HEADBONE INTERACTIVE ENTERTAINMENT SOFTWARE
By JANICE MALONEY

(FORTUNE Magazine) – SEATTLE Founded 1994 Revenues: N.A. Employees: 21 Private www.headbone.com

Susan Lammers was born with the ambition and the gambling impulse of an entrepreneur. Two years ago the Microsoft millionaire left behind the safety net of the corporation and founded Headbone Interactive.

She invested her own money--a rare business practice in high tech, where OPM (other people's money) rules. Since then the former Microsoft multimedia publisher and her team (including 6-year-old son Wally, who is captain of research) have delivered five CD-ROMs for children. Each title is based on an original script, with vivid characters such as the wisecracking boy Elroy and his long-suffering dog Blue.

The CDs, including Elroy Goes Bugzerk and Pantsylvania, have won kudos from new-media critics, who praise the cartoonlike designs and the deft weaving of educational information into interactive games. Lammers spent an average of $200,000 developing each title, and says she has pushed about 25,000 copies of each out the door. Making a go of it in the CD-ROM business is tough. With the exception of edutainment leader Broderbund, which has sold over 23 million units since 1980, mediocre sales are all too typical. Many developers have bailed out of the business.

Lammers, 38, believes that a big market for education and entertainment CD-ROMs will emerge. So does Link Resources, a New York City market research firm, which predicts that annual sales of consumer CD-ROM software will hit $6 billion by 1998. "I learned at Microsoft that it takes a while for things to develop," says Lammers. "We are not going for the quick play. We will be the Disney of the 21st century."

If that statement seems bold, well, Susan Lammers is. Since graduating from Stanford in 1979, she's been to Paris to pen the Great American Novel (still unwritten), spent four months in Alaska working as a carpenter insulating back-country homes against brutal weather, and put in time as a book editor in San Francisco, where she regularly indulged in swims in the 54-degree water of San Francisco Bay. She considers her eight years at Microsoft her stable period. "I've always been this way," she says, "willing to go for it."

--Janice Maloney