275: Riot Games Co-Founder Marc Merrill Shares the Story Behind League of Legends

The dramatic tale of how Marc Merrill and Brandon Beck set out to make a better video game, and changed the industry with League of Legends. Marc Merrill and Brandon Beck were typical college roommates. They went to class. They studied. They played video games. OK, a lot of video games. But they also shared an avid interest in business, including the business of their favorite hobby. So while other gamers helplessly yelled at their screens when a glitch popped up or they felt burned by an expensive new sequel, Merrill and Beck thought up ways they could fix these shortcomings—ways they could make the industry and the gaming world better. Today, the duo co-chair Riot Games, a video game company that places a unique focus on the needs and experiences of gamers. As their signature game League of Legends approaches its 10th anniversary, it operates in 19 languages worldwide, has inspired a line of Marvel comics, and holds competitive tournaments, with the latest championship drawing nearly 100 million viewers. How does a free game that can only make money through selling virtual goods become such an enormous business? The answer is in the radical vision for gaming that Merrill and Beck strongly believed in, and were determined to realize—even if it meant challenging game publishers, investors, developers, and themselves. As Merrill tells it, the story of how they pulled it off is legendary. From Passion to Plan “We had two shared passions,” Merrill says. “One being gaming—we were both incredibly hardcore gamers, and we loved playing games with each other—and the other being business.” Merrill and Beck were studying business at USC and, although they spent every spare second gaming, they never imagined it would lead to a career. Even as they worked toward their “responsible, adult jobs,” they constantly bounced ideas off of each other, dreaming up ways to solve the problems that irritated them most as gamers. After they graduated, and Merrill moved into a career in banking and Beck went into consulting, they continued the conversation in their West Hollywood apartment. They, and many other gamers like them, found the current model of game development frustrating. The industry ran on new releases, sending gamers to retailers to buy endless $60 sequels to beloved games. Meanwhile, those who played the games didn’t actually want a brand new game or a sequel to what they were playing. Instead, they would have preferred updates, new features, and new adventures to appear in the game they already loved. Was there, Merrill and Beck wondered, a way to create a game that first and foremost served the wishes of gamers, rather than the needs of retailers? One that could grow over time with the players? They sensed that the video game industry was headed toward a significant disruption, and as the days passed, they began to realize they might be the disruptors. “We, as passionate players of games, had identified that we felt really underserved at the time,” Merrill says, “and so had a whole thesis about how to go create a company that solved a problem that we deeply felt.” So, when the twentysomethings weren’t working diligently away at their respective day jobs, they drafted a business plan for a new kind of game. But they were nervous about taking the plunge, and they wanted to be sure this was something they could see all the way through before moving forward. So they asked themselves three crucial questions. Was there a demand for what they wanted to build? Could they build it? Would they be able to find the necessary capital to turn their dream into a reality? The moment they felt comfortable answering yes to each of these questions, they charged forward and, in 2006, Riot Games was formed. Establishing Credibility The creation of something revolutionary is never easy. “We’ve had many catastrophic circumstances that should have torpedoed the company,” Merrill says. From day one, they knew that overcoming their lack of credibility was going to be the biggest challenge in creating the game they were imagining. “Knowing what we know now, we literally wouldn’t have invested in ourselves back in the day,” Merrill says. “We ironically believe that our naïve optimism was one of the incredibly important ingredients for success.” Experienced developers were hesitant to join the team because of Merrill and Beck’s inexperience and lack of funding. Meanwhile, shrewd investors were skeptical about hopping on board due to their inexperience and lack of experienced developers. But Merrill and Beck moved forward anyway with the best they could recruit, and they strove to build credibility. At one point, they tried to bring someone on board as CTO and executive producer who had thrived in the industry for years and even had a publishing background. But as the three of them worked to recruit talent for the business, Merrill and Beck soon realized that they didn’t quite gel with their new teammate. They felt more drawn to interns who lacked experience, but understood the vision of the game and had great potential. Meanwhile, the senior staffer tended toward experienced developers the co-founders would not have chosen themselves. Because they didn’t want to come off as overpowering, micromanaging founders, Merrill says they let the developers work freely. But this soon created a serious problem. Merrill says they discovered that the lead developer had plans to steal the company and had been secretly pitching his own version of the game to other publishers. The cultural divide Merrill saw growing within the young company, punctuated by this betrayal, inspired the co-founders to become far more hands on with their business. “That was a really galvanizing event that helped teach Brandon and I that when experienced individuals say, ‘Trust me, because my 20 years experience in this particular industry or this field means that I know what I’m talking about,’ it’s really important to say, ‘Well, enlighten us,’” Merrill says. “If somebody can’t articulate a good rationale for whatever it is they’re doing, even if it’s a deeply technical concept, that’s a red flag.” Merrill and Beck righted the ship, took a more active role, and set out toward building a game demo that would illustrate their idea to investors and publishers. But after constructing the demo, they realized they didn’t have the internal talent yet to fully realize the game they envisioned. So they established an advisory board, through which very experienced, talented developers could gain free shares in the company by mentoring Riot Games’ young developers, without leaving their full-time jobs. Over time, the relationships with those on the advisory board grew. While initially, those developers would have said no when invited to join the the team, things began to change. “As that equation changed, those eventually turned into yeses,” Merrill says. With each new, experienced addition to the team, the game development leaped forward with new input and inspiration for the junior talent, pushing the limits of what was possible for the company. While the game slowly took shape, they started approaching publishers with the idea. Unfortunately, Merrill says, every publisher they spoke with believed the concept of a free battle arena game that generates revenue through in-game purchases was insane. “Our whole business model was very unproven at the time,” Merrill says, “because our game was planning to be free, and we were literally selling virtual goods.” Because of this, they realized they were going to have to publish the game on their own. And that was going to require some serious cash—$20 million, in fact. “We had no idea if we were going to be successful until spending about $17 million of other people’s money and bringing the product to market and then starting to get validation,” he says. This made investors nervous, and Merrill says that 50 VCs turned them down before Benchmark and FirstM