The Micrografx public offering.

THE MICROGRAFX PUBLIC OFFERING Give these guys credit for a sense of timing. On May 17, just five days before Microsoft launched its $10 million saturation campaign for Windows 3, Micrografx--the industry's most diehard Windows applications developer--broke the news of its first public stock offering. By the time the Micrografx shares actually go on sale (probably late June or early July), there's a good chance we'll see a Wall Street feeding frenzy that pushes the IPO price well above the $11-$13 per share that the underwriters now expect.

Even at $13 per share, though, Micrografx will be worth a hefty $57 million--not a bad valuation for a bootstrap operation launched eight years ago on nothing more than a $5,000 Visa card advance. Moreover, the two founders, Paul and George Grayson, will remain decisively in control, with 47% of the public company. The skeptics keep insisting that small developers can't build significant software companies without selling out to venture capital funds and blowing millions on big ad budgets, but the Micrografx experience suggests that entrepreneurs still have a shot at the brass ring.

In brief, what the Graysons did was find a relatively obscure niche (the early Windows market) and become a dominant player long before any serious competitors showed up. When the first release of Windows appeared in 1985, Micrografx was a tiny company struggling to keep alive with a single product called PC-Draw. The Graysons promptly placed bets on three Windows-specific titles (In*a*Vision, Windows Draw, and Windows Graph) and followed with an aggressive development effort in systems-level technology as well as graphics applications.

From the beginning, Micrografx has behaved like an industry leader, not just a company that likes to push products into the channel. Micrografx programmers have supplied their counterparts at Microsoft with a good deal of help in fine-tuning the Windows environment; Paul Grayson almost single-handedly launched an evangelist association, the WPMA; and the company's products have accumulated a whole string of industry awards. All this on revenues that a year ago barely topped $10 million:

Besides acting like industry leaders, the Graysons also had the good sense (or the good luck) to pick exactly the right kind of niche for building a high-growth company. The graphics market has never been big enough to attract unwelcome attention from Microsoft or other large-scale competitors. At the same time, Micrografx didn't have to overcome much inertia when trying to persuade customers to switch to a superior product, because users of graphics products generally don't have much investment in data, training, or applications.

Now that the Windows market has begun to heat up, however, Micrografx is bound to encounter a much tougher environment. One Canadian upstart, Corel Systems, has already begun stealing sales away from Designer, Micrografx's flagship title, which currently accounts for 60% of the company's revenues. Windows-based versions of products like Harvard Graphics and Macintosh-based graphics titles will further nibble away at the company's market share. But the Graysons haven't made many mistakes so far, so we suspect they'll hang on to a big chunk of the PC graphics market regardless of how hard these newcomers (which Paul Grayson sometimes calls "Windows whiners") try to catch up.