Paul Allen on venture capitalism and a new tech bubble

Microsoft co-founder Paul Allen.

Steve Chiotakis: Paul Allen's new book goes on sale today. In "Idea Man" the co-founder of Microsoft says Bill Gates tried to dupe him out of his share of the software giant after he got sick with cancer. But Allen has some fond memories of the early days of Microsoft and the investments he's made since.

Paul Allen, welcome to Marketplace.

Paul Allen: Thank you.

Chiotakis: How did your founding and development of Microsoft affect other investments that you made later on? What did you learn in those early days?

Allen: Well, the early days were really exciting. I tried to stuff as much information about the computer industry and about microprocessor chips into my mind as I could. A lot of the work that's key early is to find like-minded people to work with, and I was lucky to meet Bill Gates in high school. We found someone at Harvard, Monte Davidoff. So a lot of it's about putting your initial team together.

Chiotakis: Is it different now finding venture capital and people to invest than it was for you guys to find it?

Allen: We basically self-financed in those early days. When I got to Albuquerque, actually, I had to get a two-week advance on my salary. And Bill was going to Harvard and I was living on my salary working for Honeywell. So now, there's many venture capitalists that are looking at all these different opportunities, so there's a lot of money out there to finance interesting start-ups, as compared to those days.

Chiotakis: How crowded is the market right now?

Allen: Oh my gosh, it's more crowded than it's ever been. If you look at the number of applications for mobile phones and for tablets, for PCs, it's super crowded, and some of the financial models have yet to be proven.

Chiotakis: You think we're in some sort of tech bubble?

Allen: If you look at the valuations of some of these things that have unproven financial models, sometimes valuations can get away from rational levels. So there's always the potential for a bubble, and people probably thought the valuation of Google at some point was a bubble and it proved out over time. So it just depends on the situation.

Chiotakis: Between you and Bill Gates, it seems that what you do with your money is very different. I mean, Bill has his charitable foundation -- the Gates Foundation; you have philanthropic ventures as well. But you also own sports teams, like the Seattle Seahawks and the Portland Trailblazers.

Allen: There's a stylistic difference there. Bill has always had, especially in the Microsoft days, had a laser light focus and dedication to Microsoft. Once I left Microsoft, I've always had many different interests and pursued different opportunities and have really enjoyed the sports teams. But as the owner of any sports franchise, there's going to be ups and downs. There's going to be years when you're contending -- hopefully, if you're lucky -- and then years when you're struggling and you're rebuilding, and so we've gone through a few of those cycles.

Chiotakis: Paul Allen, co-founder of Microsoft. We thank you for your time.

Allen: Thank you.

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