During the 1970s the romantically crusty band of brothers that we came to refer to as the Repack-mafia developed the mountain bike in Marin County. It’s a story oft told that is gently easing its way from hard fact to feathery myth - but it really happened and affects everything bicycling to this day.
In terms of commercial product the story is quite brief. In 1979 Gary Fisher (once banned from racing because his hair was too long) and Charlie Kelly (an ex-roadie) formed a company called MountainBikes to manufacture and sell their eponymous product. They initially dominated the market with their hand made beauties that sold for over well over $1,000. In 1981 Mike Sinyard, the owner of Specialized (who had once operated out of a battered VW Microbus), had a moment of genius, and shipped a MountainBikes model to Japan to get Toyo to manufacture copies of it for him - and the Specialized Stumpjumper was born. The Stumpjumper is often considered to be the first ‘production’ mountain bike and it became the new run-away market leader even though it retailed for $900 (an outrageously exotic figure in 1982). It is a story of the counter-culture taking on the bicycle-industrial-complex and winning.
A part of the story that is usually omitted is that, also in 1981, (dull corporate) Schwinn based in (dull midwestern) Chicago launched two ‘All Terrain Bikes’ - the King Sting and the Sidewinder. These were heavy, ugly and crude, i.e. typical Schwinn’s, but they were undeniably mountain bikes (this instruction manual clearly shows an adult riding one off-road) and they had retail prices in the region of $200 to $300. They have a good claim on the title of ‘first mass-market mountain bike’. As an aside, I suspect that the term ‘All Terrain Bikes’ may have been invented to sidestep any legal problems with the MountainBikes business.
In terms of derailleurs, Schwinn opted to use SunTour’s AG (Alpine Gear) set up, with two chainwheels, a massive 14 to 38 5-speed freewheel and the SunTour AG rear derailleur. Because they were Schwinn they just had to go and use a Schwinn Approved, Huret manufactured, front derailleur - but that was the only obvious blunder. It was quite a tidy solution to the problem of providing ludicrously low gears at a ludicrously low price whilst avoiding ludicrously low reliability.