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The first thing you notice when you walk up to this vending machine is you just want to hug it.
Like I took an old refrigerator box like eight feet tall and we covered the whole thing in fur and put googly eyes on the top and giant ears.
And so it looks like a cat, but it also has an extra button.
And that extra button says random item, $1.
It could have been a burrito.
It could have been a plunger.
It could have been one of our games.
It could have been a watermelon.
Like this thing could deliver more than 2000 random items just to make people laugh.
And the crowd grew and they loved it.
And it was all because like, again, all we want to do is tell stories that interact with the crowd.
And we're just going to find new, exciting ways to do that.
Welcome to How I Built This a show about innovators entrepreneurs, idealists and the stories behind the movements they built.
I'm Guy Raz and on the show today how Elon Lee and his partners turned a random card game about cats into a hugely successful game company Exploding Kittens.
When I was a kid, game night was pretty simple.
Candyland, Uno, Scrabble, eventually Monopoly and Trivial Pursuit.
There were a handful of classics that everyone knew and everyone played.
But today, we are in a very different moment.
Card games and board games aren't just back, they're actually booming.
Depending on who you ask, the global board game market sits somewhere between $9 and $17 billion.
Sales of strategic card games like Pokemon and Magic the Gathering have surged more than 200 since 2019.
And it's all happening for a lot of different reasons.
For starters, crowdfunding opened the doors to a bunch of new creators.
Also, the designs got better and the themes got more imaginative.
And finally, people just want more ways to connect without having to sit in front of a screen.
Now, in the middle of all of this growth, is a company that began with a very strange, very funny concept for a game.
It was called Exploding Kittens.
Back in 2015, it launched on Kickstarter with a tiny goal, to raise $10,000.
But instead the campaign bloomed, blew past every expectation, eventually raising almost 9 million.
It became one of the most successful Kickstarters ever.
And today, Exploding Kittens, the company, has sold around 60 million games around the world.
But the real story here isn't just the sales.
It's how it all happened.
Because in tabletop gaming, making a great game is only half the battle.
The other half is getting people to care.
And that became something of a specialty for today's guest, Ilan Lee, the co-founder of Exploding Kittens.
He treats marketing like elaborate storytelling.
And he treats fans like co-conspirators in the fun.
And that instinct goes way back for Ilan.
Even as a kid in the suburbs of LA he had a habit of taking things apart just to see how they worked.
Toys, gadgets, and sometimes whatever belonged to his younger siblings.
So it was my brother's birthday.
He's two years younger than I am.
And he got this amazing electronic airplane and it had buttons on it.
And you push one button and it makes a takeoff noise and one button and it's the pilot's announcement and one button is the landing gear.
And I thought it was the coolest thing ever.
And he thought it was the coolest thing ever.
And one day it disappeared.
And nobody knew where it went.
And everyone accused me and I denied it and denied it and said no no no, I did not steal his airplane.
But miraculously the next day our treehouse suddenly had a doorbell that sounded a whole lot like an airplane taken off.
You just dismantled it, took the piece out that you wanted and there you go.
Let me be clear.
I destroyed everything.
Like I have very little to show for my tinkering other than pissing off my parents.
So it sounds like you were a pretty like sort of smart kid.
And I mean, was school easy for you?
Like by the time you were in middle school or high school, like were you, you know, kind of able to just do well without a lot of effort, or what?
I was never a great student, mostly because class was really hard for me.
I actually graduated from high school with mostly Cs and one A+.
And the A plus was in physics.
And it's all because I had this incredible teacher whose name was Fred Carrington.
And he, like on one of the very first days of class, he looked at me and he said you're going to fail this thing.
Like just 100%.
Yeah.
You're not paying attention.
You're no good at tests.
You're not turning in your homework.
You're going to fail this thing.
But I'm going to make you a deal.
I think you're smart.
I think we're just trying to figure out where the smart lives.
And so here's what we're going to do.
Next year, we're switching textbooks.
Brand new physics book.
And the problem with a new physics book is it's edition one.
And that means there's going to be a ton of mistakes in the thing.
And they're eventually going to re-release edition two and three and so on.
But right now, we've got this book with a bunch of mistakes.
Take this book, go home, find a mistake and fix it, and I'll let you pass this class.
And I thought, this is the greatest thing I've ever heard.
It felt like a research project.
It felt like there's something broken and nobody knows the answer, and I'm going to go solve it.
And normally I hate homework, but suddenly I was devouring this book.
Every single night.
I would read it cover to cover learning, just trying to figure out where are the mistakes.
And as a result of that, I got an A-plus in physics, even though I got straight Cs in everything else.
I mean, that's a cool experience.
And so you eventually graduate from Rochester Institute of Technology in New York with a degree in computer science and physics, or computer science.
Computer science, computer animation, and psychology.
Got it.
Wow.
Nice.
All right.
So I guess while you were in school –
You somehow managed to get an internship at Industrial Light and Magic, right?
The George Lucas, one of his companies.
And it sounds like you're – I mean, that's a very sort of specific kind of thing that somebody wants to do.
It's like somebody who's a superstar wars or – special effects nerd really wants to be part of.
Yeah.
Well, that was me for sure.
I got to work on so much cool stuff.
Now, look, the intern does the stuff that nobody else wants to do.
So like I got to briefly work on Titanic.
You know the scene at the end of Titanic where they're on the door, the famous door scene, right?
They're in the freezing cold water.
Yeah.
When they're talking to each other, you can see their breath.
The thing is, that was filmed in a soundstage.
So the water's like 80 degrees.
You can't see their breath.
So guess whose job it is to like hand animate every pixel of their breath so that you can see it whenever they exhale.
Wow.
So it was a lot of work like that.
But I was thrilled, thrilled to do it.
Yeah.
And so that that obviously would have been a great place to work right after you graduated.
But.
But instead I guess you got a call from, from like a recruiter at Microsoft, to interview for a job there.
Is that what happened?
Yeah.
So when I took that interview, they introduced me to this secret project which at the time was called the DirectX Box, named after their hardware and software platform called DirectX.
And they wanted to build a gaming console around it.
And they said, we need really smart people to help define the future of the entertainment industry.
And are you interested?
And within 48 hours, I was like, oh, this is it.
This is what I absolutely have to do.
All right.
So you moved to Seattle to start working on what is going to become the Xbox.
And what was your role?
I mean, what job were you given?
So they hired me as, it's called a program manager.
And my job was basically just make sure that the trains stay on the rails.
And yeah, work on schedule and budget and find the right teams to produce the right products.
What today is called a project like.
Well, you were a project manager, but that became a real job, you know, eventually
And it seems like, and correct me if I'm wrong, you're probably not a great person for that job.
I mean, maybe you are like, are you?
I'm just even talking to you here, like I can identify the type and you're not that like and not in a bad way at all.
Like you're, I'm similar.
Like you're fidgety, you're moving in your chair.
Like your brain doesn't work that way, where you're like.
Okay, here's your task.
Here's your task.
Here's your task.
Here's our schedule.
Or where am I wrong?
No, you're totally right.
I'm laughing because that exact observation is kind of what changed my life at Microsoft.
I was introduced, my boss was a guy named Jordan Weissman, and meeting Jordan Weissman really defined the next two decades of my life.
But it all started with him sitting down with me and making that exact observation.
He essentially said you're one of the worst program managers I've ever seen, but I think you might be a good designer.
So we're going to give that a try instead.
And he put me on the design team to develop the first six titles for the Xbox, the very first six.
And yeah, so my job was literally running around from team to team, helping wherever I could, so that when this thing goes out the door, those first six titles are absolute AAA hits.
It was, I was there for about six years and it was just constant.
Here's a problem, come up with a solution.
Here's another one, come up with a solution.
And what was the first game that you were sort of assigned to work on or you got involved with?
Uh, the first one was Halo, um which uh, I want to be careful not to make it sound like I was the lead game designer on Halo.
I was on the design team for Halo.
There was hundreds of people working on that game.
But starting there and um, you know that that game, like defined that game really changed the history of video games and being associated with that.
Uh, we knew uh, right away, like right away, that this was going to be special and it kind of set the bar for the other five games and and what we needed them to be.
And so uh, i was just working with this incredible rock star team and we all worked for years to just get those things out the door, And I guess one of the projects you end up working on is with Steven Spielberg.
He had a movie that came out called AI, and I guess you were assigned to kind of turn that into a video game or something for the movie.
Yeah.
Yeah, Jordan brought Steven Spielberg into my office and said he's got this new movie coming out called AI and we're going to do a collection of Xbox games.
I think there were either four or five Xbox games that we were going to do based on AI.
So one was going to be an adventure game where you get to play as certain characters in the movie, and one was going to be a racing game and one was going to be a gladiatorial combat game.
And so we started working on all of those and then jordan said uh, you know, what we really need is the glue.
What is the story that, like holds all of these other games together?
And i remember we went out to lunch one day and we were just tinkering around with what is this glue thing?
What does it mean?
How do we deliver the glue?
And uh, we were sitting at lunch and jordan's phone rang and he looked at me and he said what if that was the game calling us right now?
And my brain just fell out of my ears.
Like, what a crazy statement.
And so we rushed back to the office and started designing a brand new thing.
Which was what if we wrote this whole story?
This thing with these characters and all these different plot points, and it ties all of these stories together.
And then we broke it up into little tiny pieces, a two minute video clip and a text snippet and a piece of audio.
And we scatter all of those all over the Internet.
And it's like a scavenger hunt.
You're going to search around and hunt for all of these little pieces, pull them in, reconstruct the narrative in order to experience the story.
And we built it.
It was really difficult.
This was maybe the hardest I've ever worked in my life.
I was in the office at all hours.
I eventually installed a bed in my office because I was like I'm never going home anyway, so I might as well just make this official.
And I lived there for months as we were building this thing.
And eventually we launched it, and yeah, two things happened.
One is we went to see a screening of the movie the premiere of AI and we realized oh man, we got to cancel every one of these games.
We can't launch the gladiatorial combat game, and we can't launch the adventure game.
It's just the wrong match.
Because the movie was actually kind of depressing, right?
Because the movie was like this gut-wrenching narrative and this drama that didn't.
It wasn't a fighting movie and it wasn't a racing movie.
And that was where we had built.
But you hadn't seen it before or you didn't know the story before?
We read the script and that was, well, parts of the script.
And it's just.
The final edit was totally different than what we expected, and so we did two things.
One is we had to cancel all those games.
But the second was we thought let's launch the glue anyway, because it is a beautiful, sweeping saga and you can experience real emotion through this thing, and so we put it out there and we set up all the phone lines and the websites, and this was the game that was known as the beast.
The beast yeah, The first time we did an inventory count on how many assets we had built, the number came out to 666.
And so the project got its name.
And this was a video game that you could get on Xbox, right?
It was a video game-ish thing that you could get by visiting a website.
There was no physical launch.
Right.
And this was just, in a sense, it was like a promotional thing connected to the film.
That's right.
But in fact, the movie really was not successful, if I remember correctly.
Yeah, the movie did okay.
By his standards, by Spielberg's standards.
By Spielberg, yeah, that's true.
By any other director's standards, this would be a hit.
But by Spielberg's standards, it was on the lower tier of the stuff that he had produced.
So, all right, this must have just been like a crazy experience, because I think not, that long after you decide to leave Microsoft, you're just like wiped out.
What was going on?
Um, one is I was still very fascinated by this, the beast and, and where we could take it.
But I knew that Microsoft was certainly not the right place.
Like it just, it couldn't live there.
It had no place there.
And two is Microsoft immediately wanted us to get started on, uh, the Xbox 360, the second Xbox.
And I was just so burnt out.
I could not think about another console.
I could not think about more game development.
And so I told Jordan that I was going to resign.
And very luckily, Jordan said, hey, me too.
Let's go start something together.
Wow.
And you got to keep in mind we'd also just come off of a lot of money earned by delivering the Xbox, but a lot of kind of next generation storytelling done through the beast.
And the money part seemed much less interesting to me than the next generation of storytelling.
And that's what I wanted to pursue.
Yeah, I mean, this will play into what you would eventually do in your life.
But that experience was about creating these rabbit holes for hardcore fans and for people who really were committed to like solving this mystery and going to different websites and, and you know,
Listening to recorded phone messages and all kinds of like these just rabbit holes, basically.
That's that was what you were doing.
You were creating rabbit holes.
That's right.
This was like interactive theater done on a scale of like millions of people at a time.
So I would write a piece and I would put it out there.
And then the players the millions of them, would grab it and dissect it and switch it around and make hypotheses about where it was going to go next.
And that's like, you know, hitting the ball back onto my side of the court.
OK, now it's my turn.
And I just thought this is the coolest thing ever.
I just I want to do stuff like this.
So you leave Microsoft, but I think you actually stay on as a contractor because they actually ask you to stay on to help with them with Halo 2.
Yeah.
But meantime, you and Jordan decide to start your own company.
And tell me what that company was going to be.
It was going to be like make these kinds of campaigns that you did with the Beast.
It was going to be a video game company because it was called 42 Entertainment.
What did you do?
Tell me what it was going to be.
So we really wanted to build... At first, the idea was, let's build more of these things.
They were called alternate reality games.
The fans actually named it that.
And we thought, all right, that's cool.
And that was what The Beast was, basically.
That's what they called it.
Yeah.
Think of it as a game that used your life as the platform.
Okay.
Yeah.
So we really wanted to build more of these.
We raised a little bit of money from friends and family and almost immediately got this call from Microsoft saying will you work on Halo 2?
And we said, what if we did the marketing for Halo 2?
And they said, okay, well, here's the thing about the marketing for Halo 2.
We want it to be really, really, really big, like really significant.
And I remember I said, well, you don't have to worry about that.
Like Halo 1 was the biggest thing ever.
Halo 2, everyone's just going to be totally excited about it.
You have nothing to worry about.
And they said yeah, but we want the marketing for Halo 2 to be a cultural phenomenon, that.
And I thought oh, now we're talking.
Like, if you're giving me permission and budget to build a cultural phenomenon, like, sign me up.
And so I teamed up with the lead writer from The Beast, a science fiction writer named Sean Stewart.
And he wrote this story that was based on Orson Welles' War of the Worlds.
Yeah.
So, like, that's the story of Halo 2, right?
It's aliens invading the Earth, and what would it be like to actually tell the story of being in your apartment when that happened?
Or walking down the street and you see a bright light in the sky and what happens next?
And then, just like for The Beast, we cut it up into little pieces.
In this case, all audio.
These little two-minute snippets of audio.
And we said, instead of delivering these over the radio, what if we delivered them over something new, rather very old, which was payphones?
Hundreds of thousands of ringing payphones all over the world.
You're walking down the street, you hear a payphone ring.
You walk up to the payphone.
You pick it up because what the hell is happening there?
And you hear this two minute audio clip and it tells you where to go next, where to hear the next piece.
But also by doing that you're unlocking it for everybody else on the website who's also trying to put those pieces together.
So all of our payphones would ring on a certain day of the week.
I think it was a Tuesday.
So all the payphones are going to ring on Tuesday and slowly millions of people reconstructed it.
And you would just pick pay phones in like major cities like L.A. and New York?
Yeah, exactly.
Yeah.
We'd send out scouts of teams to actually find the pay phones.
It wouldn't be like a pay phone on a rural highway in the middle of West Texas.
Well, we screwed that up a few times and accidentally did that.
But yeah, we tried not to.
Okay.
Yeah.
So 42 Entertainment really begins as kind of a – I mean, you may not like this term and I don't think it's bad, but like a marketing company, basically to create campaigns, right.
And it was – by the way, does this still happen?
Like do these things still happen when you know, I don't know, Grand Theft Auto is going to be released and stuff?
Like do they –
I don't really, I mean, certainly not to this scale anymore.
It must have been expensive to do this.
Really, really expensive.
And every time we did another one, we had to raise the bar, right?
You have to at least do better than the last campaign you did.
And so that got really hard after a few years.
Did it make money?
Was 42 Entertainment like doing well enough to sustain – to be sustainable?
Yes, but –
It was a service business, right?
Right.
You're constantly hustling for new... Yeah.
Yeah.
So we would make money as long as we were working.
And every night I would go to sleep and think, I'm about to go to sleep for eight hours.
And during those eight hours, I'm not making a penny.
And that started to really weigh on me after a few years.
And it gets really.
It starts to really get tiring to have to think like okay, we just did something cool and world changing and everyone's talking about it.
And I'm not making any money off of that.
Like I'm struggling to pay rent because I just, I got paid for that one thing and that's it.
And now I got to find the next thing.
Otherwise I'm not going to eat.
Yeah.
And I guess pretty soon you came to the conclusion that this just wasn't going to be sustainable.
I know you had thought about trying a couple of things and even did, but you eventually wound up going back to Microsoft for a while.
It was like 10 years after you left.
And I guess, from what I read, you went back to work on a new product like the latest Xbox, Xbox One, was it?
Yeah, so I agreed to take this job.
They're throwing a lot of money at building content for this Xbox games and TV shows and a whole entertainment platform.
And I could do that.
I know how to build all those parts.
I've got experience in all those parts.
And I don't have to worry about the revenue model.
They've already got that baked in.
So maybe this will be cool.
And I went and did that for about a year and a half and launched the thing, got the Xbox out the door, got the studio up and running, released all this content and it was mostly good.
And then I had kind of an existential crisis.
I...
I remember I went to my brother's house who has two small kids.
And I'm so excited to see my niece and nephew.
And I walk in and I'm like, hey, how's everybody doing?
And they don't even look up because they're staring at the TV screen and they're playing the Xbox.
And to add insult to injury, they're playing a game that I designed.
And I just thought like, oh, I am so clearly part of the problem here.
Like something about it feels broken.
And within about two weeks, I resigned and knew I had to go do something else.
While we come back in just a moment, Elon and his friends launch a record-setting Kickstarter campaign around a box of cards that actually meows when you open it.
Stay with us.
I'm Guy Raz, and you're listening to How I Built This.
Thank you.
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You know, one of the most surprising things about how I built this is just how many pitches we get every year.
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Hey, welcome back to How I Built This.
I'm Guy Raz.
So it's around 2014.
Elon is almost 40 years old and about to leave Microsoft for the second time in his career.
As for what's next, he's not sure.
No, I don't know what it's going to be, but I know it's going to be storytelling somehow.
Got it.
Okay.
And were you living in Seattle at the time or were you living in LA?
I was living in LA and what was I doing at the time?
I was doing nothing.
I spent a week just saying like, don't know what i'm gonna do.
I'm not gonna do anything, i'm not gonna make any plans, let me just.
Let me just try to relax for a week.
And then i got an invitation from a friend of mine, uh matt harding, who said uh, come to hawaii with me.
We're gonna set up a group little hawaii trip.
Some of my favorite people, we're all i'm gonna rent an airbnb, we're all gonna go hang out.
And one of the people that Matt Harding invited was this guy, Matt Inman, who is the creator of the online comic The Oatmeal.
Okay, this is a different Matt.
This is a very popular... comic with, like, just weird animals and... I don't know.
It was a cult comic, basically, right?
Yeah.
Well, very popular is an understatement.
Like, Matt has books on the New York Times bestseller list of his comics.
He Matt's specialty is he can figure out how to take a very relatable thing, find the humor in it and illustrate it in a single panel.
And people have just absolutely become obsessed with him as a result of this unique, beautiful skill.
All right.
So this is where we finally are going to get into Exploding Kittens because, as I understand it, you brought a deck of cards with you to Hawaii, right?
And what you've been tinkering with an idea for a game that a friend of yours had kind of suggested to you.
Is that right?
What's the story?
Yeah.
Another friend of mine, Shane Small, had come up with this idea for an app.
And he said, what if we do Russian roulette with a deck of cards and it'll be an app?
And you're trying to draw cards, but don't draw the bad card.
And we'll, I don't know, we'll somehow convert this into something that you can play on your iPhone.
And I said, look, I don't understand what most of that means, but...
Let's do that for real.
Like to test if any of this makes any sense at all.
What if we did all of that for real?
And we'll take a real deck of cards and I'll just scribble on some of them with a Sharpie and we'll play this game using a real deck of cards.
And so I literally took a Sharpie and a poker deck and I started scribbling on it, and I still have the deck over there on my shelf.
And all it was, was Russian roulette.
There was one bad card in the deck.
Draw, take turns drawing cards.
Don't draw the bad card.
Every other card that you draw, maybe will help you somehow.
Maybe one will let you peek at a card before you draw.
Maybe one will let you force somebody else to draw instead of you.
That's the whole game.
And you were playing this in Hawaii.
That's right.
We were all playing this game.
And Matt Inman said, hey, I've always wanted to make a game.
I've always wanted to make an oatmeal game.
And I don't know anything about game design, but this seems really fun.
What do you call it?
And I said, oh, it's called Bomb Squad.
At the time, it was called Bomb Squad.
And he said, OK, I have two questions for you.
One, can I join your team?
And I'll illustrate all the cards.
And two, can we change the name to anything other than Bomb Squad?
And I said, why do you want to change the name?
And he said, well, it's so obvious to be scared of a bomb.
Bombs are scary and they hurt people.
And it's so on the nose that, like, who cares?
He said what if instead, the thing that you were scared of in the deck were cute adorable, fuzzy little kittens?
And we'll call the game Exploding Kittens instead.
And that was literally what he said to you.
He was like that sentence.
Okay.
This is a guy who had like a, he had like books coming up.
He had like a business and it's you.
And the other guy was Shane.
Shane small.
Yeah.
Shane small.
Okay.
And you guys are like, yeah, let's, we want to make a card game.
Just put this in perspective for me, right?
You had just come out of a multi-billion dollar company, Microsoft, right?
Already one of the biggest companies on the planet at that point.
And had a good salary.
And you were looking for your next thing.
And in your mind, were you thinking...
This is it.
Because I'm thinking if I knew you, I'd be like, that's cool.
I'd totally, you know, go have fun.
But were you thinking like, this is the thing I've been waiting for.
This is the way I want to tell stories.
No, not even remotely.
I really thought this was going to be a fun weekend project.
I thought, look, I got nothing else going on.
And did Matt, too?
Did he think this was going to be just a fun thing?
Just for fun.
Just so people could have some joy.
But not necessarily a business.
Matt thought... it was going to be bigger than I thought it was going to be.
Like I remember we had this conversation, we had to open a bank account to start this thing, right?
And so we go in and we meet with the banker and she's like okay, so you're going to open this thing and how much money do you think you're going to deposit into the account?
And I said, well, we're going to put this thing up on Kickstarter.
We're going to try to raise $10,000.
And she said, OK, I get that.
But like, how much do you think is actually going to be deposited into this account so we can set up the right kind of account for you?
We can put all the right fraud detection things in place and the whole bit.
And I said, $10,000.
That seems about right.
That's how much we'll earn off of it.
And Matt immediately said $5 million.
Right.
So like his thinking on this thing was totally different than mine.
But he also never thought it was going to be a company.
He thought it would just be a quick Kickstarter campaign.
Right.
Okay.
So when you guys decide to form a business, did he initially think let's just do it under the oatmeal brand?
Or did you all agree, let's just create something totally new?
We all agreed to do something new.
We all knew we were going to be all equal owners in this thing.
We're just going to start it.
But again, this is just going to be a weekend project.
There's nothing here.
This is just going to be fast.
We'll all earn a little bit of money based on which of the three of us you ask.
And then we're going to move on and go get real jobs.
And so did you even bother to talk about, like you know, let's figure out, you know, our equity splits and let's set up an LLC and, you know, get an IP lawyer.
No, we should have done all that stuff.
Instead, we'd said, let's all own a third of this thing and shake hands and move forward.
And that was it.
Which actually is perfectly fine.
Yeah, it was fine.
Um, then we, uh, then we launched the thing.
I mean literally within I would say like four weeks of that meeting uh, of meeting Matt.
We had the thing up on Kickstarter.
Okay.
Let's, before we get there.
So you, it's a card game.
You have the concept down, which is basically Russian roulette.
But what happens then?
When you get back after this Hawaii trip, he just goes to town on on making the creating the artwork for these cards.
Yeah.
So every card in the deck, there's 56 cards.
Every card in the deck is going to be a one panel comic.
My job is figure out what the hell those cards are.
Like we're going to need a whole lot of cards.
Everyone has to feel special and unique.
My whole principle behind the thing was every card in this game should invite an interaction between you and another player.
So I really wanted this thing to feel like you are playing against players.
You're not playing against the game.
Everybody is playing against each other.
And that's just that interactive training that I had walked in the door with.
And that partnered with Matt's art.
Over the course of just a few weeks, we put this package together.
That was the very first version of Exploding Kittens.
And were you – I mean there were games, like there was a whole – I mean Pictionary has been around and like there were games for – definitely for adults, right.
Was this conceived as a – there was Cards Against Humanity.
I don't know if that's still around.
Yeah, yeah.
Were you conceiving of this as an adult game or as a kid game or what?
Yeah, we mostly thought about it as a game for M.A.T.S. fans.
So it was going to be funny, it was going to be fast, it was going to be super easy to learn.
Right, and so some of the cards like, for example, you could diffuse an explosion by getting a card where you could rub the kitten's belly, or you could distract the kitten with a laser pointer, give it a catnip sandwich, or you know, just funny quick laughs on each card.
Just as a side, my favorite card in the whole game is called Taco Cat, which is half taco, half cat and a palindrome, which just makes me so very happy.
Right, okay.
So, all right, so you have the concept down, and...
And you guys decide to do this as a Kickstarter, which we'll get to in a second.
But the idea was you'd raise the money and then you'd – did you identify like a contract manufacturer to make them?
Like is that easy to do?
Are they in China?
Like who did you find to help you?
I found someone local.
I really thought... Local LA?
Local LA, yeah.
My theory was, okay, if I contact a local card manufacturer, I was like, what's the minimum order?
And he said, you have to produce a thousand decks of cards.
Like, that's the minimum here.
I was like, cool, okay, fine.
And I was like, how much does that cost?
And he said, oh, you know, somewhere around $10.
We'll just round it.
If you include shipping and everything, $10.
I was like, cool.
All right.
So we need $10,000.
That's our goal.
In order to hit our minimum, $10,000.
We'll set our campaign for $10,000.
And all the idea was at that point was we have a very funny deck of cards.
We have Matt who's going to do the marketing.
And we've got this guy who can print a thousand decks of cards for us.
Okay, it was going to cost you about 10 grand.
So you needed to raise...
10 grand to do this probably a little bit more because you want to make some money off of this right.
Ideally, yeah.
Right, okay.
And you went to Kickstarter because, I'm assuming, because it was a way to get attention, right?
I mean, because you guys could have probably financed this with 10 grand between the three of you.
Yeah, no, Kickstarter is a really good place for marketing, essentially, right?
Like we need people to show up saying I'm excited about this thing, I told my friends about it and now my friends have somewhere to go.
So Kickstarter was a really nice place for us to just launch this thing for the very first time.
And if we found that there was no interest, we just sort of ride off into the sunset.
Like, it doesn't matter.
There's no harm, no foul.
So this goes up in January of 2015, the three of you and Matt.
And I've seen it.
You can still see the video.
He makes a little like one and a half minute promotional video about this thing with his really funny drawings about this game.
And Matt also announces this on his website, The Oatmeal.
That's right.
Yeah.
OK, what happens next?
So, uh, we hit that 10 grand in the first 20 minutes.
Nice.
It was only seven minutes after Matt posted.
So we were live, we did nothing.
Then Matt posted and seven minutes later, we hit our 10 grand, which was incredible.
And you were asking people for $10 or $20?
$25 for two games.
So you could buy.
I think it was like 20 or 15, or 20 for one game, 25 for the bundle of two games.
And two games are the same game?
Same game, one regular version, one not safe for work version.
I see.
Okay.
Yeah.
Okay.
And 20 minutes you hit.
Wow.
Amazing.
Okay.
Incredible.
Then what happens?
Then what happens?
Then the Matt fire hose just continues.
And all of his fans flooded into the site, watched the video.
And within the first 24 hours, we passed the one million mark.
That's ridiculous.
I mean, it's just totally ridiculous.
It's a card game that you need 10 grand to produce a million dollars, okay?
A million dollars.
It's okay.
Okay.
Then what happens?
Then then you shut it down right, because who needs more money than that?
Yeah right uh, in the next 24 hours we hit, but you didn't show a million.
Yeah no, in the next 24 hours we hit the two million dollar mark okay, and then, and then in the next 24 hours we hit the three million dollar mark.
It's totally insane, i mean so and this was all kind of it's.
Now it seems like it's almost like like virality, like everybody's, like it's sort of half interest but half joke, like oh, this is, this is a kind of a joke.
Let's just add on.
Let's just I want to be part of this thing.
There was definitely a bunch of that going on.
But then something really interesting happened.
On day four, we made only about $200,000, which is huge.
Like, that's incredible for any campaign.
But we're now accustomed to making a million dollars a day.
A million dollars every day, yeah.
And so on day the next day, we made even less than the day after that, even less.
And what we realized is that we've tapped out, like all of the people, that Matt, through the oatmeal, can reach.
He has reached and they've converted as much as they're going to convert.
And that's it.
There's our total.
And it was at the time we were at about three and a half million dollars.
And Matt and I sat down and said, OK, well, now what?
And we kind of realized we had two choices.
Option number one is just shut it down.
Just say we're done.
Like.
I don't even know how we're going to produce this many copies of the game, let alone what might happen at the end of 30 days.
So let's just say we're done.
No more promotion.
No more talking about this thing.
And the other option was this little voice in the back of my head saying or what about storytelling?
And I said, look, what if we change the way the Kickstarter works?
What if, instead of a regular page, what if we convert our entire page into a game that tells stories?
And Matt said, what the hell does that mean?
And I said well look, normally a Kickstarter campaign has these things called stretch goals right,
Yeah.
We're trying to raise $10,000.
But if we raise $20,000, everybody gets a fancy carrying case.
And if we raise $50,000, you get more cards added to the game.
They borrowed that from public radio, by the way.
Oh, did they?
Stretch goals, yeah.
It is such a good term.
Public radio stations would say, we're trying to reach our stretch goal here.
Yeah, keep going.
That's perfect.
So you're like, okay, because you had 30 days, right?
The campaign was going to be live for 30 days?
Yeah, 30 days.
Okay, yeah.
And you could have shut it down because you way exceeded your goal.
You're in 3 million now.
Yeah.
But now you're saying let's create these stretch goals that will incentivize more people to join.
Yeah, except a new twist on them.
So instead of saying let's tie our stretch goals to money, which is what everybody was doing.
Right.
What if we have those same stretch goals?
We'll still add cards to the game.
We'll still do the fancy carrying case the whole bit.
But what if instead we tie our stretch goals to storytelling?
And we're going to create these things called achievements.
And the achievements were insane things.
It was like... look, there's this character in the game called Taco Cat.
Show us a hundred pictures of a real Taco Cat.
And if you do, we're going to upgrade the game for free.
And people went out and they dressed up their cats as tacos and they took pictures and they sent them to us.
And then we said, okay, cool.
How about, I don't know, 10 Batmans in a hot tub.
Show us that.
And they went out and they got Batman costumes and they got in a hot tub and they took pictures and they sent those to us.
And we converted our entire Kickstarter page into a shrine for these achievements.
We just put the spotlight right back on the audience and said, look how incredible you are.
And like, when you think of crowdfunding, everyone thinks about the funding part of that word, right?
And they focus on it.
And we made the opposite decision.
We're like, what if we ignore funding entirely?
We don't need to worry about money again.
Let's worry about the crowd part of that.
And we're never going to ask you for more money.
But you have this going on for 30 days.
Yeah.
And after 30 days, you raise how much?
It was just shy of $9 million at the end of it.
And I think, to this day, it's one of the largest Kickstarter campaigns, not in terms of overall money, but in terms of overall number of people who contributed.
Yeah.
We're 10 years later, and it still holds the record for the most number of backers of any campaign.
How many people?
It was 219,000 backers.
That's crazy.
It's crazy.
It makes no sense.
It's totally crazy.
All right, so you guys all of a sudden have almost $9 million or just under or over $9 million.
And now, by the way, how many packs of cards did you have to make?
So 219000 backers made means that because most people wanted more than one deck, we had to produce 700000 decks of cards for our very first print run.
Okay.
And now you're going to upgrade them.
And so one of the things was that when you open the pack of cards it would meow like when you open like a greeting card and it plays happy birthday.
Yeah.
So you had to embed like a chip in there to meow when you?
Yeah, we had to embed a chip and a speaker and a light sensor so that it could detect when the lid was actually opened.
We thought, oh, this will be fun.
This will be cute and easy.
And I think we ended up spending an extra million dollars just to produce that chip.
It was a very expensive, cute little toy.
So how did you get, I mean, you were going to have this guy make you a thousand decks.
You have to make 700,000 now.
So what did you call the guy and say, Hey, we got like, tell me what happened.
Yeah.
I called him up and I explained, uh, what we needed.
We needed 700,000 copies and he just started screaming like just absolute chaos.
Um, I later learned that that would be higher capacity than the entirety of the number of decks of cards he's printed in the 10 years he had been in business.
So he was just out.
He was just like, I don't know how to help you.
Um, then we called up a casual friend at Cards Against Humanity.
And they do really, especially at the time, they did just so many decks.
And I said, look, here's our problem.
Here's what we got to do.
I don't, I have no experience in this thing.
And they were really nice.
They said, look, You're going to call our distributor.
You're going to call our manufacturer.
You're going to call our agents.
And we're going to make sure we hold your hand through this whole process, because we've printed even more than that in a year.
So we got you.
And it was incredible.
Like, they took such good care of us.
And we promised our backers having no idea how many decks we were going to have to produce, we promised them that we would deliver this thing in seven months.
And so the campaign launched in January.
We promised it would ship in July.
And because of Cards Against Humanity and their help, we shipped every single copy by July 30th of that year.
Wow.
So they helped connect you to a manufacturer.
Yeah.
Presumably in China.
Yes, exactly.
And they were able to embed the meow in those cards, invent, produce, and then embed the meow chip.
And now this is where the story typically ends for most Kickstarter campaigns.
Now they're not all we've done uni pizzas on this show, uni pizza oven starters Kickstarter, but even successful Kickstarters.
They raise all this money, there's a lot of hype, they send the thing out and then that's it.
It's done.
But I have to imagine that you're thinking, wow, maybe we are on to something here.
So once you send them all out, I imagine you're thinking all right, let's get these into you know, game stores and, and and turn this into a product.
Like what was the because you you guys are all informally made this agreement to start a company.
And now you've got a company sitting on eight million dollars.
Yeah, this is not.
This is non equity funding.
Yeah, this was um, this was insane.
Like, what a crazy way to start a company.
We had no investors.
Uh, we had uh, the largest kickstarter in history at the time and uh yeah, we were just off to the races.
So we um contacted a bunch of retailers uh the targets and the walmarts and the amazons of the world and said like look, we've got this thing.
We think more people want it than just the people who backed it.
Are you interested?
And luckily, most of them said yes.
And so we just continued working with that first manufacturer to just produce as many games as possible.
And the first year, like after Kickstarter, the first year we pulled in about 20 million in sales just moving through retail.
And the retail was Target and Walmart and Amazon.
And just putting it on the shelves.
Yeah, exactly right.
And the game had enough hype because of the Kickstarter that we didn't have to do too much marketing.
We had to do...
Some pretty creative things at conventions to get more word of mouth going.
But we could coast both on Kickstarter and then a whole bunch of like guerrilla marketing tactics to get through that first year.
But the idea was, let's go to gaming conventions because that's where you're going to find buyers.
I mean, given that you came from this background of like storytelling and just wild kind of ways of of getting people engaged, you had to come up with some ideas to do the same thing at these conventions.
Yeah, yeah.
So what we, what we finally figured out for conventions is we have to compete with these guys who are spending millions of dollars on their booths and we don't have millions of dollars to spend because we've spent all our money producing the games and who are the big players.
It's like the hasbros hasbros mattel, spin master, the the giant ones yeah yep, And so what we tried to do, like I started thinking about all right, what is your interaction at a convention?
It's mostly just like interacting with a vending machine, right?
You go up, you put in money, you push a button, you get your thing, you walk away.
And I thought like okay, if all this is is a vending machine, what if we built the coolest vending machine anybody's ever seen?
And that's kind of what we did.
Like I took an old refrigerator box like eight feet tall and we covered the whole thing in fur and put googly eyes on the top and giant ears.
And so it looks like a cat.
And the first thing you notice when you walk up to this vending machine is you just want to hug it.
I mean, it's just so beautiful and lovely.
And it's this eight foot tall, smiling cat.
And it's got all the things that a vending machine needs.
It's got buttons to push and pick your game.
And it's got a big screen to tell you what's going on.
And it's got a little slot where you can put in your credit card or cash.
But it also has an extra button.
And that extra button says, random item, $1.
And if you push that button, then you put in your dollar.
When I say random item will come out of this machine, I mean a truly random item came out the bottom of this thing.
It could have been a burrito.
It could have been a plunger.
It could have been one of our games.
It could have been a watermelon.
Like this thing could deliver more than 2000 random items through this vending machine, just to make people laugh.
And at this point, you should be scratching your head a little bit, because how is that possible?
How can you build a vending machine that does that?
And the answer is, we didn't build a vending machine.
We built a vending machine costume.
And eight hours a day.
Our little team would sit inside this horribly cramped space, put pushing watermelons and cantaloupes and hot burritos out the front of this vending machine to this crowd.
And the crowd grew and they loved it and they wanted to see what would happen next.
And our little vending machine started to have a 10 minute line and then a 20 minute line.
And then eventually like an hour long line that was blocking all those multimillion dollar booths.
And it was all because like, again, all we want to do is tell stories that interact with the crowd.
And we're just going to find new exciting ways to do that.
So, I mean, you remember this, right, which was at the time there was all – and this is normal.
This is the way the world is.
There were bloggers and other people who criticized you guys for doing it through Kickstarter, initially because they were like hey –
They're just using that as a way to drive pre-orders and they could actually afford to do this on their own and Kickstarters for people you know who are really like DIY.
But I guess your response to that was, yep, exactly.
That's why we did it that way.
Yeah.
I mean, that's the best use I can think of for Kickstarter is like go to Kickstarter to build a community.
It's not there to raise funds.
It has the side effect of raising funds, but you're really raising a community and that's the place to do it.
Do you think that you were able to sort of keep this going because of the nature of the game or the nature of your fans versus like, the brilliance of your marketing campaigns?
Because, again so I mean the odds are still stacked against you, even after you raise a lot on Kickstarter.
Like there's tons of Kickstarter successful Kickstarters that are no longer in business.
Yeah, I think what I've figured out about our company is that everything we do has to have two components.
Component one is we need to have a really good game, because I need you to buy something, take it home, have a shared experience with your family, and then everybody spreads out and says oh, I want to have that experience again.
I'm going to go buy my own copy.
And the game, the quality of the game has to facilitate that.
But the second part is none of that matters unless we know how to sell those games.
Which is where all the marketing comes in, which is where the vending machine comes in, which is where all these you know, wacky idea after wacky idea comes in, because we have to be able to say this is the thing you want to bring to your next gathering.
This is the thing that when you give it as a gift at a birthday party, everyone's going to say, oh my God, I've really want, I've wanted this thing for years.
Like.
Yeah.
Right.
Because in year two, as you say, I mean well, the first full year or the second year of 2016 you still I mean you're doing 20 million in sales, at least something like that.
So.
Yeah.
Yeah.
Every year, like for the first few years honestly, for the first, like 10 years, Exploding Kittens is very consistent at hitting that 20 million mark.
It was just driving the business.
So it's 20 million every year is driving the business.
And you had, it was like a recurring revenue stream basically.
Yeah.
Yeah.
And an incredible place to be.
And we should just sort of add that this is a very efficient thing to sell, right?
Because I can't imagine it's that expensive.
I mean, first of all, you didn't have to pay an artist or license there because he's a co-owner right.
And making and printing the cards and getting them shipped in a container.
How much does that cost per deck?
Right.
Yeah, it's to make cards, put them in a box.
This comes out to like between one and two dollars based on the product, right?
And we're selling it for 20.
So that's a really good business.
But you, as a person who has built products, you know like so much more has to be spent to market that thing.
Yes.
And I think that's every time I say that statistic like yeah, we're building things for a dollar and selling them for 20, everyone has that reaction until you realize, like this is a complicated business.
And there are so many parts that require cash infusions constantly in order to stay above the competition, in order to stay relevant, in order to make sure that next year you do as well as the previous year.
It's expensive in all the ways that you don't normally write down on paper.
All right.
So you get this out into the world and you are you've got a real business.
But again, like at that point, you know I'm thinking well, you know, what's the lifespan of this thing?
Right.
Like because building a generational product is very, very hard, especially in games.
Right.
You've got Settlers of Catan and everything. and Connect Four and Pictionary and Trivial Pursuit.
I don't even know if that's still played.
I have no idea.
This is dating me.
But, you know, checkers, chess, right?
I mean, there are certain games that just endure.
But I mean, out of the millions and millions of games out there, it's just a tiny number stick.
So was any part of you thinking, even with the great success of year one and year two like okay, this is just going to peter out?
Eventually we got to think about the next thing, or how to keep this going, or or, or what?
Yeah, i mean really the the very next year?
It was.
Well, let's assume this.
This whole thing is going to fail and all sales are going to stop.
We've got to get another game out the door and uh, we got to work almost immediately trying to do our second game, which was called bears versus babies.
And Remind me what was the premise of that game.
The premise there was Matt, once again, we went back to Matt, and Matt wanted to make body parts.
He's like I'm going to make one card with a head and one card with a torso, and one with legs and one with arms, and we'll do a whole deck of like 100 of those.
And you mix and match these characters together to make incredible creatures that do battle against this oncoming horde of raging infants who are trying to destroy the monsters all the time.
And so we called the monsters all the bears and against the babies.
And that was the premise of the game.
And it was lovely.
I mean, it was just such beautiful art.
And we raised like $5 million on Kickstarter for that campaign.
You did another Kickstarter?
Another Kickstarter and raised a ton of money.
But we put it out in retail and within a year, sales just fell off a cliff.
It was really eye-opening for us to see this isn't magic.
It's not like anything you put out there is going to be as big as Exploding Kittens, because we were staring at one evergreen product Exploding Kittens and our second one, after just 12 months, completely disappeared.
Why?
What did you, I mean, you must have sort of sat back and said, well, why this one, not that one?
Did you ever come up with any answers?
I don't have a great answer, but I do know that, like when I go to game nights with my friends, I'm bringing exploding kittens and I'm not bringing bears versus babies.
It's a little too complicated.
It's a little bit harder to explain to people the rules.
It takes a little bit longer.
And I think it's just all those little little, little little just added up to probably not quite worthwhile.
Alright, so the next game you come up with, You've Got Crabs.
Yeah.
This was Matt named You've Got Crabs and he wanted to launch it on Valentine's Day.
And this one only survived about eight months in retail before it completely disappeared.
And, you know, a lot of that was just it was the wrong game.
Like it was probably of the three that we had released to date.
It was probably the weakest on the game design front.
The game involves a lot of people sitting in silence.
Right.
It's, it's you're.
You're sending secret messages to your teammate, hoping that they notice the message and nobody else at the table does.
And so that's the things, like you're scratching your nose, you're tugging on your ear or you're creating all these secret signals which sound really good on paper.
But then when you're sitting around the table and everyone's just sitting there in silence, tugging on their ears like everyone knows, something's going on.
Yeah.
Yeah.
Yeah.
And nobody's laughing and nobody's cheering.
And there's, yeah, it just, it really fell flat.
So what I'm curious is you've got two years of pretty good sales with Exploding Kittens, but not growing necessarily all that much, but staying pretty constant.
But you're investing money in these new games, which are losing money.
Yeah.
I mean, were you guys just like we got to figure this out, because we cannot survive on exploding kittens alone?
Yeah.
Yeah, we really couldn't.
That was just I mean, that was the thing that was keeping me up at night.
That was I stopped eating.
It was just awful, awful, awful, awful.
And, you know, that title was looming over us of like one hit wonder.
What if that's the only good thing you ever do?
When we come back in just a moment how the business bounces back with a new game that blends dodgeball with burritos.
Stay with us.
I'm Guy Raz, and you're listening to How I Built This.
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Hey, welcome back to How I Built This.
I'm Guy Raz.
So it's around 2018, and Elon and his team have created one hit card game and two confirmed flops.
And so they're casting about for another good idea.
And then a guy showed up named Brian Spence.
And Brian Spence is a game inventor, and he showed up with a game called Flaming Mangoes.
And Flaming Mangoes was half card game, half dodgeball.
He was like, look, I've got this idea.
You're gonna play cards.
Everyone's gonna move cards around the table as fast as you can.
You're trying to collect sets of cards.
Every time you collect a set of cards, you earn a point.
But every time you get hit by these burritos, which everyone is throwing around the table constantly, you lose a point.
So you got to do these two things at once.
And it's really fun and really funny.
And I looked at this game and I thought this feels exactly like when I approached Matt with Exploding Kittens.
And so I took that and I sat down with Matt and I said, here's a really good game.
I think I'm going to make a few little tiny tweaks to it to make it an even better game, but it's called Flaming Mangoes and that's not going to work.
What should it be called instead?
And Matt, because he is mad and brilliant, said this game is going to be called Throw Throw, Burrito.
And we're going to... It's basically a food fight.
We're going to be throwing burritos at each other.
And here's how we're going to market this thing.
We're going to put a box that says the world's first dodgeball card game and there's going to be a big window in the box where you can see the squishy burritos and a giant arrow pointing at them that says, just you throw these.
Every single line that I just said is brilliant.
Like it was so smart.
And when we put that thing together and put that in retail, this beautiful box with these two squishy burritos, even though it says it's a card game, and you throw these all of a sudden.
Beautifully, we had another hit on our hands.
But why would somebody say, oh, that's the game that I want and not the previous ones?
What was it about?
Were you able to tell the story better?
Why would people pick that off the shelf?
So it really stands out on the shelf.
Like it's got this little nice sense of mystery and storytelling right on the box.
Like you told me this was a card game, but what the hell is this dodgeball thing?
Why are these burritos here?
And you take that game home.
That's just enough to get enough people to take it home.
And then they go and they play it with their friends and every one of their friends leaves that party thinking I got to buy this game.
And that thing, I think its first year, it sold 500,000 copies.
A normal game, its first year, will sell 30,000 copies.
Like, this was just off the charts for a game.
And every year since then, it's grown because it keeps spreading.
And how did you, but how did you market it?
I mean, just... So, yeah.
So once again, okay, so this is a little confusing.
Once again, we did a Kickstarter, but this one raised even less.
This one raised only like $3 million at Again, huge success, oh my goodness, amazing, right?
But this is a bad trend, right?
We started at nine million and then to five and now we're at three.
But this game.
Once it hit retail, it jumped absolutely to the top of the charts and it has stayed there.
It has stayed on the top 10 list ever since it launched.
All right, so you put this game out and it is, and finally now, not finally, but now.
No, let's say finally.
Yeah, we were sweating for a lot of years.
You got three years in, now four years in, you got a hit.
And now you're feeling like, okay, we've got some momentum here.
Yeah, now people are starting to take us seriously.
Now retailers are saying, okay, what else you got?
Like, pitch us more games.
We're really interested to see what else you've got.
And now investors start knocking on our door.
You got Peter Chernin coming in, for example.
Yeah.
So Peter Chernin of the Chernin Group showed up at our studio and basically said we really believe in what you're doing.
We love the community you've built.
And can we invest?
And we turned down most investors because it never really felt like the right match.
And we were so proud of ourselves for saying, we have no investors.
We've done this completely through crowdfunding.
Right.
But when the Chernin group showed up, it was just instant chemistry.
Like, these are really good guys.
But what did he think you guys could be?
I mean, you're selling games.
I mean, these guys invested in Barstool and, you know, things like that.
What was his pitch to you guys for what you could be?
Yeah.
So Peter Chernin showed up with one of his partners, Jesse Jacobs, and their pitch was so good.
They basically said, look...
You have built this thing from a very small company of three people to a very medium sized company.
I think at the time we had like 40 people and you've got two huge hits on your hand and we're sure that more are coming.
But realistically speaking, this is probably as big as you're ever going to get.
You'll have another hit or two, but you're going to stay right at this point.
The next stage for you is the tv show and the movie and the theme park and all of these huge, gigantic expansions and we are the best in the world at building those things basically to become an ip brand exactly, exactly.
And uh, i looked at matt and matt looked at me and we're just like yeah, that's a really strong pitch.
And so it took a few months of negotiation but we finally uh took an investment from them.
They invested uh 40 million in the company And immediately they got to work at helping us expand, figuring out like, all right, how do we build a TV show?
And how do we build a movie?
And what are all the other things we need to start working on immediately to grow this thing?
I mean, the whole idea initially started out because you were feeling like oh, or in part, like you were responsible partially, in a small way, for kids being addicted to screens, video games.
Now, here you are 2019 2020, and that's going to be part of what you're going to have to think about doing.
I know, there's no way around that.
It really came back to haunt me.
And we started very quickly working on the Netflix show, which is now out.
But when it was in development, I had this exact dilemma.
Just thinking about this over and over again.
And we started building an app, and I had the same dilemma just over and over again.
And the deal I kind of made with myself was...
As long as the core of this company is always board games, tabletop games, things that inspire face-to-face interaction, I am okay exploring expansions in these other realms that feel like they are serving additional exposure to this source of joy through face-to-face interaction.
And maybe that's a little bit of me trying to justify it to myself, but it felt at least like okay, I can at least sleep at night again.
So with the churn groups, sort of infusion of cash was there and they were saying look, you know, it's it's video, it's IP, it's it's move, it's video movies products, you know?
Theme parks like what, what I mean?
Okay, you get the Netflix thing happens.
I mean, those are big ambitions.
What did you guys I can't imagine that you were able to do all of those things.
But what did you start to build out beyond card games?
Yeah, we started to, at first it was just design.
At first it was, okay, if we wanted to do jigsaw puzzles, what art do we need?
What team members do we need?
A lot of it was just building a roadmap for the next five to 10 years for the company.
And then we started hiring people to implement little tiny parts of those.
And that got us through most of 2019.
And then everything changed in 2020, of course, with COVID.
With COVID.
And that probably was an unexpected boom for your business.
Yeah.
Suddenly, there was the most dramatic increase in game demand that I have ever seen.
And it was families mainly, right?
All families, right?
Everyone's at home.
Your options are put everyone on a screen or do something together.
And we saw a 90% increase in revenue that year, just in 2020.
Wow.
We could not print games fast enough.
Anything we tried to bring new production facilities online would immediately sell out and we'd have to find new ones.
Yeah.
It became very expensive to ship things because all the container ships were taken.
It was just impossible to get spots.
A lot of our plants shut down because of COVID.
Anytime there was an outbreak, suddenly we can't use that plant anymore.
Our distribution warehouses would shut down because of COVID.
So it was absolutely like for a full two years, it was just playing whack-a-mole.
Every day, some new catastrophe would come up and we'd have to find a solution for it.
All of our competitors were having the same problem.
And so really, our guiding mantra was just like whatever it takes to be the only game on the store shelves.
Everyone else is going to fail at this.
Ours is going to, our game is going to be there no matter what.
What was the, I mean, was there still in the back of your mind, it's still maybe now, right?
Like, were there moments where you're like wow, we just this is.
You know, we're just on a lucky streak here.
But at some point, something's going to topple it or people are going to move on or I don't know.
Or now are you at the point where you're like nope, this is like Connect Four or like Uno, like it is an enduring game.
I live in constant fear that this whole thing is going to topple.
I don't think there's been a day that's gone by where I've thought oh well, I don't need to worry about that anymore.
Exploding Kitten sales go up and down.
All of these things are constantly competing with all of the other shiny things in the universe and I never know what is going to endure.
So it's.
My only solace is I think we're really good at making games, so we will continue to make a whole bunch of games every year and hopefully every year enough of them will go viral and become evergreen hits that I can worry a little bit less about approaching zero.
Worry, but never quite arriving at zero.
Yeah.
So I know you've got another investor that came aboard in 2021, a French publisher that made an investment.
And I think they took a majority stake in the company, right?
They did.
Yeah.
So they're called Asmodee, and they purchased 55% of Exploding Kittens.
And what does that mean?
Was that, in your, from your point of view, a chance to expand into europe or or what?
Yeah um, i realized that uh, we well, one matt and i have really never taken anything out of the company.
So one was shane left early.
Right, he left, shane left in.
Uh, shane actually left in 2015, the very first year.
Yeah okay, But Matt and I, really we just everything we make, we pour right back into the company.
And so this was the first time where someone came along and said look, we can help you expand internationally.
The reason that things like Throw Throw Burrito are in 29 different languages is because of our partnership with Asmodee.
So when this opportunity came up, we thought this could be win-win for everybody.
And that was the first time we sold enough of the company that we no longer have the majority.
And so one of the I guess things that sort of has emerged over the last few years and I imagine it's in part because you start a family right.
Now you've got one child, you've got two kids?
I have two kids, yeah.
Is when you have kids.
Oftentimes, as many people know, it opens up a whole world that you just didn't know about right.
You just start to see things and learn about things in a different way.
And I guess part of I have to imagine because you you've gone into sort of the pre-K world, because many of your games are easy for a six and seven year old to understand.
Sure.
Yeah.
But I guess you were like hey, there's a chance to get, to get in with like three, four or five year olds.
Yeah.
When my daughter turned four, I was so excited because I thought oh well, first I'm going to play Exploding Kittens with her and all of our other games.
And I realized that like, she's just too young for them.
Like really the sweet spot for Exploding Kittens is like six, seven, eight.
And so I thought, okay, no problem.
Let's go to the store.
We're going to buy all the games for pre-K, all the games for like ages three and up.
And we did that.
And I took him home and we played all these games and I had the worst time ever.
These games are so bad, and they're so mundane, and if I want her to win, I have to let her win.
Or if we're playing Candyland, neither of us have any facility in this game.
It was horrible, and I hated it.
I like Candyland.
There's candy in there.
Oh, no.
Candyland is the worst.
Okay, fine.
It's delicious.
I'll give you delicious.
I will not give you good game, though.
But afterwards, she looked at me and she said, you know, Daddy, let's play again.
And I thought, I don't want to.
Like, I hate this.
And she asked me why.
And I said, well, it's just not fun.
I'm not having any fun at all.
Let's go do something else instead.
And she said, well, let's fix it.
And I love that phrase so much.
Like, I couldn't believe my adorable four-year-old was telling me like, let's build something.
And so for the next few months we got out the construction paper and the markers and the crayons and I would design games and she would scribble all over cards and we would test things out and we designed like 12 games together.
And eight of them were terrible, like totally unplayable.
Four of them, though, were like good enough that I wanted to develop them more.
And so I worked with more designers and we brought them into the studio and we developed those four games, and all four of them got bought at retail.
Wow.
And it is one of the most beautiful experiences I've ever had in my life.
Yeah.
I get to walk down the aisles of target holding my daughter's hand, and she can point at her signature on every single one of those boxes.
And it's just, ah, it's just the greatest feeling in the world.
And now I mean, I know you're a privately owned company so we can't independently verify it, but I mean you know what is your like?
I mean, are you guys in terms of sales?
Are you over 70, 80, a hundred million a year?
Uh, we're over a hundred at this point.
Um, I, you're right.
I can't say the exact number, but we have, we've now published more than a hundred games.
Wow.
Yeah.
And even the first one even exploding kittens continues to pull in just huge amounts of money every year.
It just, it continues to be on the, in that top 10 list every single year.
And you've got cards and games and collectibles.
But I imagine that probably 80% of your revenue, maybe more, still is from the games.
Oh, yeah.
I would say 90%.
Yeah.
Yeah.
And where's the biggest sales channel?
Is it Amazon?
Is it brick and mortar stores?
Is it direct-to-consumer from your website?
Brick and mortar is still about 60% of our business.
Wow.
And that's everything from Target and Walmart to small game stores.
Yeah.
You'd think online would be the lion's share, but it's not.
And how do you think about making new games?
I mean, you've got a team.
I think you've got about 70 people on your team roughly now.
Yeah, that's right.
And so how do you guys decide what to pursue?
I'm sure you have to have a lot of ideas in order to decide to land on one and pursue it.
Yeah.
We have these design retreats, and we do them, you know, let's say two to four times a year.
And the whole team sorry, the whole design team, which is like five or six people.
We rent an Airbnb.
We all go to this house.
We spend three or four days just tinkering with ideas.
And we've got a table full of raw materials like weird toys and inflatables and just anything we can get our hands on to just tinker and just play and say ooh, what if this and what if that?
But on the last day the marketing team comes to the house and we have to pitch them and teach them how to play all 20 of those games.
And the reason that we're doing that is because they have ultimate veto power over anything.
So we could think it's the best game in the world.
But if the marketing team cannot figure out how they're going to sell that thing, that game dies, that moment.
So yeah, I mean it's interesting because what you've come from you came from such a digital world and you really made your mark in a very analog world, right.
And it's awesome.
I mean it just – it sort of underscores this idea, and I hear this so much more now every time I meet entrepreneurs or when I'm at an event.
It's people are – looking for in-person experiences.
They're looking to connect.
There's a crisis.
I mean, I'm not saying anything people don't know.
There's a crisis of community in the United States and many Western countries where, you know, just social media has kind of created these disaggregated, you know, environments where people are just living in their phones and their digital devices.
And It seems like you kind of have an opportunity and have been riding this wave of people wanting something more.
Yeah.
When we passed the 40-person mark, Matt and I realized we need a mantra for the company.
We need a tagline for the whole company, something that unifies everything we do.
And the thing we came up with was we don't make entertaining games.
We make games that make the people you're playing with entertaining, like i think that speaks perfectly to what you're describing is let's connect, let's sit around a table and let's laugh and let's eat food together and let's let's exchange ideas and let's play this silly game or kick each other under the table to cheat or whatever it is like to be able to facilitate that and say all of the stuff we make is just to help you uh, get away from your screens and and enjoy each other.
Uh, it's just i feel so lucky.
I i can't believe i get to work on this.
I can't believe this is the thing i get paid to do.
So, when you think about how that happened and how it turned into this from a very digital world that you were really immersed in your entire career to a very analog, you know world, which i love um, I mean, it's kind of unlikely right.
Like, it's sort of unlikely how it just happened this way.
But I wonder how much you attribute to the work you put in and how much you think just had to do with luck, the luck of meeting these people at the right time, the game, the fact that it just resonated with you.
Can I tell you a story?
Please.
I knew this question was coming because I listened to your show and I still I struggle with this answer so much.
So when I moved back to Los Angeles, one of the things I like to do is take the bus to work.
So I'm riding on the bus and every day.
And one day, I go to get on the bus.
I've got my $1.75.
And I walk onto the bus and the bus driver puts his hand over the little money machine, so I can't put my money inside.
And I said, what are you doing?
He said, well, the money machine's broken.
And I said, well, what do I do?
And he said, well... you know what?
Just get on the bus.
It's fine.
Just get on, pay me back next time.
I was like, okay, cool.
Great.
How lucky.
I sit down and another guy gets on.
He's got his money in his hand and the bus driver again puts his hand over the thing and says the money machine isn't working.
I can't take money.
And the guy freaks out and he just starts screaming.
And he's like, I can't believe this keeps happening to me.
I'm going to be late for my meeting now.
Everything's always against me.
And he storms off the bus.
And I watched this happen and I thought like, oh, what a bad day he's had.
What terrible luck this guy's had.
And he was one question away from having a really good day, which is like, what do I do?
Or can you help?
Or please just help me.
And instead he gave up and he stormed off and he had a miserable day.
And so, like I don't exactly know what luck is, but I do know that every time I'm confronted with a problem and it has the opportunity to go really, really wrong, giving up is always the wrong answer.
And that's like all I've figured out about this whole luck question is like good luck comes from not giving up.
Not all the time, but it is certainly the most important ingredient I've ever found.
That's Elon Lee, co-founder of Exploding Kittens.
So I have a slightly different take on Candyland.
I think Candyland lost it when they changed the Magic Mustache King.
They changed the look of it.
I like Candyland.
Candyland in the 80s was amazing.
I used to just look at the gumdrops and I just wanted to eat the board.
Guy, you might be the first person in history to defend Candyland.
I mean, but there's candy on a board.
Worst game in history.
Wow.
A computer could play the exact same game as you at Candyland.
And so why are we bothering with this thing?
Other than, yes, the candy looks delicious.
Yeah, fair enough.
Hey, thanks so much for listening to the show this week.
Please make sure to click the follow button on your podcast app so you never miss a new episode of the show.
And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at GuyRozcom or on Substack.
This episode was produced by Sam Paulson with music composed by Ramtina Rablui.
It was edited by Neva Grant with research help from Noor Gill.
Our engineers were Maggie Luthar and Kwesi Lee.
Our production staff also includes Andrea Bruce, Alex Chung, Casey Herman, JC Howard, Catherine Seifer, Chris Messini, Carrie Thompson, Rommel Wood and Elaine Coates.
I'm Guy Raz, and you've been listening to How I Built This.
And don't stop the podcast just yet, because right now you're about to hear an amazing small business story that you don't want to miss.
This segment is presented by American Express.
With a business platinum membership, the best just got even better.
So today we're revisiting Stemple Creek Ranch in Tomales, California.
Back in 2021, we had him on the show to talk to us about how they were adapting to the pandemic.
But before we get an update, let's go back 128 years ago, when a young man came to the United States with a dream.
My great grandfather immigrated from Garzano Italy, in 1897 with the sole purpose of producing food for the Bay Area.
So it was pretty amazing back then.
How would you even know about the Bay Area when you lived in Garzano, Italy in 1897?
This is Loren Poncha.
Loren grew up in Tomales, California, on the cattle ranch that his great-grandfather started.
For a while he thought about going into the family business, but he saw how hard it was for his parents to make a living.
So instead, he got a corporate job.
I was selling veterinary pharmaceuticals all over the country.
And while I was doing that I could not stop thinking about the ranch and how I could figure out a way to come back and kind of reinvent it.
Sometime around his 30th birthday, Loren realized he'd always regret it if he didn't try.
So he and his wife Lisa asked his parents if they could buy their cattle and lease their land.
And his parents said, great.
So Loren and Lisa got to work rebuilding the ranch the way they thought it should be run.
I wanted to mimic or replicate Mother Nature and have larger herds of animals that would move throughout the landscape.
And that was a big mindset change because nobody else was doing that in our area.
They also flipped the business model on its head.
The way I grew up is we would sell all of our calves on one day of the year and that's what we got paid.
And we didn't know what that number was going to be until the end of the day.
So instead, Loren decided to sell his beef directly to customers, and that way he could set the price himself.
We put up a five page website and within five days we started getting orders from people we'd never met before.
Within just three years, they hit a million dollars in sales.
But Loren was still working his day job as well, which kept him on the road sometimes six days a week.
I'd fly home, I'd do farmer's market, I'd do the cattle work, and then I'd fly out again.
And I had a wife at home and a newborn child, and I was like, man, something is going to give.
So finally, he quit his company job and went all in on the ranch.
And it's paid off.
Stepple Creek is thriving.
Today they harvest about 2000 cattle a year and they've built a bunch of other income streams as well.
We do farm-to-table dinners, and there's a wedding venue and three little farm stays.
People come visit us for the weekend and they're just like whoa.
This is 55 miles from the Golden Gate Bridge.
This is unbelievable.
They've also been expanding.
The original ranch was 269 acres.
But today, Stemple Creek has over 8,000 acres.
And they're not slowing down.
As long as we can keep honesty transparency, quality and keep those three things going, then we'll keep growing.
It's not about money.
This is about making people feel good and making nutrient-dense food and authenticity.
That's Loren Poncha of Stemple Creek Ranch.
His story was presented by American Express.
To build a business like no other, you need a card like no other.
There's nothing like business platinum.
If you like how I built this, you can listen early and ad free right now by joining Wondery Plus in the Wondery app or on Apple Podcasts.
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