FAW #6: Mitch Kapor of Lotus Development
How Lotus got started
Mitch Kapor purchased an Apple II in 1978 and was fascinated with it. He tinkered writing programs in Basic and ended up spending a weekend helping out a buddy at MIT by writing a statistic program that would analyze data for his dissertation. He was green as a programmer and initially clueless of the mathematics involved but his buddy coached him through the math and when they had finished, they realized they had created something that others would find useful. About this time VisiCalc hit the market and Mitch was inspired by the quality of their application- the usability blew away anything else that was out there. Mitch was approached by the publisher of the VisiCalc product (Personal Software) and asked if he could clean up his application a bit and brand it as a companion graphing product to VisiCalc. He obliged and after two years of work and postponing school to pursue developing his Tiny Troll graphing product, they retooled, re-branded and released the product as VisiPlot.
The break-up
The VisiPlot product immediately began generating significant revenue that resulted in monthly $100,000 royalty checks for Mitch. With this passive income he had a chance to take a breath and decide what he wanted to do next. He analyzed the process by which his graphing software was used and found several ways to speed it up and make it less cumbersome but political differences in the organization diluted his say and (like Milton in Office Space) he found himself with his red stapler in the basement. He decided to pitch the publisher on buying him out and in fact convinced them to do so for $1.2MM. Mitch knew there would be a heavy-duty non-compete as a part of the buyout but he was able to secure a clause that let him retain the right to develop a graphing calculator application because it seemed so ambitious that the publisher just assumed he’d never be able to do it.
Building the wrong thing
Like so many other founders, he set out to build the wrong thing initially. He brought in partner Jon Sachs and they developed a spreadsheet graphing application for the Data General minicomputer but they quickly realized given the geekiness of that platform, their app was accessible only to technical people so it had limited use in the business context for which it was intended. “The galvanizing event was when IBM announced the IBM PC in August 1981…IBM was the first ‘real’ computer company to come out with a PC, legitimizing it for the business marketplace.”
The PC that IBM built had 10x the memory of the Apple II and had a faster processor. Mitch wisely saw the opportunity and targeted this platform. The spreadsheet program by Microsoft was basically a port from an 8-bit architecture and while it ran on the new PC, it didn’t take advantage of the 16-bit architecture or larger memory space. Lotus capitalized on this fact by writing their app specifically to use the full resources of the new PC. They also placed a great deal of focus on usability and streamlining the process for generating a graph. Under the Apple II VisiCalc/VisiPlot scenario, a user had to have two disk drives and load the VisiCalc application, save a file to drive 2, close it down, open VisiPlot, open the file from drive 2 and graph. This was a ton of steps that Lotus was able to collapse into an integrated offering that graphed with the press of a single button. That time savings for the user was a massive selling point for their product and it was only made possible by the greater power of the PC that IBM had created.
The Lotus culture
Mitch said: “Almost from day one I understood that I was passionate about the applications themselves, that they’d be integrated, easier to use and be powerful. They’d help make people more productive and I cared a lot about that. The other thing I wanted was financial independence. I had an enormous desire not to be dependent on other people, or to have to have a job. I wanted to dictate the terms.” “The other thing that I cared about a lot right from the very beginning was creating a workplace that treated people well…when I unexpectedly found myself running this high-growth successful software company, the thought of making it be the kind of place that I would want to work at and different from all those other places was incredibly appealing.”
These two paragraphs struck a nerve for me. Having spent a couple years in extremely corporate settings, I too felt the “soul squelching” pains of internal politics and vowed to go on my own and someday help build a company that would be a place where I would want to work. Fostering creativity, engaging in open dialogue, eliminating bureaucracy and spurring innovation were the cornerstone values I wanted the company to have. While we’re far from being a big successful company at this point with JumpBox, I like to think that we nailed all those values in the small team that we do currently have. Seeing that we share these same aspirations for our company that Mitch did for his was gratifying.
Mitch said: “I like working with entrepreneurs who have a compatible set of values and are inspired by a vision and are passionate about some piece of disruptive technology - who are going to create something that actually has value for people in a way that can be a game changer. That’s sort of my sweet spot.” Mitch- if you’re reading, you might be our soul mate- we are arguably in the best position to help bring Open Source to the non-technical masses and eradicate thousands of person-hours of frustration daily around this stuff with JumpBox- wanna talk? ;-)
May 29th, 2007 at 10:29 am
[…] The Fog Creek co-founders both had programming backgrounds and feared they didn’t have the business experience to actually sell their product. The sought to structure a reseller arrangement like Lotus had done with Iris where they would do a 50/50 revenue share with the company that distributed their software. This idea fell flat with no takers. They tried offering a finder’s fee on the site for people that brought in sales and that too flopped. They dabbled with creating an affiliate program to pay a percentage commission on sales generated through in-bound links from other sites and, after a negligible amount of sales generated from that program, they canceled it out of annoyance from sending $19 commission checks. They tried timed coupon giveaways that expired within 72hrs and this too produced only marginal results. Spolsky says, “The one thing we learned over five years is that nothing works better than just improving your product. Every minute, every developer hour we spent on any one of these crazy things - although they had some marginal return on the work that we put into them - was nothing compared to just making a better version of the product and releasing it. If we had taken all the effort we put into these crazy schemes and put it into moving our software development schedule ahead by the equivalent amount, it would have paid off much more.” […]