The years 1975 to 1981 have a parallel in the gold rush era. Two or three persons, with little capital, had a chance to succeed. The period from 1982 saw the consolidation of the early firms, and new entrants were required to have substantial venture capital. As a result, only a small number became a player in this second phase.

In the first phase beginning in 1975, programs were small since the personal computer of these years had limited memory. The demand was for creative flair and technical knowledge, and the participants were of a bright undergraduate type, with business suits and ties being avoided like the plague. There was a large gap to the existing packaged software industry with their powerful software tools and methods for developing programs.

Beginning in 1981, the market for personal computer software stood at $140 million, and grew in the following three years to $1.6 billion, with only a small number of products emerging as the market leaders. Included were VisiCal spreadsheet, WordStar word processor, and the dBase database.

The personal computer marketing was compared to pop music or book publishing, with advertising costs taking 35 cents of every dollar, and was twice the costs of developing the program. The manufacturing costs for duplicating floppy disks and manuals were the smallest component of the costs. Like pop music, the developer was seeking the elusive "hit" to support their marketing and development costs.

By 1982, the competition had been reduced to fifteen companies for two thirds of the business, and the technical knowledge required had grown with the dramatic increase in performance of the personal computer. The space between the large mainframe software and the competing personal computer was narrowing. As a result, the team to write the software grew from two or three to ten or more people. The original VisiCal spreadsheet had contained 10,000 instructions, while the Lotus 1-2-3 spreadsheet required 400,000 lines of code. Large capital expenditures were required to be a winner among the 35.000 products for a place among the 200 products on a computer store shelf.

Existing firms such as VisiCorp, MicroPro and Ashton Tate became also ran, and four of today’s leading companies Microsoft, Novell, Lotus and were growing from minor to major players. VisiCal was wiped out by the arrival of competing Lotus 1-2-3 plus other strategic errors.

Lotus Development Company was formed by a thirty-two year old Mitch Kapor in 1982. He had developed software for VisiCorp in 1979 and had sold his royalty rights to them for $1.7 million. With this cash, plus other venture capital of $3 million, he developed Lotus 1-2-3 as a more technically sophisticated software package. The cost of $1 million to develop, and $2.5 million to market was rewarded with sales of 850.000 copies at $495 each, in the first eighteen months. This success was probably the last of a new venture becoming a major one at a stroke.