In this work we develop a microscopic physical model of early evolution where phenotype--organism life expectancy--is directly related to genotype--the stability of its proteins in their native conformations-which can be determined exactly in the model. Simulating the model on a computer, we consistently observe the Big Bang scenario whereby exponential population growth ensues as soon as favorable sequence-structure combinations (precursors of stable proteins) are discovered. Upon that, random diversity of the structural space abruptly collapses into a small set of preferred proteins. We observe that protein folds remain stable and abundant in the population at timescales much greater than mutation or organism lifetime, and the distribution of the lifetimes of dominant folds in a population approximately follows a power law. The separation of evolutionary timescales between discovery of new folds and generation of new sequences gives rise to emergence of protein families and superfamilies whose sizes are power-law distributed, closely matching the same distributions for real proteins. On the population level we observe emergence of species--subpopulations that carry similar genomes. Further, we present a simple theory that relates stability of evolving proteins to the sizes of emerging genomes. Together, these results provide a microscopic first-principles picture of how first-gene families developed in the course of early evolution.