On this day 40 years ago, Microsoft’s IPO ignited a historic wave of private wealth generation.

March 13 marks a momentous occasion for wealth enthusiasts as it celebrates the 40th anniversary of Microsoft’s public debut. On this day in 1986, the Seattle-based software company transformed not only the tech industry but also created thousands of millionaires and a select few billionaires. This article explores Microsoft’s remarkable journey from a fledgling startup to one of the most valuable companies in the world.

The Genesis of Microsoft

Founded on April 4, 1975, by childhood friends Bill Gates and Paul Allen in Albuquerque, New Mexico, Microsoft began its journey far from its later home in Seattle. The duo bonded over their mutual passion for computers while attending Lakeside School in Seattle. After a brief stint in college, Allen left to work at Honeywell, while Gates enrolled at Harvard, where he would soon diverge from academia to pursue their shared vision.

In 1975, Popular Electronics Magazine featured the Altair 8800 microcomputer—a pivotal moment inspiring Gates and Allen to develop an operating system for it. Their success with MITS led them to pursue larger ambitions, and on April 4, 1975, they officially founded “Micro-Soft,” which later became Microsoft. By 1976, the company generated $16,005 in revenue, laying the groundwork for its future successes.

In January 1979, Microsoft relocated to Seattle as it faced challenges in attracting top talent to New Mexico. Steve Ballmer joined the company in 1980, marking a significant addition to its growing team.

The Breakthrough with IBM

In 1980, IBM sought a software partner to create an operating system for its new personal computers and initially approached Microsoft. Gates, however, recommended Gary Kildall of Digital Research, who had an operating system already in development. Unfortunately, Kildall missed the meeting, prompting IBM to return to Gates, leading to a pivotal partnership.

To facilitate the collaboration, Gates acquired a software clone named “86-DOS” for $100,000 from Seattle developer Tim Paterson and rebranded it as MS-DOS. Instead of selling the rights to IBM, Gates opted for a licensing agreement, allowing Microsoft to retain ownership and significantly expand its market reach as personal computers began to proliferate.

The IPO and Its Impact

On March 13, 1986, Microsoft went public, joining a wave of tech companies seeking capital in the burgeoning digital age. Codifying its status, the IPO raised its opening price from an initial estimate of $16 to $21 after Oracle’s successful debut a day earlier. Upon opening, Microsoft shares surged to $25.75, marking a tremendous initial reception from investors.

Despite having a market cap of $780 million upon its IPO, Bill Gates’ stake was valued at $350 million, a sum that would rapidly appreciate as Microsoft grew. Remarkably, Gates only sold $1.6 million in shares on the first day, as he was on vacation in Australia.

Four Decades of Growth

Since becoming public, Microsoft has consistently posted staggering growth, surpassing $1 billion in revenue by 1990 and hitting $281 billion in annual revenue projected for 2026. Its market capitalization has exceeded $3 trillion, with a previous fleeting high of $4 trillion.

Bill Gates’ net worth soared alongside the company’s fortunes. He became a billionaire by 1987 and was the world’s richest person by the mid-1990s. Currently, he is estimated to have a net worth of approximately $117 billion, although he has gradually reduced his ownership in Microsoft to less than 1% while donating significantly to charity.

What If You Invested $10,000 in 1986?

If you had invested $10,000 in Microsoft shares at its IPO, those shares would have multiplied dramatically through stock splits and dividend reinvestments. Today, those initial shares would amount to approximately 137,088 shares, valued at roughly $55.5 million. Additionally, with the current annual dividend, you would earn around $498,999 per year in passive income.