing time.
That’s the spark.
When people ask who was the founder of Microsoft, they often forget that Paul Allen was the one who dragged Gates into the light. Allen was the visionary who saw a cover of Popular Electronics in 1975 featuring the Altair 8800 and realized the window of opportunity was closing. He literally ran to Gates' dorm at Harvard. He told him they had to move. Right then.
They didn't have a product. They didn't even have an Altair. They just had a gutsy claim that they could write a BASIC interpreter for a machine they’d never touched.
The "Micro-Soft" hyphen days
The company wasn't even called Microsoft at first. It was "Micro-Soft," a portmanteau of microprocessors and software. They set up shop in Albuquerque because that's where MITS, the makers of the Altair, were located.
It was a scrappy, chaotic mess.
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Gates was the relentless businessman, the guy who would stay up for 36 hours straight coding and then go into a meeting and dominate the room. Allen was the "idea man," the one who saw the long-term hardware trends before anyone else. They were a perfect, albeit volatile, match. Allen later wrote in his memoir, Idea Man, about how intense Gates could be. It wasn't always sunshine and rainbows. There were screaming matches. There were deep disagreements over equity. Originally, they planned for a 50/50 split, but Gates insisted on 60/40, and later 64/36, arguing that he had done more of the heavy lifting on the coding side.
Moving to Washington and the IBM deal that changed everything
By 1979, the duo moved the company back to Bellevue, Washington. They were making money, but they weren't the kings of the world yet. That changed because of a meeting with IBM.
IBM was looking for an operating system for their upcoming PC. They actually went to Digital Research first to talk to Gary Kildall, but that deal fell through in what is now one of the most famous "oops" moments in tech history. IBM came back to Microsoft.
The kicker? Microsoft didn't even have an operating system to sell.
So, what did the founder of Microsoft do? Paul Allen went out and bought the rights to "86-DOS" (also known as the Quick and Dirty Operating System) from Seattle Computer Products for a measly $50,000. They rebranded it as MS-DOS.
This is the move.
The genius wasn't just in the software; it was in the licensing. Gates and Allen insisted on a non-exclusive license. They let IBM use it, but they kept the rights to sell it to other "clone" manufacturers. That single decision is why Microsoft became a monopoly and why most of the world uses Windows today instead of an IBM-proprietary system.
The third "founder" nobody talks about
If you want to be pedantic about who was the founder of Microsoft, you have to mention Steve Ballmer. While he wasn't there on day one in 1975, he was the first business manager hired in 1980. He brought a level of corporate aggression that neither Gates nor Allen really possessed in that specific "salesman" way.
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Ballmer was the one who turned a group of brilliant hackers into a functional, albeit cutthroat, corporation.
He eventually became CEO, but his influence on the early culture was massive. He was the energy. The "Developers, Developers, Developers" guy. Without his ability to scale the business side, Microsoft might have remained a niche software house rather than a global empire.
Why Paul Allen left
Success came at a cost. In 1982, Allen was diagnosed with Hodgkin’s lymphoma. While he was undergoing treatment, he allegedly overheard Gates and Ballmer discussing how to dilute his shares in the company because they felt he wasn't productive enough.
That was the breaking point.
Allen stayed on the board for years, but the partnership was effectively over. He left the day-to-day operations in 1983. It’s a bit of a tragic ending to the most successful duo in business history. Allen went on to become a billionaire philanthropist, bought the Portland Trail Blazers and the Seattle Seahawks, and funded space exploration. Gates, obviously, became the face of the company for the next three decades.
Common misconceptions about the founding
- They built the first PC: Nope. They built the software that made the first PCs actually useful.
- Gates was a lone wolf: He was incredibly dependent on Allen’s technical foresight in the early 70s.
- The garage was the HQ: While they worked in various spaces, the "garage" trope is more of an Apple thing. Microsoft started more in dorm rooms and then transitioned straight to professional (if messy) office spaces in New Mexico.
The technical legacy: More than just Windows
When we talk about who was the founder of Microsoft, we shouldn't just look at the bank accounts. We should look at the code. They popularized the idea that software had value independent of hardware. Before them, software was often just something tossed in for free when you bought a big expensive machine.
They changed that.
They also sparked the "Open Letter to Hobbyists," where Gates argued that people shouldn't steal software. It was an incredibly unpopular stance at the time, but it paved the way for the entire modern software industry.
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Actionable insights for the modern era
The story of Microsoft's founding offers some pretty blunt lessons for anyone in business or tech today. It’s not just a history lesson; it’s a blueprint for how to—and how not to—build a company.
1. Equity should reflect contribution, but be careful of resentment. The shift from 50/50 to 64/36 created a rift between Gates and Allen that never fully healed. If you are starting a company, be transparent about why someone is getting more. Don't let it fester for decades.
2. Licensing is more powerful than selling. Microsoft didn't get rich selling MS-DOS once. They got rich by making sure they owned the rights to sell it to everyone else. If you're building a product, look for ways to make it the "standard" rather than just a one-off sale.
3. Find a partner who sees what you don't. Gates was a brilliant executor. Allen was a brilliant visionary. You need both. If you have two "idea guys," nothing gets shipped. If you have two "executors," you might spend five years building the wrong thing.
4. Speed beats perfection. They sold BASIC to MITS before it was even finished. They bought DOS from someone else because they didn't have time to build it. In tech, being first to market with a "good enough" product usually beats being second with a "perfect" one.
If you’re looking to dive deeper into the gritty details, read Hard Drive by James Wallace or Paul Allen’s Idea Man. They offer two very different perspectives on the same events. Most people just stick to the Wikipedia summary, but the real power moves happened in the small, uncomfortable moments where two friends had to decide if they were going to be hobbyists or titans.
They chose to be titans.