Born in 1953 in Seattle, Washington, Allen was born to Kenneth and Faye Allen, a university library administrator and teacher, respectively. Allen grew up in Seattle's North End community and attended the private Lakeside School, where he taught his friend Bill Gates about electronics and programming languages. Allen attended Washington State University and prepared software with Gates in a campus computer laboratory for a small company. They envisioned utilizing microprocessors to perform mainframe functions in miniaturized computers. Their first business attempt, a company called Traf-O-Data, failed because of competitors who could sell products more cheaply, but in the process Allen gained awareness of how to succeed at business. He then left college to work as a programmer for Honeywell in Boston, Massachusetts. Noticing a January 1975 Popular Mechanics advertisement for a microcomputer kit, Allen contacted Gates, suggesting that they prepare software for this pioneering personal computer.
The pair established the Microsoft Corporation in Redmond, Washington, in 1975 with Allen serving as executive vice president, directing research to design new products. Allen believed Microsoft should promote both software and hardware