Bug-Byte was founded in 1980 by two chemistry graduates, Tony Baden and Tony Milner. The business developed a pioneering range of 8-bit computer games during the early 1980s. Bug-Byte was best known for its games for the Spectrum, but the firm also developed games for Sinclair, Commodore and other home computer brands. Of these games, Manic Miner and Twin Kingdom Valley were the best known.

The company was based in Mulberry House, Canning Place, Liverpool, and would help to generate other software businesses in the area, including Imagine Software and Software Projects.

After a difficult financial year, in June 1985, the company went into voluntary liquidation. The rights to their games and the Bug-Byte brand were purchased by Argus Press PLC. Argus' subsidiary company Argus Press Software Ltd would go on to release new games and budget versions of their own software under the Bug-Byte name.

Following a management buy-out, Argus Press Software Ltd became Grandslam Entertainment in 1987.