Information Processing

Software

VisiCalc's creator goes it alone

Business Week

June 7, 1982

Software Arts Inc., the creator of the best-selling personal computer program, VisiCalc, is making a bold bid to be a marketer as well as a writer of innovative microcomputer software. Unlike VisiCalc, which is marketed by VisiCorp., Software Arts' newest program, TK!Solver, will be sold by the fledgling Cambridge (Mass.) company itself. The decision to go it alone presents a big challenge for three-year-old Software Arts, which is still grappling with the phenomenal growth in revenues sparked by the success of VisiCalc.

Thanks to that best-selling program, the company's revenues quadrupled to more than $4 million last year. But Software Arts has received little fame from its success. Most of the glory has gone to VisiCorp--formerly called Personal Software Inc. -which owns the VisiCalc trademark and is often assumed to be the program's developer. That misconception, which VisiCorp has done little to correct, "has forced us to build up our name on our own," says Daniel S. Bricklin, chairman of Software Arts.

No regrets. The decision to sell its own software was reinforced by the strong possibility that VisiCorp may compete in the future with Software Arts. Besides publishing personal computer software developed by outside authors, VisiCorp has recently begun to write its own programs. "We can't have our marketer [in a position to] push us around too much," says Robert M. Frankston, president and co-founder of Software Arts.

In no way, however, does the tiny programming company regret its earlier decision to relinquish the marketing rights to VisiCalc. While VisiCorp "has not given us the credit we feel we deserve," Bricklin says, the deal has been "very good for both companies." More important, the decision allowed Bricklin and Frankston to concentrate on building a management team and, writing new programs. "Had we done [the marketing] ourselves, we would have gone under," says Bricklin.

VisiCalc's spectacular success has muted much of Bricklin's and Frankston's disappointment about their company's low profile. Since VisiCalc's introduction in 1979, it has sold more than 250,000 copies--at about $250 a copy--and is widely credited with spurring sales of personal computers to business people. VisiCalc became so popular by making it easy for users to calculate and recalculate spreadsheet (row and column) projections for financial analysis, planning, and forecasting.

TK!Solver--the "TK" stands for tool kit--is aimed at a different, and broader, class of users. VisiCalc shows how changes in one variable affect many others; TK!Solver handles calculations involving strings of equations with more than one variable. It is geared to professionals in engineering, architecture, finance, and education, who use complex mathematical formulas.

Like VisiCalc, TK!Solver makes it unnecessary to know computer programming languages, such as BASIC or FORTRAN. A user simply types in an equation and the known variables. TK!Solver translates those commands into mathematical relationships and data the computer understands, and then produces the missing variables. TK!Solver will be "a smashing success" for the personal computer industry, predicts Julian E. Lange, executive vice-president of Software Arts, because it does away with "number crunching" and gives "professionals, engineers, business people, and educators a new and compelling reason to buy a personal computer."

The success of the new program, which cost Software Arts $1 million to develop, depends largely on the company's ability to market it. Initial versions of TK!Solver, expected to reach retail computer stores late this fall, will be designed for personal computers from Apple Computer Inc. and International Business Machines Corp. The basic program will carry a retail price tag of $299, with applications packages for specific industries selling at $50 to $100 each. In addition, some manufacturers will market the product directly to their customers. "In the microprocessor world, the name of the game in software is distribution," observes David E. Gold, a California consultant to venture capitalists.

Recognition

Although the ability of Software Arts to market a major product has not been tested, its management has a good deal going for it. For starters, though the company's name is almost unknown to the general public, it is "already a "Good Housekeeping seal of approval' " in the personal computer industry, notes Esther Dyson, an analyst with Oppenheimer & Co. Dyson and other industry observers also think highly of the newsletter that Software Arts developed for VisiCalc users, both as an educational tool and as a clever way to give the company some recognition. Bricklin says that the company will publish a similar newsletter for the customers of TK!Solver. To boost the company's image even further, he will spend "at least a few hundred thousand dollars" on, advertising, a sizable sum for so-small a company. And to stimulate interest in TK!Solver among dealers and potential users even before it hits the market, Software Arts will send representatives around the country to demonstrate the program and distribute brochures in retail stores and computer clubs.

Personal computer customers are not the only people interested in Software Arts. A mid-May press conference for TK!Solver attracted venture capitalists eager to get a closer look at the company. So far, Software Arts has turned down all proposed infusions of venture capital and has also ruled out a public offering. "Control is very important to us," explains Lange. The company was founded with only $85,000 in cash and loans, and it has financed its growth solely with internal funds--a policy that Lange says will be continued in the foreseeable future.

Delegating

Many industry watchers agree that the company's prospects are bright. For one thing, most of its top managers have both business and technical expertise--a rare combination among principals of small high-technology companies. Bricklin, for example, holds a BS in electrical engineering and computer science and also an MBA. All four senior managers are sensitive to the special needs of small businesses because their parents were entrepreneurs. Bricklin and Lange agree that this awareness has helped Software Arts avoid some of the problems of young companies. Entrepreneurs, Lange says, commonly "don't realize they can't grow the kind of company they want unless they pull back" and delegate authority.

With a strong management team now in place, Software Arts is ready, says Lange, to seek out new software niches "where there is no head-to-head competition." The common theme will be a focus on tools that help people who have no special interest in computers. The company's revenues, say observers, could double annually for the next few years because there are millions of potential VisiCalc users and the personal-computer software market is expected to balloon from $500 million in 1981 to $4.6 billion by 1986. "We know the industry is wide open right now," says Bricklin. "If you're a leader, like we are, the sky's the limit."

GRAPHIC: Picture, Frankston and Bricklin: In a reversal of policy, Software Arts will now market the programs it writes. Rick Friedman/Black Star

Copyright 1982 McGraw-Hill, Inc.