Gates and Allen's Microsoft BASIC was the key to Microsoft's initial success. The software was very popular with computer hobbyists who begin distributing and reproducing the software for free. Gates did not think this was right, and in 1976 he wrote an open letter to computer Hobbyists. In the letter, Gates told the hobbyist that "One thing you do is prevent good software from being written" (Gates, Bill H). He also stated that "As the majority of hobbyist must be aware, most of you steal your software" (Gates, Bill H). Gates also pointed out that only about 10% of the users of Altair who also used BASIC paid for the software. The full letter can be read here.

After many disagreements with Gates, the President of MITS sold the company to another computer company. Gates and Allen eventually obtained the software rights that they had developed. In 1978 the Microsoft headquarters moved to Bellevue, Washington. With 23 year old Gates as the head of the company, and only 25 employees, Microsoft grossed $2.5 million that year. Gates was very involved with Microsoft and his employees. The computer industry was rapidly growing, and Gates wanted to get Microsoft involved with other computer companies. To make this possible, Gates was constantly traveling and pushing Microsoft software. Mary, Gates' mother, eventually introduced him to the CEO if IBM.

After working with IBM, Microsoft began experiencing rapid growth, the staff increased to 128 employees, and Microsoft's revenue increased to $16 million. It was in mid-1981 when Microsoft finally became incorporated with Gates as the president and the chairman of the Board, and Allen as executive vice-president ("Bill Gates").