The Exchanges

Q And with a million and a half dollars, you can't obviously create a game, right? Or can you? Is that, is that enough? Or was, like, did you guys think you could, you could actually make something with that money?

A So, so I think one of the, one of the interesting things looking back is we believe that we could. We had created this really detailed model with all the assumptions from all the conversations and research we did that would That basically had us convinced that we could build and complete this game for two, I think it was 2.8 million dollars. So we thought we were halfway there with a little bit of buffer. And, uh, we were entirely wrong. I mean, I think all said and done, it was closer to twenty million dollars. And it highlights how, uh, you know, honestly, our own naivete was in many ways an asset to us. We were We were so unprepared to do what we were trying to do, and we were so unclear about what we were really up against that we didn't, that we didn't talk ourselves completely out of it.

AI assessment note: “one of the interesting things looking back is we believe that we could.”

Q Oh, you could, you could go to a Best Buy, you could go to a store and buy the game?

A Yeah, so we ended up deciding to sell a box because interestingly, as we got closer and closer to launch, the game's media wasn't going to pay attention to us. In fact, we didn't exist if we did not have a box. If you were a game that didn't have a physical box, you weren't a game. And so we partnered with a traditional publisher, THQ, to create a box. What would be in a box? We had to figure out what that would be, and it ended up being a, um, bundle of the same digital content that you could, you know, that you would theoretically be able to buy in the game. And the, the irony of it is we did end up getting reviews. Um, and one in particular, we got a, a, a 60 out of a hundred from like a premier, uh, game review site.

AI assessment note: “Yeah, so we ended up deciding to sell a box”

Q you know, your, your, your concept, your model here is not going to work. This freemium model is, is, is, you know, multiplayer only, and direct-to-consumer model is not going to work, but you were not going to make a game that you would buy at Best Buy off the shelf. You were going to always make a game that was only online. So why did you need a publisher?

A So the model for publishing online games were still emerging. And, and we were thinking about our game as a living, breathing service. So the online, the major online games that preceded us, they all still had a publisher because to get the game in the hands of players was still done through, you know, shipping a package good. So when you, if you played, you know, a popular massively multiplayer game like a World of Warcraft, you still bought the game at Best Buy. Um, And then somebody had to host the servers and create the infrastructure and manage accepting payments, even online, and manage all these things that we take for granted today, there were no real off-the-shelf solutions for.

AI assessment note: “somebody had to host the servers and create the infrastructure and manage accepting payments”

Q And I mean, obviously you were frustrated about that, and, and I guess that, that kind of led you to a decision, which was a pretty risky decision, which was to just Publish the game yourselves, right? Like what, what was the impetus that, that gave you that idea?

A You know, I think as we got closer and closer to shipping the game, we would have these meetings with publishers, and far more often than not, you know, we just sort of felt like the other companies didn't really natively understand what we were trying to accomplish and what our players would care about, and it freaked us out. And enough that we decided, you know what, maybe we should figure out how to publish this thing ourselves, at least in English and in the United States. That felt possible. International felt just way too daunting, and we had so many other, so many other basic execution challenges ahead of us that were, that were, that were daunting. So we decided we would publish internationally if we could find a great publisher with a third party, but in the US we'd publish ourselves.

AI assessment note: “we just sort of felt like the other companies didn't really natively understand”

Q And from like, if I met you at that time in 2006 and I was like, okay, tell me about this game. Like, and I had no, I knew nothing about video games, which I'm sure a lot of your investors knew nothing about them. And they said, tell me about onslaught. What's the story? How would you describe onslaught to them?

A So this was, this was always incredibly hard to explain to people because there's, there's layers of it. Um, in a nutshell, you're gonna jump in a game. There's gonna be five players on your team against five players on another team. Each of you is gonna be, you know, championing a superhero of sorts. And so we'd maybe relate it to Marvel or something, you know, you'll, you'll pick a Spider-Man type And, and, uh, and you'll have maybe Wolverine on your team and, and, and, and a, and a set of heroes with complementary abilities against another team with a, with a bunch of superheroes with complementary abilities. And, um, you'll essentially, again, this is where it gets tough to explain, but you, you know, you'll meet, you'll meet on the field of battle and try to destroy the other team's base before they destroy yours. There's a heck of a lot more nuance to it in the moment to moment experience, but But yeah, that's how we would attempt to explain it. And it was always a challenge and it still is to this day.

AI assessment note: “in a nutshell, you're gonna jump in a game. There's gonna be five players”

Q than 50% of the business. But it seems like you guys pretty quickly realized that you, you didn't care, or maybe you did, I don't know, but that it was better for you to have a small piece of a bigger company than a big piece of a smaller company. Do you, is that advice that you give to other Entrepreneurs that don't worry so much about your equity stake?

A I think part of it was we were, you know, we were young, twenty-somethings raising a substantial amount of, of other people's capital to essentially build our dream game. And so we just, we felt so grateful to have that opportunity and almost such imposters to be able to have that opportunity that we, we wanted the investors to have certain controls. Like we felt better about it. If they had the right risk reward equation, because from our perspective, this was still a crazy bet. Um, I think in terms of advising other entrepreneurs, I think it's really case by case. I think if you partner with the right investors and you can confirm that they're aligned with the vision for all the right reasons, that, you know, that that can be a really effective and important partnership. And we tended to be pretty trusting on that angle and it worked.

AI assessment note: “I think in terms of advising other entrepreneurs, I think it's really case by case.”

Q So at this point, I mean, clearly the, the, the wheels are turning in your head, right? You're, you're now talking about building a company. And, I mean, were you guys thinking of quitting your jobs? Like what, what, what steps did you start to take?

A You know, every free minute that we had together, we would be playing these games. And, and as we played them, we would have thoughts and ideas. And eventually, we'd start to explore these ideas and put the put them down, you know, on paper and start to imagine, you know, what if we It was, it was essentially like the creation of a, of a, of a business plan, almost like a, a presentation that we would, that we would ultimately refine and share with investors to see, A, what, what do other, you know, making games is expensive. What are investors going to think? Is this crazy or not? Would they back a couple of young twenty-somethings? And B, we wanted to simultaneously reach out to experienced game developers and see what they thought. So it was this iterative process of, and, uh, You know, in terms of, like, quitting our jobs, we were gonna, at least me personally, like, I didn't want to quit my, I liked my job, and I didn't want to quit my job until I was really confident that all those other stakeholders, whether it's investors or potential talent that would want to join us, would validate that we weren't insane.

AI assessment note: “in terms of, like, quitting our jobs... I didn't want to quit my job”

Q But by working with a publisher, it meant that they would probably own the IP or, or, or have a stake in that, right?

A Yeah, the publishing deal generally came with, uh, sort of an advance on those future royalties, uh, So it was almost like an investment in the development of the game, which is how a lot of games end up being financed. But yeah, in exchange for that, there were often those kinds of rights were at stake. Also, the most important thing for us was, was we needed to have a direct relationship with our players. Um, this was going to be an online experience that people were going to come back to and play over and over again, that we'd have to balance and adapt and change and add features to. And we needed to have a relationship and a really deep feedback loop With our audience, and we needed to control the things that they were going to care about, or at least have a publisher who we believe would care about those things, be attuned to those things, relate to those players, and make those decisions for us.

AI assessment note: “in exchange for that, there were often those kinds of rights were at stake.”

Q So presumably you start to hit the road and, and, and look for more money. And, and so when you started to go to VCs and explain all these things that you're explaining to me, were they super enthusiastic? I mean, were you going to, to VCs and just like getting term sheets left and right?

A Uh, no V VCs were, were not enthusiastic. So we, uh, first of all, we didn't really know how to, how to even engage with VCs. And we ended up, um, You know, getting introduced to somebody who would essentially like make the introductions for us almost as, as intermediary and tee up meetings. And we, and we'd go to these meetings and, you know, I think the VCs sensed the, the passion, but, but ultimately it came down to betting on content. And most of them felt uncomfortable making a financial bet on, on a game. They're just like, you know, how do we evaluate if this is, this is going to be fun or not, or it's going to work or not. Um, so the vast majority of VCs Turned us down.

AI assessment note: “no V VCs were, were not enthusiastic”

Q And Mark, you headed to USC to start college, and Brandon, did that, I, I know eventually you would also go to USC. Was, was the fact that Mark was there, did that Influence your decision to go there, or was it just, just to happen to be the place where you decide to go?

A It was a total coincidence, but it certainly made me more excited about it. Uh, I, I even visited Mark when he was at school and hung out with him, you know, in the dorms where he, he had a bunch of gaming buddies and they would, they'd play games together. And, um, I wasn't a very good student. You know, I had ADHD and a, and a variety of learning differences and was in a pretty, you know, tough competitive school environment. And, and I, and I just, I was not The kind of student I was sort of supposed to be. But in the meantime, I'm living in this world online. I wanted to spend every minute in my spare time. I would, you know, build scripts that would play my character for me, um, while I had to be at school. So I would continue to make progress.

AI assessment note: “It was a total coincidence, but it certainly made me more excited about it.”

Q And this is like a few weeks before you launch. I'm just curious, was there like, is there somebody at Riot Games at that point where you're like, hey, can you build a store in two weeks? Did you have that person?

A We had much, much better engineers this time around because of the experience with, with the backend failing previously, and because we had to build a team now and hire a team as fast as possible from scratch that could build the entirety of the backend, we had some, some really great experienced engineers, and they, you know, they're the ones that sort of diagnosed this problem and had sort of the suspicion that this may, may not land. It was worse than everyone expected, and then, you know, they just leapt into action, and We were just spending a, you know, almost a hundred percent of our energy trying to solve this wall. At the same time, making sure that our game was actually ironing out all the bugs and the last remaining features for a fixed launch date. And we shouldn't have necessarily had a fixed launch date at this point, given all the risks, but we sort of naive. So there's another thread here, which is we had a box. So we ended up having a box on shelves.

AI assessment note: “We had much, much better engineers this time around”