How They Started (4 page)

“I was feeling completely sure of myself and totally confident about what my plans were, and pretty bulletproof,” Trip recalls.

Trip’s interest in games began in childhood—and so did his interest in business. While still a teenage student at Harvard University, he borrowed $5,000 from his father to create a board game centered on his love of sports, AccuStat Football. The money allowed Trip to create several hundred copies of the tabletop game.

The game was loved by players but was a commercial failure, teaching Trip indelible business lessons that would shape his future plans.

“It was a thorough business experience for me, as I had to design, manufacture, have a marketing plan, and even assemble the product,” Trip recalls. “It helped me realize I was going to be an entrepreneur, but I was also disappointed that I failed. It made me a lot more careful and thoughtful before I started EA.”

At Harvard, Trip graduated
magna cum laude
with a self-designed major in strategy and applied game theory, then added a Stanford MBA in 1978. Trip chose his first employer, Apple Computer, deliberately. He had seen the Apple II debut at a computer fair the year before, and wanted to work for a home-computer company.

In Steve Jobs, Trip found a mentor who would greatly shape his outlook. It was early days at Apple: the company based in Cupertino, California, had just 50 employees when Trip joined.

Trip’s responsibilities at Apple grew over his four-year tenure, but he never lost sight of his primary goal: to acquire business savvy and watch for personal computers (PCs) to become more popular and powerful. From Jobs, he’d learned to think of himself as creative and unstoppable.

The time was growing ripe for his startup. One gaming company, Brøderbund, debuted in 1980. Trip heard from one investor who was interested in funding a game startup. He worried he was getting behind the curve.

In Steve Jobs, Trip found a mentor who would greatly shape his outlook. ... From Jobs, he’d learned to think of himself as creative and unstoppable.

His dream of starting a company had crystallized into what Trip thought of as his “big idea.” Most software companies, he’d realized, treated developers like serfs instead of fostering their creativity. He wanted to start a game company that would operate like a music label.

“By this time, I had experience working with prima donna software development geniuses and realized these are really creative people,” he recalls. “I began to realize I could work with them as independent artists, and treat them as artists.”

At just this time, Trip read in an airline magazine about venture capitalist Don Valentine of Capital Management (which would soon become legendary Silicon Valley firm Sequoia Capital). The article related that Valentine was so intimidating that one young entrepreneur actually fainted in his office during a pitch. His management style was likened to that of a crocodile, lying in wait and listening and then rearing up to rip everyone’s ideas apart.

While this might have cued most would-be business owners to pitch someone else, the article prompted Trip to call Valentine and ask for a meeting. He admired Valentine’s attitude and thought he could get frank advice from him, which was exactly what Trip wanted. He wasn’t afraid of Valentine’s bite.

Knowing Trip’s track record at Apple, Valentine readily agreed to a meeting, and Trip arrived at the Sand Hill Road office with some trepidation. He had no written business plan yet for the company he had christened Amazin’ Software, and Apple was gearing up to launch the Lisa computer. He thought Valentine would urge him to fulfill his commitments at Apple and finish his launch work. But that wasn’t Valentine’s opinion at all.

“He said I should quit Apple right away,” Trip says. “He offered me free office space, which is like saying, ‘If you pull this together, I’ll want to fund it.’ It was the encouragement I needed to take the final step.”

Trip quickly wrapped up his work and left Apple in April 1982. Before taking Valentine up on his offer of free office space, Trip spent several months working out of his house, refining the business plan. He incorporated the company in May 1982 and funded it initially with $200,000 of his own Apple stock profits.

During this time, Trip worked on learning about the music-industry business model he planned to emulate. He flew to Los Angeles after a venture contact introduced him to legendary A&M Records co-founder Jerry Moss. Trip also spoke with a music-industry lawyer and got a copy of a recording contract to learn how to structure contracts for his software “artists.”

While still working from home, Trip made his first few hires. The first was experienced PR man Richard Melmon, whom Trip knew from a stint at Apple. Melmon left his job at VisiCorp, maker of early spreadsheet product VisiCalc, to join the nascent company.

“He was by far the most important and highest-ranking guy I hired that year,” Trip recalls. “I hired him because I felt I should have someone older than me around to provide a little adult supervision.”

Melmon and Trip would turn out to clash, and their versions of events differ—Melmon’s biography suggests that he, not Trip, raised the funding money for EA, for instance. In any case, Melmon would end up departing EA after just a few years.

The budding company quickly outgrew its one small room in the back of Valentine’s office suite, with some staff camped at card tables in the hallway.

From Apple, Trip drew product manager Dave Evans, gaming fan Joe Ybarra, and one of the rare women in tech at the time, Pat Marriott. The trio would be Amazin’ “producers,” working with talented game designers to create products and bring them to market.

The team was rounded out by an office manager, Stephanie Barrett. In August, the small troupe took up residence in Valentine’s Sand Hill Road offices. The budding company quickly outgrew its one small room in the back of Valentine’s office suite, with some staff camped at card tables in the hallway.

Trip kept paying the bills: for payroll, equipment, and software development in-house, as well as fees to outside software “artists.” He had the resources to keep going in this fashion for another year or so but felt he needed to bring in investors to tap their business expertise and accelerate the company’s growth.

Several investors were interested, but Trip zeroed in on those he wanted on board, starting with Valentine, and Ben Rosen from Sevin Rosen Funds, whom he knew from Apple. Others came knocking: Trip recalls picking up the phone at his home in the Portola Valley to find future legend John Doerr, who was then new to Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers.

As he wasn’t desperate for the cash, yet, Trip was feeling cocky. Thinking that Valentine wanted too rich a deal, Trip played the venture capitalists off against each other to get a better valuation for his company, lowering the percentage of Amazin’ the venture capitalists’ money would buy. In the end, he raised $2 million in the first round at the end of 1982, half from Valentine, with the other half split between Sevin and Kleiner.

Amazin’ moved to a small office in Burlingame, California, in October 1982. During the company’s short stay there, Trip continued hiring, luring Stanford pal William Bingham (“Bing”) Gordon. Other early hires were Tim Mott, David Maynard, and Steve Hayes, all from Xerox PARC. Shortly, Amazin’ moved to more spacious quarters in San Mateo, California, where the company would remain for more than a decade.

Around the time of the move from Valentine’s office, the newly hired team began to agitate for a new company name. Some team members disliked the Amazin’ moniker. In one early business plan, Trip had used the name SoftArt as an amalgam to convey both software and artistry. But both Trip and Melmon knew Dan Bricklin, founder of VisiCalc maker Software Arts, and thought it best to avoid such a similar name.

Trip wanted to include the word “Electronic,” and suggested it might be called Electronic Artists, in part as a tribute to independent movie studio United Artists, whose model of artist-driven production he sought to emulate. But Hayes reportedly objected, saying that the developers were the artists rather than the staff. Finally, the team settled on Electronic Arts as the new name.

Despite all of Trip’s years of planning for his launch, the newly renamed company’s timing turned out to be a bit off. The technology needed to play truly full-featured electronic games had arrived, but had not yet been widely adopted by consumers. The dominant game system at the time was an 8-bit Atari console, which offered a puny amount of memory.

Trip knew from the start he didn’t want to create games for the Atari. While waiting for the game-console industry to mature, the company would focus on creating games for PCs. This posed its own challenges as the most popular PC of the time, the Commodore 64, did not yet come with an external disk drive. One would be added in late 1983, but at an extra charge that would discourage many home users.

To counter this problem, Trip devised a workaround that ended up being used in Europe for the company’s first game releases: the games were converted to audio signals on a tape cassette. With the help of an A/B adapter cord, the data could then be input to the computer to play the game.

In 1982, EA’s producers had released their first games for the Apple II—
Hard Hat Mack
and
Axis Assassin
—as well as a few games for the hated Atari 800 console—
Pinball Construction Set, Archon, M.U.L.E.,
and
Worms?.
In keeping with Trip’s record-artist philosophy, each game was packaged like a record album with an eye-catching, graphical cover. This immediately set EA’s products apart from competitors, whose packaging was less slick-looking.

Rather than signing a distribution deal with an established company or competitor to get the games into stores, Trip and the entire team set out to meet thousands of mom-and-pop computer store owners to sell them, one by one. It was hugely time-consuming, but paid off in new relationships—and a distribution scheme in which there was no middleman distributor and EA kept more of the profits. Of the first group of games,
Archon
and
Pinball Construction Set
emerged as the big sellers.

A key game was released in 1984 that would set the course for much of EA’s future success. The basketball-themed
Dr. J and Larry Bird Go One on One
took Trip’s record-artist theory one step further, leveraging the name recognition of the two sports stars to sell games. Fans loved the chance to essentially
be
one of their sports idols, and the game went on to be EA’s best-selling release for the Apple II.

In keeping with Trip’s record-artist philosophy, each game was packaged like a record album with an eye-catching, graphical cover. This immediately set EA’s products apart from competitors.

During the scramble of the first few years, Valentine fulfilled Trip’s expectations, offering universally critical feedback and never making a positive comment. In July 1984, he sent Trip an EA budget with two numbers circled: burn rate and cash reserves. “Two months left!” it said. But Trip knew sales of
Dr. J
were going to avert a financial crisis.

Trip quickly learned that while he was envisioning the game designers as the prime selling point, gamers were loyal to the game, not the designer, a revelation that would shift the company’s marketing focus for good. Sales that first year were $5 million—the company was off and running.

Just six months after the first venture capital round, Trip went back and raised $3 million more in investor funding, mostly from the same investors, plus A&M’s Moss. For the second round, with a few products out and several of them shaping up as solid sellers, Trip was able to obtain the funds at a company valuation four times greater than on the first round.

As the company was releasing its first games, the hope was that soon game consoles would become a viable platform for EA’s games, too. But instead, the game-console industry collapsed. Atari’s system was dated and the company had failed to plan ahead to release a new, more robust version. Consumers lost interest, causing retailers to stop stocking the games and suspect electronic games might be just a fad.

Trip remembers the next few years as a time of serious hunkering down. He imagined his team as the Fremen of Frank Herbert’s classic sci-fi novel
Dune
, recycling their own sweat to survive the desert. The company scored successes with more celebrity-driven games, including
Jordan vs. Bird: One on One
and
Earl Weaver Baseball.

By concentrating on games for computers and releasing popular titles, the company was able to bring in $11 million in sales in the company’s fiscal year ending March 1985. EA began to turn a profit in fall 1984.

“We were profitable,” he recalls, “but we had to be disciplined about how much we spent. We made sure we didn’t overstep our bounds.”

In 1988, Trip decided to try international expansion as a means to grow during the gaming-industry doldrums. The company acquired game-creation houses in Australia and France, opened an office in Japan, and in general overspent. Trip remembers the international foray as a “misadventure” from which the company beat a hasty retreat.

Trip remembers the next few years as a time of serious hunkering down. He imagined his team as the Fremen of Frank Herbert’s classic sci-fi novel Dune, recycling their own sweat to survive the desert.

Fortunately, 1988 also saw the release of a game that would prove to be one of the company’s biggest franchises. Originally called
John Madden Football
and later
Madden NFL
, the game would go on to release annual versions and sell 85 million copies through 2010.
Madden
would be joined in 1993 by another major sports franchise,
FIFA
. Together, the brands would drive the success of EA Sports, one of the company’s biggest niche brands.