The company was founded by Walt Bilofsky in 1980 out of his Sherman Oaks garage, which he converted into an office, to develop software for the Heathkit H89 microcomputer.

Toolworks merged with its distributor, Software Country, in 1986 and, after going public in 1988, acquired IntelliCreations, DS Technologies, and Mindscape.

Bilofsky eventually adopted the name "The Software Toolworks", using it publicly for the first time with an advertisement submitted to the magazine Byte in June 1980.

He converted his garage in Sherman Oaks, California, to a two-room office, outfitting it with a disk duplicator, shelving, and a shipping area.

This continued in 1981, with Robert Wesson developing a clone of Pac-Man, the game Munchkin, and a port of Invaders for the H89, and Bilofksy adapting the artificial intelligence psychiatrist ELIZA.

The team aimed at making the application more fun to keep users engaged, thus it incorporated large quantities of text it deemed interesting, generated mistake analyses, and made it visually appealing.

Renée L'Espérance, a Haitian woman whom Crane and Abrams had met at a Saks Fifth Avenue store, was contracted to represent Mavis Beacon.

[1][6] This changed when a positive review of the application published in The New York Times generated much demand, restoring all of Toolworks' usual distribution channels within two weeks.

[4][1] Each team member at the company was tasked with developing one of the ports but the undertaking eventually proved a financial strain and Toolworks ran out of funds by the end of 1987.

[4] Shortly thereafter, the company acquired developers IntelliCreations (of Chatsworth, California) in August 1988 and DS Technologies (of West Chicago, Illinois) in February 1989.

The required quantity was overestimated and many keyboards were damaged in transit, causing high financial losses for Toolworks.

[21] By 1993 Computer Gaming World described Toolworks as "the reigning king of software repackaging efforts" (shovelware) on CD-ROM.