Founder Friday with Mike Sepso of Major League Gaming
Mike Sepso recently participated in the Blank Center’s Founder Friday, where he shared how he went from an undergrad at Babson in 1994 to starting Major League Gaming, which was sold to Activision Blizzard Inc for $46 million in 2016.
Sepso was into broadband even before it was a big thing. At that time, the Internet was just starting to be used outside of the government, but students still had to use the computers on campus, because people generally didn’t have their own. Sepso and a number of classmates would host gaming competitions using the on-campus computers in the lab.
When Sepson graduated 1994, he took an NYC job in finance selling municipal bonds, which for anyone who doesn’t know, are perhaps the most boring type of bonds to trade. He worked there for about a year, but couldn’t wait to get out. At the time he was living in Brooklyn, way before it was cool, and began supporting himself doing web consulting, mainly making websites for small businesses, since at the time having almost any knowledge of the internet was enough.
The first success came when Sepso met his co-founder at a party, when the two were bored with the crowd. They started building a business and didn’t try to raise capital. The thought process was, if you’re not sure how to start a business, you can always provide a service to other successful businesses. At the time, internet users had to use a phone to connect, and companies were trying to convince people to use a broadband line. So the business started working with media companies as clients, helping them acquire customers. Thus, Gotham Broadband was born.
They eventually grew this business to about 100 people, but were worried about where the industry was going. Sepso didn’t want to lay people off, since it was a service business, so they bought the company back from investors and then winded it down, keeping the employees for their next venture. The company had made a lot of money, so they just paid the employees to take the summer off and “went to a lot of Yankees games.”
Yet Sepso says that he wasn’t rich, but just had enough money to take the summer off. He and his co-founder noticed that a lot of console based games were taking off, but especially in Korea. In these competitions they even had video game competitions, and so Sepso asked, “can we Americanize this?” People had consoles in their living room, but the company wanted to set up something like Nascar, except for video games. In 2003 they started Major League Gaming (MLG). Apparently, the first competition was “a bit of a disaster” because the company “didn’t know what they were doing.”
They met in a coffee shop and people flew in from all over the world to compete, and the shop was bursting at the seams with over 100 people. But a new idea will never be perfect, said Sepso…even in big companies you have to be unafraid of failure. By 2004 they had started the pro circuit.
The company grew rapidly and and worked out a deal with Activision, asking for $46 million from Activision to buy whole company. Eventualy Sepso went back and took a job at Activision because he had “run out of people to ask advice from”.
How did you start your community?
“There is no magic, just a lot of hard work. A lot of starting a business is getting out of your own way. Stop thinking you know, and go listen to customers. Become part of that community and get to know the super-members of community and empower them to help you.”
How did you first promote the MLG in 2003?
“We started out with online message boards; we found out who the best halo players were and messaged them. We also threw tournaments on campus. The people that came to our first event happened to be some of the first stars in MLG…today we would call it an influencer strategy.”
Where will gaming go in the next 10 years, especially virtual reality?
“It’s not quite ready for consumers, because there are some physical limitations. It’s also still very expensive, but that will get fixed quickly. The consumer market is going to be a mix of augmented reality with virtual reality instead of just VR. Also, the big publishers typically wait until there are 50+ million people with the tech in their home before they make a big push.”
“At different stages of an industry you have a mix of large and small companies. In the video game business, the big games spend hundreds of millions of dollars to create a market. But sometimes you have games that take no money, like league of legends and other mobile games. I can guarantee that there are 100+ companies who’ve raised seed capital to make the “next” Battle Royale. You can be more risky if you are a little company. If it is a hit a big company will just buy it.”
What is the ideal pricing model of games?
“It depends. Mobile gaming followed the free to play model about a decade a go. People wouldn’t pay $1 for a game until they’d already played a while. My company owns Candy Crush, which is the biggest mobile game with 400 million users. That said, not all of them need to pay, whereas with other games like league of legends you need people to keep paying.”
Some advice for founders:
“If you look at startups as an investor you need to look at what a team would do. Entrepreneurs can be the worst venture capitalists sometimes because they project what they would do to other people’s businesses.”
“Finance skills are really valuable for when you’re in a startup…having them is sort of like being in really good shape as a pro athlete.”
“If you’re doing a gaming startup you should do it all yourself instead of outsourcing.”
“You should never be afraid of failure. That don’t mean spend all of your money on a business. But that often means realizing why people don’t want a good or service. Even asking people what they want is giving you the wrong data. Look at Elon Musk – all the stuff he’s selling isn’t always what people want at the time.”