End Game: Curt Schilling and the Destruction of 38 Studios
Schilling set out to build the greatest video-game company the world had ever seen. Instead, 38 Studios exploded in his face. A look inside the chaos, arrogance, and mistakes that led to the loss of $75 million in taxpayer money.
As Schilling’s personal investment shot past $5 million, he knew he would need outside financing. Since the Red Sox hero was able to get meetings with just about anyone within the broadcast range of NESN, he and his executives met with potential investors practically every week for the company’s first three or four years.
Todd Dagres, a founder and general partner at Boston’s Spark Capital, one of the top tech venture capital firms in the country, trekked out to Maynard for a meeting. He says he was looking to invest in games, but admits that he was also excited to meet the bloody-sock hero.
Schilling gave him an office tour, clicked through PowerPoint slides, and delivered a passionate pitch. But Dagres says Schilling came off as overconfident, as though he didn’t understand what a huge bet he’d made with 38 Studios. Project Copernicus was going to require tons of cash, and if the game flopped, the company would go down with it. 38 Studios didn’t have “the ‘A’ team that I thought you’d want to see developing such a difficult game,” Dagres says. It lacked MMO development experience at the top. “Curt was not the CEO,” Dagres says, “but you could see he was quite involved and had a lot of control. I was a little nervous.” He also took note that the COO was Schilling’s relative.
Then there was the issue of equity. Dagres says that Spark Capital likes to get 20 percent of a company it invests in, but that Schilling’s offer was far too small. Schilling denies that he hoarded equity, but multiple sources say that, because he was funding the whole enterprise, he guarded it jealously.
“He was very forthcoming to tell you how much of his own money he put in,” Dagres recalls. Schilling tells me that he considered that kind of disclosure a selling point: “I assumed that they would look at it as, ‘If he’s this far in, it’s not going to fail. He’s not going to let this thing fail.'” Instead, Dagres was shocked that Schilling was plunging so much into such a risky venture. The VC left with his checkbook firmly closed.
Time and again, though, Schilling emerged from meetings like this one thinking he’d hit a home run. “There was never a single one that he didn’t walk out of saying he absolutely killed it,” says a former employee who attended a number of investor meetings. But over and over, there was no investment. Still, Schilling remained optimistic. “Curt sincerely believed that Copernicus was the best thing since sliced bread,” the former employee says. He “could not imagine a scenario where other people would not see the same potential he did. His attitude is always, This is gonna happen, the deal is going to close.”
“Absolutely,” Schilling tells me when I run that quote by him. “And that’s the way I’m built. I think it’s one of the reasons I was able to do what I did playing baseball. And it’s not fake. I’ve been around situations where you can make people believe something they don’t believe.”
Perhaps, but no investors seemed to be believing — and as they continued to pass, sources say, Schilling and Close, the CEO, began clashing over the equity issue. Meanwhile, Jen MacLean, the VP of business development, was pushing 38 Studios to buy a Maryland video-game outfit called Big Huge Games, which was available for cheap. The deal closed in May 2009, giving 38 Studios 70 new employees. Three months later, Schilling fired Close and appointed MacLean CEO.
Hanging over everything, though, was the fact that there was no new money coming in. As the calendar raced toward 2010 — Schilling’s original deadline — Project Copernicus remained years away from completion. If Schilling wasn’t able to track down money soon, the studio would be doomed. He needed a savior, and was convinced that if he worked hard enough, he’d find one.