Building a Community of Game Developers Through Venture Funding With Ed Fries of 1UP Ventures

August 8, 2023

Building a Community of Game Developers Through Venture Funding With Ed Fries of 1UP Ventures

Ed Fries is the General Partner at 1Up Ventures, a venture capital fund supporting a diverse and inclusive community of independent game developers. An industry pioneer, he created his first video games for the Atari 800 in the early 1980s. Ed spent over 17 years at Microsoft as one of the early developers of Excel and Word. Before retiring as the company’s Vice President, he transferred from the Office team to interactive entertainment and launched his passion project — Microsoft Game Studios. Over an eight-year span, Ed published over 100 games, co-founded the Xbox project, and propelled Microsoft as a trailblazer in the video game business. He continues contributing to the gaming industry as a board member, advisor, and consultant to diverse organizations, including Exponential Entertainment and the International Game Developers Association (IGDA).

Here’s a glimpse of what you’ll learn:

Ed Fries discusses 1Up Ventures and the firm’s contributions to the gaming industry
What differentiates 1Up Ventures from other investment capital funds?
Ed shares the components of a successful gaming company
What is the formula for a marketable product pitch?
Common pain points when growing a company
Advice for aspiring entrepreneurs
Ed shares an anecdote about one of his first acquired startups
What factors impede successful gaming product release by established brands?
The importance of building a company culture

In this episode…

The video game industry is an evolving space chock-full of challenges. Game developers must consider risks such as malfunctioning technology and other product launch complexities while striving to create an entertaining product. It’s a daunting process that requires patience, skills, creativity, and ample funding.

Venture capitalists like Ed Fries and his partners at 1UP Ventures fund talented game developers with ingenious ideas and provide viable sources of guidance and support for accelerated growth. However, it takes more than passion to acquire financing. The gaming enthusiasts most likely to succeed in a funding round typically have an original, clad-iron pitch and a bold approach when presenting their concepts.

In this episode of the Here’s Waldo Podcast, Lizzie Mintus sits down with Ed Fries, venture capitalist and General Partner at 1Up Ventures, to discuss the roles venture funders play in video game startups. Ed discusses what differentiates his company from other investment funds, the components of a successful gaming company, advice for aspiring entrepreneurs, and the importance of company culture.

Resources Mentioned in this episode

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Episode Transcript

Welcome to the Here's Waldo podcast, where we sit down with top visionaries and creatives in the video game industry. Together we'll unravel their journeys and learn more about the path they're forging ahead. Now, let's get started with the show.

Lizzie Mintus: I'm Lizzie Mintus, founder and CEO of Here's Waldo Recruiting, a boutique video game recruitment firm. This is the Here's Waldo podcast. This episode is brought to you by Here's Waldo Recruiting. A boutique recruitment firm specializing in the video game industry that prioritizes quality over quantity and values transparency, communication, and diversity.

We partner with companies, creatives, and programmers to understand the why behind their needs and provide a white glove experience that ensures a win outcome. Today we have Ed Fries on the show. Ed created his first video games for the Atari 800 in the early 1980s. He joined Microsoft in 1986 and spent the next 10 years as one of the early developers of Excel and Word.

In 1996, he left the office team to pursue his passion for interactive entertainment and created Microsoft Game Studios. Over the next eight years, he grew the team from 50 people to over 1, 200. Published more than 100 games, including more than a dozen that brought in over a million dollars. He co founded the Xbox project and made Microsoft one of the leaders in the video game business.

In 2004, Ed retired as Microsoft Vice President and began working as a board member and advisor with entrepreneurs in the video game business. He also serves on the board of many nonprofit organizations, including IGDA, the International Game Developers Association, the Pacific Science Center, and the Smithsonian American Art Museum.

In 2019, Ed joined with some friends to launch 1UP Ventures, a venture fund to support independent game developers around the world. Let's get started. Thank you for being here today, Ed. Can you tell us a little bit about 1UP Ventures? Yeah, so OneUp Ventures is as it sounds. It's a venture fund. We only invest in video game developers, and the whole idea of OneUp Ventures is for each fund to invest in 50 different game companies around the world and then connect the founders of those companies together to form a community where they can all exchange information and help each other to be successful.

What made you decide to launch this fund?

Ed Fries: I was approached by one of the big Korean game companies and they were looking for a way to get connected to developers in the West. I had been part of a community of game developers for more than a decade at that point. And it was a really neat thing to be part of.

It was this tight, supportive community of people who helped each other. I thought, what if I combine these two things, form a venture fund to bring funding to game companies, but also borrow from these other ideas of this community that I was part of and bring that experience to more people.

Lizzie Mintus: What was this community?

Ed Fries: It's actually a secret community.

Lizzie Mintus: Okay. I'm not even supposed to talk about it. Okay, we won't go into it. What were the early days like about start of starting your own fund? Did you feel like you had a playbook from starting in so many companies in the past? Or were there some surprises along the way?

Ed Fries: A lot of things I've done in my life. I really had no idea what I was doing when I started. That's a good thing in my experience. It's good to be a little naive when you go into something. If you knew how difficult it was gonna be, all the problems you'd have, you might stop yourself from doing it.

In this case though, I think it ran pretty smoothly. One of the first things I did was bring on a couple partners and those two partners are still my partners today. Kelly Wallach, who I started to talk to about this idea of community. She created something called the Indie Megabooth.

And... had a similar experiences. I had where there was a lot of people who were founders of game companies and trying to get them to talk together and help each other. And so we bonded the first time we talked. Then my other part partner, Chris Wheaton. I had worked with him when I was on the board of the Pacific Science Center.

He was the CEO for a while there. And he really helped with communication to the lawyers and setting up the venture fund, in the deals that we do to make sure that we're following the rules and the contracts say what we want them to say and that kind of thing. Between the two of them, they make my job pretty easy.

Lizzie Mintus: I love that you have community and you have logistics and the vision. What makes you different than other investment funds?

Ed Fries: Yeah, really, it's that focus on community that and Kelly and I come from the video game business. We both spent a big part of our lives there. So I think we connect pretty well with the founders that we talked to understand what they're going through and give them advice from our own experience, but then also connect them with other people like themselves. And encourage them all to exchange information and help each other. Most venture funds, they are what are called lead investors and on any one deal, there can only be one lead investor.

The lead investor takes the majority of the investment. And it's a big job to be a lead investor. You really have to do a lot of the due diligence to make sure that the team is what they say they are. You have to put all the legal documents together. Then you typically sit on the board of that company as it goes forward to watch over your investment in every deal.

There's a lead investor, but there's also usually room for follow on investors and follow on investor is a lot easier. You put your money in to help fill out the round and you don't have to do any of the other work that I was talking about. Typically a lead investor can only do a limited number of deals per year because of The work that they have to do and the ongoing work that they have to do.

But a follow on investor can do as many as they want. I knew that I wanted to build a community of 50 founders around each fund and each fund was gonna invest over a three year period. So that's a lot of deals, 16, 17 deals per year, more than one per month. You can really only do that as a follow on investor.

And so the challenge with being a follow on investor is, once the lead investor has decided to invest in a deal, typically there's a whole bunch of people who want to be follow on investors. And so why should they take our money over someone else's? And really the answer to that has been that it's because we don't just bring money to the deal.

We bring this community and the community is a lot more than just connecting people together. We take the majority of the management fees that the funds generates and we put those back into the community. So I'm pretty sure we're the only fund that does that. We use the money that comes from those management fees to fund things like industry data, which is expensive for little companies to afford and make that available to all the founders. That's an important perk.

We do in person events, both smaller events in different places around the world and then a big annual event where we bring everyone together so they can spend time together for a few days every year and exchange information and really get to hang out with each other and get to know each other better.

And we do a lot of virtual events at one every few weeks to get people again, sharing information. But we also have industry experts like yourself on to talk about their particular area how their business works. And they're there to answer questions for people in the community. So it's a whole big program.

Lizzie Mintus: I love it. Very unique. And Kelly is the perfect person to drive that.

Ed Fries: She is all the stuff that I'm talking about. It's Kelly's work there on it when it comes to community. So I'm glad you called her out.

Lizzie Mintus: She is wonderful. How many companies have you invested in and how many do you plan to?

Ed Fries: We are at about 64 right now. So we did the 50th and final investment out of the first fund last summer. And we're about 14 investments into the next fund right now. We're coming up to the end of our fiscal year in about September. Right on track. Maybe a little, even ahead of where we want to be for the year. I have to do 16 or 17 investments per year to get to 15, three years.

Lizzie Mintus: So interesting to hear you say that people choose to take your money because I feel like people on the other side have a totally different perspective. So that's really interesting.

Ed Fries: Yeah, it is. It's funny. I don't know if it's like that in, in other industries when it comes to venture, really the hardest part for these founders is to get a lead investor.

And once the lead investors in place, it's not that hard to find people to help throughout the round.

Lizzie Mintus: That makes sense. Here's the biggest question. What is the recipe for success? Do you think for a gaming startup? What makes you say? Yes, I really want to invest in this company.

Ed Fries: Yeah. I think part of it I can say, but part of it too is more a feeling that comes from having a done a lot of these deals over the years and sat through thousands and thousands of pitches, both Kelly and me. There's a rational part and then there's a sort of emotional part, an intuitive part.

But, one thing I can say on the rational side is that, game business has got to be one of the hardest businesses in the world, honestly. It has everything that can go wrong with making a piece of software, combined with everything that can go wrong with making a piece of entertainment.

You think about all the things that can make a movie go sideways And you combine that with all the technical challenges of the piece of software and it's really quite daunting, the good thing about working on something really hard though is it attracts really talented people who want to take this difficult challenge. And in the end we're making a really exciting product. Something that's fun and entertaining. So that I think is a strong draw to so it's an industry where you've got you're working really with amazing people.

But still success is tricky. It's not always predictable. Why does one movie just take off and others fail? That happens in the game business all the time. One of the constants I see, though, is that the team is really passionate about what they're doing.

It's the business is so hard that if you're just coming to work and doing your job, it's probably not enough. You really have to believe in what you're doing and have the passion to want it to be great. And so seeing that kind of determination and drive. I think it's one thing that really influences me to want to invest in a company.

Lizzie Mintus: That's why I recruit for the game industry. I did tech in the past and people were so focused on mostly money, but in games, people love what they do and they're so passionate and their dream is to work on or create a certain title. it's inspiring. I think it gives you energy.

You've listened to thousands and thousands of pitches. What do you think maybe a common. Pitfall is? Maybe it's just the inverse not having really passion, but what would you say there?

Ed Fries: Yeah, I think when I talk to the more experienced people that I talk to the more interesting and unique the pitches are. People have less experience the pitch tends to look more like a little twist on whatever's popular right now.

Really what I see is more bravery from people who've done it longer. More willing to take chances to do something new and really original. For us, when we sit through a lot of pitches, there, there can be a certain sameness to them. So it's always exciting for us when we hear a new idea.

Or somebody who's willing to take on something, or even someone who, you know, in the game business, and I think this happens in all entertainment industries. You end up building up this set of rules- you can't do it this way, or this will never work, or this is going to fail because they tried that seven years ago, and it didn't work. Those ideas, those rules that aren't really rules, right? To be able to say, that no one really did it the right way. They didn't really think it all the way through, but we have. It's things like that make it fun for us during the pitch and fun for us to work with these companies as they try really to do, It's almost the impossible, right? You're trying to do in the game business, you're always trying to do something that's never been done before, because if you're doing something that's been done before, it's not that interesting. Plus you have that thing about tech where tech is always moving forward.

And so if you're just doing what's happening now in tech, it's in the three years. By the time it's done, it's old news. So you're always shooting for something just beyond the horizon, right? Both on the technology side, but then also creatively. Being able to be able to shoot far, but not too far. It's a real challenge.

Really can be the thing that determines success or failure.

Lizzie Mintus: Games takes so long to make often, especially the larger studio, big budget games. So quite a challenge point where you started from when you have the idea versus shipping.

Ed Fries: Yeah. It can be three to five years and that's a long time. So being able to keep a team together during that time and of course, correct along the way as new technologies merge, but still stick to the vision that you had about why- if you can create this, it's going to be something people really want.

Lizzie Mintus: Yeah, they need somebody that has unconventional ideas and can inspire others, basically a classic CEO. Really?

Ed Fries: That's a good summary. I'm glad you said that.

Lizzie Mintus: You advise tens of companies that have been acquired by companies like Twitch, Razer, Adobe, Microsoft. What do you think makes these companies so exciting to be acquired? I feel like that's always, for many, a big dream.

Ed Fries: Yeah, I think the key is still what we talked about before is to focus on the product you're trying to build, the way you're trying to change the world, whatever that world is, bring something new whether we were working on spreadsheets or word processors or video games. Trying to bring something to your customers that they don't even know they want yet. But when they see it, they're like, wow, I got to have this. If you concentrate on that, the other stuff tends to work itself out . Acquisition, blah, blah, blah. Work out once the product's out and it's successful. People love it.

Lizzie Mintus: Yeah. When we first met, we talked about how founders always struggle. They go from one to two or from a small team and they hit 10 people and it's this whole new field and then they're 25. Tell me a little bit about, there's some themes that all companies phases that they go through. So what are the common phases that struggle points through those phases and how do they overcome them?

Ed Fries: Yeah, it's almost like powers of two. I don't know. I'm an old programmer, so we all think in powers of two. It's every time it doubles, I think, that whole new sort of Things emerge. When you've got a handful of guys and they're all in one room and they're all working on something, there's easy communication and everyone understands what's going on.

Once it gets big enough, they get separated into different offices and the communication has to become more formal. Maybe you're into your groups are becoming more specialized. So you have that's most information. Artists and programmers and those teams start to speak different languages, and you have to have communication between those languages. They need more oversight, above them, like a producer, not necessarily above, but alongside of them, somebody to help get them on schedule.

As the group grows and grows, you have to add more systems, more processes, more rules. When I started on Excel, we had seven programmers on the first version of Excel for windows and then we went to 15 and then we went to 35 and then we went to 50. And each of those kind of steps really felt different and we want as few rules as possible attitude.

That's what it came to. We wanted to have as few rules as possible, but not fewer. Not like less than we needed and as we grew, we needed to put in more rules. So it's a matter of resisting the temptation to get too bureaucratic, but at the same time, understanding that communications become more difficult. Like one example from when I was working on office was- every day people would check in their changes and then we would do a big build and hopefully it would work and you try to check in stuff so that you don't break other people's things.

When there's 7 people break checking stuff in, if you make a mistake once a week, then it's broken every day. When there's 30 people checking in, you can only make a mistake every month and it's still broken every day. That means you have to be a lot more careful every time you check in because you can only make a mistake , less often and still it's broken all the time, if that makes sense.

So that's one example of how scale makes things harder on these teams.

Lizzie Mintus: Yeah, it is harder. It's all hard, really.

Ed Fries: For me moving up through from being an individual contributor to managing a small team to managing a bigger team and so on, that was an interesting process in the sense that, like, when I started, what really mattered for me to be successful was to be really good at just one thing, which was writing code. And I was pretty confident in my code writing ability.

I had started writing games and I had Written more than more code than probably most people my age at the time that I started, but I still had a ton to learn from the people around me when I got to Microsoft. But as I moved up, it was almost like it became less important that I was good at any one thing and more important that I wasn't bad at any one thing, which is a really different thing. When I was the vice president, I had to do so many different things every day.

From giving a speech in front of a big group to maybe firing somebody, to talking to the press and, doing a good job there, to doing a budget review and understanding the financial side of things, to dealing with technical people, dealing with artists. It becomes, as you move up, more about not sucking at any one thing. At that point, the failure tends to come from having some one part of all the different things that you need to do that.

You're just not able to do well enough. But also being able to make trade offs. It's really important as you move up. You get to the point where there's just more work than you can do in a day. And I've seen this before in a lot of people's careers where they get to that point.

And the way that you get past that point is by being able to make compromises and trade offs. And some people can't do that. It's like everything I do is perfect. That's what I do. Okay, if everything you have to do is perfect, then you can only go so high. You know what I'm saying?

Because at some point you have to decide, I don't have time to be too perfect on all these things. I'm going to be, I'm going to do good enough on these things. And I'm going to do great on these things.

Lizzie Mintus: My mentor named Chris Mandarino always talks about getting things out the door. She says 70 to 80% is good.

Sometimes she goes down to 60, but it is important to do the thing because I think a lot of people agonize and agonize and it takes you so long to get that last 10% done. Or you want to hold on to so many things because. They're just done how you want to do them, but you can outsource it to someone else and maybe they'll give you 80%, but at least it's getting done.

Ed Fries: No, that's exactly right. Some people can't do that. They can't delegate something to someone else and let them do it their way, right? It's hard. I'm going to take it back and redo your work. All those are lessons that you learn, often painfully as your job gets bigger.

Lizzie Mintus: Yes. Ups and downs. What advice would you give to aspiring entrepreneurs who are considering starting their own business?

Ed Fries: One piece of advice I have for people is to think about what's the worst that could happen. I really have this cool idea and I really want to go do it, but I don't know. Got this good job and blah, blah, blah. It's do you think somebody would hire you back later?

You know what you think the fact that you went off and learned some new skills would make you less hireable than you are now? I don't think so ? So I think that's the thing is getting people to be willing to take that kind of risk, knowing that they can always get a normal job if it doesn't work out.

Now it doesn't mean you want to do something crazy like mortgage your house to fund this new project or whatever, right? Use other people's money like ours to help fund your risky endeavor. We're set up to handle risk. We're very diversified. Our investors know what they're getting themselves into.

As long as you're learning new skills and understand that it's risky and you can always get a normal, safe job. I think it's a good thing for people to try.

Lizzie Mintus: Yeah, I told myself that too, when I started here. Did you? Oh, yeah. It was scary. I thought maybe I'll just get a job internally somewhere. What should I do? You agonize over it. It's a big, scary, it's an unknown, and it's always an unknown, and you just wade into the unknown. But it's good for the right person. It's good.

Ed Fries: Yeah. And you can get experience. I started some little companies on the side when I was at Microsoft and ran them and got some experience from that.

And you can get sometimes more entrepreneurial stuff in your job at a big company. Try things like that. But still there is at some point that step you have to take. And it can be scary.

I remember when I was try deciding between a couple different job offers that I had to go, what to do next after working on work and I went to, I was really like, I just remember like my stomach feeling bad.

I was like really stressed about it. There was, and there was this job that I really had passion for, which is to get back into the game business and then there were some safer choices that people were like, and people were literally telling me like that I was, if I took this games job, I was one vice president told me I'd be committing career suicide.

Another one said, why would you leave office one of the most important parts of this company. To go work on something no one cares about. That's what they said when I said I wanted to go do this games thing. But anyway, I went and I talked to this guy who was a senior guy at Microsoft who had been a mentor to me.

And, I talked to him and I'm like, I can't decide. I've been thinking these different jobs and here's all the pluses for this one, and here's the pluses for that one, and blah, blah, blah, blah, blah. And he's this guy from Texas, he's very not Microsoft, like the Microsoft, typical Microsoft person was like, who's the smartest guy in the room and they're like trying to talk the fastest and be the smartest.

This guy was the opposite. He had the kind of southern drawl and he took everything slow. He just didn't play that game. But then he'd say something in his own slowish way and you'd realize that was the smartest thing anyone said in the whole meeting. So anyway, so I go to him and I was like, yeah, and then this and that, and I can't just sign on. He looks at me and he says, it's just, And sometimes you can't figure out what's going to happen ahead of time.

Like sometimes you just gotta decide.

And that's such good advice. It was like a weight coming off my shoulders. It was like, he's totally right. Trying to figure out the future that's unpredictable. I just have to make a decision, try something and see what happens and we'll see. So I decided to do the games thing and it worked out. We did Xbox and by the end, people at Microsoft actually cared about games.

Lizzie Mintus: It was not a waste of time after.

Ed Fries: Yeah, it turned out to be something that they did care about.

Lizzie Mintus: And that's where your heart was too. Exactly. That's so important. I talked to a lot of people who are figuring out what job to take and it's always interesting to hear the analysis and their spreadsheets and so many things involved, but I'll get them.

Ed Fries: It's easy to get caught up in that to think that you can just.

Lizzie Mintus: Yes, I have a formula. I'm going to plug my jobs in and I'm going to see which one rings higher. This one's 97. 4, 93, whatever. I'm going to work on the word. Yeah. I went on your LinkedIn because I'm a recruiter and I saw that you started a company called Fire Ant that you had for six months and then got acquired by Sony.

Ed Fries: I was basically helping some guys who worked in my team. They after I left Microsoft, it was a cost cutting after I left. In fact, it's related to me leaving. There was a lot of pressure to cut projects. I really didn't want to cut. And at some point I decided, Oh, this is probably a good time to go.

So this one project in particular got cut and I felt bad about that. And I really believed in the guys. And so I teamed up with them and helped them start a little company to take that idea forward. Microsoft, ironically, they were gonna, when they canceled the project, they said that these guys that they could take the intellectual property with them, so that they could continue to develop what they were developing. And then Microsoft reneged on that promise, unfortunately. But still, these were really good guys, and it wasn't hard to find a place in the industry for them. And Sony approached the company and wanted to acquire him, which was great. I was just there to help them get started.

So I, I did not go to work for Sony. Although sometimes there's press coverage from there that makes it sound like I did. Yeah, they worked for Sony for a long time. They worked on a game that became called the Agency. which was a spy MMO, but unfortunately it never saw the light of day like many games.

Lizzie Mintus: I think about that a lot. How many games get cancelled that were just a hit waiting to happen?

Ed Fries: Yeah, it happens. Sometimes I run into people who Been in the industry, a dozen years or more and they tell you, Oh, I worked on this and I got canceled. It doesn't happen that often that someone's been there that long and never shipped anything.

But sometimes you meet those people who've just had that string of bad luck to be on the wrong projects.

Lizzie Mintus: I hired a guy who every single studio he had worked at over the last 15 years and shut down.

Ed Fries: See, that's what I'm talking about. I meet people like that. It's going to happen statistically, but it doesn't happen to everyone. Most people find their place and end up working on something they can be proud of.

Lizzie Mintus: Definitely, I learned a lot along the way, but it is always hard, especially if your game is cancelled and you can't showcase your work and you're trying to interview and talk about what you've done, but you can't so yeah.

Ed Fries: Yeah. I'm not just showcase it, but these are people who put a ton of passion into their work and to know that work was in a way wasted right. Something that you did for a while and it's just gone. That's tough.

Lizzie Mintus: But maybe you have learning that then on the positive side of things, something you learned during that process that you can implement in your next venture, and you can make the next killer app, killer game.

Ed Fries: Yeah. You probably learned some things that you probably watched that studio did wrong. You know what to look out for the next one that you sign on with.

Lizzie Mintus: Absolutely. If you were a large company, maybe Microsoft, maybe another large player in the industry, what direction, what focus would you have?

Where do you really think the industry is going and the companies need, or the large companies need to adapt to?

Ed Fries: Yeah, we're in the entertainment industry and in games you have this mix of technology and technology moves forward relatively quickly and art doesn't move forward in some ways at all.

About the same things that the Greeks were writing plays about thousands of years ago. it's about the human condition, being a human being. And I think a lot of people who aren't outside the game business don't see games that way yet. But that's because they don't really understand what games are and where they're going. And games are really a medium of expression, a medium of communicating.

So you look now and see how all these games, I was just watching the new series of Witcher on Netflix, right? Game related intellectual property, and that actually started from book series in Poland- are affecting more and more media beyond just games, right? More movies and based on games. More people spend more time playing games than watching movies or TV.

But it's still to meet that same desire, that human understanding, human connection, right? What's changing and what's not changing, and they come together both in games, which I think is interesting. I'm not sure I answered your question. But, when it comes to big companies, it's easy to screw up games.

I see a couple themes in that. You can look at Amazon's been trying to do games for more than a decade now and has yet to ship a single really successful game. That's scary.

Disney is a good example of a company that struggled with their game business and I actually did some consulting with them after I left and I can see why they were having problems. Basically in the case of Disney, they put their games group underneath their consumer products group. So they had their movie division and in the movie division, there was the understanding of the company that movies are hard and they fail or succeed. But there are creative endeavors that are risky.

But games were under consumer products, and the other things that were under consumer products were things like Mickey Mouse t shirts, and when you sell a Mickey Mouse t shirt, you better make a profit, or you're bad at your job, and they, and especially inside Disney, you could take a Disney property, say, something like, I don't know, name a Disney movie, Lion King, and you could license it to other game companies and make guaranteed money, whether that game succeeded or not.

So when you then you try to build a games group in that environment where you're not allowed to fail, they would never do movies that way, but they thought that was okay. But games and movies are very similar. In fact, games are just like harder movies. Like I said, they have all the risk of a movie combined with all the risk of a piece of software.

They have this added technological risk. So that's why they fail. And ultimately they completely eliminated their games group and just went to pure licensing. is one way to solve the problem. It means they'll never be very successful in games, but it means they'll never have failure. Amazon, to their credit, they've stuck with it for a long time.

They've just been doing some things fundamentally wrong. And if you just do something wrong forever, you're just going to fail forever. Some people give up too soon in games because it can be, it can take a long time to develop. All the things you need to build a game and to fail with it and understand why you fail with it try again.

CD Projekt Red is a great example . Their first success really came with Witcher 3. It didn't come with Witcher 2 or Witcher 1. I was in a conference in Spain and this guy got up and gave one of the most amazing talks I had ever seen. And it was about Witcher 2. And about all the things that went wrong.

And the whole theme of the talk was, and then this terrible thing happened to us. And then we had two choices. We could do the easy thing, or we can do the right thing. And we chose to do the right thing, and it cost us millions of dollars, and we had all these problems, but we did the right thing, and then he went over, and the whole talk was just like one after another. And then we had to do, we could do the easy thing, or we could do the right thing.

At the end of the talk, they have really big ambition. They say they're going to be the next BioWare. And this little group in Poland, at the end of the talk, I was really believing they were going to do it.

And their next product was which are three, which was incredible. So anyway, I'm really rambling, but no, it's good. They're always ups and downs. Yeah, it's interesting to predict success. What's going to be successful and what's not, but I feel like after a while, like you said, which made me laugh, I thought your answer was going to be, you go with your gut for when to invest, because that's what everybody says.

I go with my gut, everybody who has any level of success. So it's funny to break that down. Making games is life or death. Like you were saying a lot of times. What are the biggest challenges or very near disasters? I'm sure there are many that you have encountered throughout your career, and how were you able to navigate that to avoid disaster and find some success?

Yeah, I think this kind of gets to another thing that I was gonna talk about. Something that we had to learn as we were going through growing Microsoft's game business is that one of the things that really makes these companies successful is the company culture that they build. And when we were first acquiring game companies, we would acquire them, move them out to Microsoft, integrate them within our bigger team, just like they were just more cogs in the machine or something. Here's how we do things at Microsoft. Here's what our offices are like. Here's what, when you do that. It took me a while to understand that when you do that you're really trying to take one company culture and bolt it on top of another company culture.

Microsoft certainly has a successful company culture for building spreadsheets and word processors and things like that. Is it a culture that makes creative products and risky products? We had just acquired Bungie and we're moving them out to do Halo. And I had a big area of a building ready for them.

Our facilities people had come in and done it all out Microsoft style and I was very proudly leading them around this wing of, this new wing of this building. Here at Microsoft, everyone gets their own private office with the door. Here, look at these beautiful offices and you've got this view out here. Your little cafeteria area and blah, blah, blah.

I got to the end of the tour and I'm like, what do you think? And they said, we hate it. And I'm like, what do you mean you hate it? And they said, we don't like to have all these walls. We just want to be in like one big room and have like little cubicles and.

I'm thinking cubicles like that's like the lowest status thing you could have at Microsoft was like, even an entry level programmer at Microsoft gets their own private office so they can close the door and work quietly. I don't know, maybe some accounting people somewhere have cubicles.

That was me not understanding the point, right? Yeah, it was like the point was that We're a collaborative team. We want to be able to really work together, exchange ideas. We want the programmers and the artists to be sitting together so they can when the tools break, they say the programmer next to your tool broke, I can't do what I want.

They don't want everybody off in their own little office spread out across this building. So that was a real learning experience for me, and I had to call the facilities guys and all those walls you just built in that building for me, tear those all out, please. We're going to do this a different way.

But then that was the kind of an experience that was a turning point for me and understanding that culture is really important to these companies. We were working with a little company called Ensemble Studios down in Texas, and we had never had the time, to integrate them, to move them up after that Halo experience, I realized, I'm glad we never did. They each have their own unique spirit, their own unique culture, and they can be very different. Ensemble and Bungie were both very successful companies, but they worked very differently.

They had very different cultures, and that's what made them great. They had this strong culture. It didn't have to be the same culture. There's one culture that works for making games, but a strong culture, and I'm sure you know this from recruiting, it attracts a certain kind of person, right?

Like part of what a culture it's a filter for who fits our culture and who doesn't fit our culture, right? Whereas Ensemble had a very family kind of culture, Bungie had a very hardcore culture. We're the smartest. We're gonna work the hardest. We're gonna do this amazing stuff.

Both of them made amazing products, but they did them very differently. A big company can come in and just wipe out a culture accidentally without even appreciating it. And then the people don't fit with the culture anymore and the culture doesn't express itself through the product anymore, that kind of thing.

So there's a lot to that. I think about that a lot. How your internal team's happiness and function is everything that you don't see, right? All your productivity, how you have processes, how your culture and the final product at the end, but you have to have all of that in sync. And maybe that's why some larger tech companies have a game or struggle because it's Part of this larger product, but it's not its own.

Exactly. That's why I'm talking about it now and I assume that's something related to the problems that Amazon has, but I'm not close because I know a lot of people that they hired, I know very good people that they hired across the industry that they brought in there and I saw them fail one after another, even though there were people I had a ton of respect for, who I knew how to do good work.

And so it has to be something bigger has to be some corporate culture level thing that's not letting them do their best work. That's word on the street. You get to know what's going on in all the companies. I bet. So it's fun to hear. Yeah, they had a huge team and I hope they find what they're looking for and some success and figure it out.

To their credit, they keep trying, they keep making changes. They're going to get there.

Lizzie Mintus: What technology are you the most excited about that is coming out?

Ed Fries: Normally if you ask me that question almost any other year, I would have told you that, I really don't believe that much in getting excited about technologies.

I am a, like a technology guy. and I do get excited about it, but I think technologies are really in general hard to predict. Like we, I think we're on VR wave number five or six in my career. And where you see these technologies, is it going to work this time? No, it turns out people still don't want to put this thing on their face, even though they can have this really cool experience.

Nope. It still makes them sick , that kind of thing. But right now I think there's. a really different thing happening, that goes beyond my normal objections to looking at these waves of technology and that is the AI stuff that's happening. This isn't like everything else that, this isn't like another VR or Web3 or name another technology of du jour, flying cars, self driving cars, whatever you want.

This is a fundamental discovery that no one saw coming and is going to, it's hard to predict how big an impact it's going to have. But my personal opinion is almost everyone's underestimating how big an impact AI is going to have. On the world over the next couple of years. So that's a pretty strong statement.

Lizzie Mintus: Yeah, it's a polarizing topic, but it's here. And in what way do you think it will impact the game industry the most?

Ed Fries: I'm speaking far beyond the game industry, but you can take almost any job function, and look at how this technology is going to change the way people work.

When I was working on Word more than 20 years ago. More than that now- Coming up on 30 years ago. I had this idea. I actually have a patent on the wall over there for this thing. My idea was, what if instead of being like a word processor, it could be more like a sentence processor, document processor like it could really understand beyond just words what's going on. Then if that were true, imagine what kinds of features she could add. So imagine you could have a set of , I call them knobs, a set of knobs that you could turn. Like once you wrote this document, like you're working on a paper for school- it's a 1000 word paper and you come out 900 words: Oh, I just want to turn the length knob a little bit to get it up to 1000 words. And then the 1000 word document. Okay, great. Or this is like this academic document. I don't really understand. I want to turn the knob that turn it down to fifth grade level or whatever. So I can read this. Or turn it up.

Or I write this thing, but now I want to sound fancier. Okay, let's turn it up. Or maybe there's a knob for how colorful it is so a style knob or any number of things. But the only knob I could really figure out how I might be able to do in the early nineties was a summarized knob. Like one that to shrink the document down.

And so I worked with Microsoft's research group and we came up with some ideas for how to do that. We actually added this feature to Word where you, it was called auto summarize, where you could shrink a document. But the whole idea of that was that it was like to be the first knob in a series of knobs as things became, as we got better and better at understanding text.

And really it was a long time before there was any real progress in that. But now we have, overnight the ability to do that easily in any number of ways with something like a Chat- GPT, right? Yeah, you can feed a document in and then tell it. I want it longer. I want a shorter or I want it to sound better. Write it like the author so and would do it. Way beyond what we could have imagined back then.

But that's just one tiny aspect of what's happening now. You have all the image generation code as a programmer. I still program. I was doing some programming on the airplane the other day, flying back from Tokyo. It was funny for a couple of reasons. I was writing Python, which is not a language I know very well.

And I'm like, Oh, I'm going to be offline for the next 10 hours. I'm going to like pretty quickly, I'm going to run into some Python syntax stuff that I don't know, but then I was like, Oh, actually, I've got some small large language models here on my laptop.

I can just start one of those up and ask it Python questions. And so I was like, how do I do this in Python? I need to format a date. I don't know the syntax for using the command to show a date and time properly. And this little large language model running on my little laptop goes, here's how you do it.

You do it like this. It's oh, thank you. I didn't have access to the internet. I didn't have a book. I had a little large language model. The thing is four gigabytes. That's tiny, but it knows just about everything. It's mind blowing. Anyway, I can go on and on this topic for hours.

I really don't think people understand the impact it's going to have. And programmers make them more efficient, makes them a lot faster, doesn't replace them. Makes them a lot more efficient artists. Same thing. We still need. artists to have a vision for what something's going to look like in a game.

But a lot of game art is incredibly tedious. Somebody sits there for months, drawing this beautiful statue, creating this three dimensional model for the statue that the player is going to run past guns blazing barely even notice this thing sitting in the corner. It's I made that statue.

It doesn't, it's not a good use of human time, to craft that stuff all by hand when we have better tools. But we still need human direction and human oversight to make it all look consistent, to make it all look like one thing. I got a pitch deck the other day and I could immediately tell it was generated art and the art was beautiful.

The way I could tell was every single image looked like it was made by a different artist. As soon as I mentioned it to the team, they're like, yeah. We just got three guys. We needed to do this, which is fine. So anyway, I'm not at all bought into the AI is going to destroy the world, make everyone lose their job, but I am into that.

This is really going to change the way we all work and that we're all going to need to adopt these technologies as quickly as possible to be competitive.

Lizzie Mintus: Yeah, just like anything, adopt or die. But I feel like they're so I'm overwhelmed by the amount of AI tools that are out there and it feels challenging to even wrap your mind around it. Nonetheless, I'm in the most effective way.

Ed Fries: Yeah. Every Friday, a YouTuber. Video comes out, this guy says, here's what happened in AI this week, and I watch it so I can see what's going on, because he's oh, this was a pretty slow week in AI this week. I just watched it this morning. Only these 10 things happened, and they were all pretty amazing.

Yeah, it's moving fast. And I think it's going to be even bigger than people think. Usually tech gets overhyped. When tech stuff comes out, this is a case where I don't think I think it's under hyped. I honestly do.

Lizzie Mintus: Yeah, it is. It is the new web three crypto. That was the GDC joke. That's the new buzz, but that's exciting.

What do you think about the new Apple headset?

Ed Fries: I'm lukewarm on it. I haven't tried it, but I'm in a phase where VR again. I think they put some interesting innovations in it that haven't been tried before, but I think fundamentally is the problem. These things have is that people don't want to put them on their face. I think it's a pretty fundamental problem.

You might remember as 15 or 20 years ago now. The TV business was going to go to all 3D TVs and they got, they made this big push to advertise these 3D TVs and all you had to do was wear the super light pair of these shutter glasses. They have the little shields that faster than you can even see click back and forth and then all your TV viewing can be in 3D and how amazing is that going to be?

No one would wear it. No one wanted that. No one wanted to wear those dorky glasses that around with their friends. No one would do it. It didn't. It was a huge multi year effort to bring this thing to market and it failed like a year. Like it was it came and it went and now you were almost 20 years later now and nobody's talking about 3D TVs or almost nobody.

So I think, Human beings are complicated. When it comes to something that's going to be on their body, on their face or whatever, there's a lot of social stuff about that. There's a lot of fashion stuff that I think.

As tech people sometimes forget oh, we built a school gadget. Why won't people wear it? Yeah, because it makes me look stupid, I don't know. So I'm a little, I'm a little dubious. There's more some technical issues about what they're doing to that are, we could get into, but I actually think I'm talking more about the fundamental problems. We'll see. I'm excited.

Lizzie Mintus: If anybody can make it a thing, it's probably Apple.

Ed Fries: It's betting against Apple is a risky business for sure. But also Apple's had a series of failures just like anyone in tech. Nobody's text record is 100%. So yeah, so we'll see. I'm wrong all the time.

Lizzie Mintus: Yeah. Absolutely my last question who has been your biggest mentor throughout your career and what was the best advice that they gave you?

Ed Fries: Oh my gosh. That's a hard one. That's so many mentors. Probably the biggest mentor for me was a guy named Chris Peters. He was my first boss when I joined Microsoft full time.

And he was my boss. He really helped me go from being an individual contributor on Excel to managing a small team. He helped me fire the first person I had to fire, which was difficult for me. He then moved over to Word and immediately got in a fight with the development manager at Word and the development manager quit and then brought me over to run it.

So he had a big influence on my career through Microsoft, but I learned a lot from him. A big part of his job was really difficult. And it was a job that I had to do after a while, which was standing up to the people above him, protecting his group and his project. People talk about manager being an umbrella versus, I don't know, the opposite is funnel or something.

He was a really good umbrella. He did a really good job of dealing with all this crap out there and keeping it away so that people on his team can focus on what we're building and do it on time. Really good at making it clear to us what our goals were what was important, while still being just a very accessible and friendly guy. I've had some scary bosses before. He was never a scary boss. He was like somebody I just immediately looked up to, who helped me whenever I needed it. I probably learned from him- how I wanted to be as a boss someday. Yeah.

Lizzie Mintus: I feel like you have two kinds of bosses. The ones that show you how to be and the ones that show you how not to be. But you learn.

Ed Fries: Yeah. And I had both later on. I had some of both. But I was lucky the first 10 years basically to have directly or indirectly one boss that I learned a lot from.

Lizzie Mintus: Yeah, see what's on in your career.

Ed Fries: He actually worked for me for a while later. Oh, which was really weird.

Lizzie Mintus: It is and it isn't. I swear every single person that you interact with comes back into your games world in some way you wouldn't expect. Yeah, it's all very connected. Where did he work with you or for you?

Ed Fries: Later when I was running games. I needed somebody to run this group that was having trouble and he was looking for something to do. I was like, great. Come help me with this broken group. I really need somebody who knows how to fix a group.

Lizzie Mintus: Perfect. Yeah. He did a good job. Thank you for talking with us.

This is Ed Fries, co founder of Xbox and general partner of 1UP. Ed, where can people go to learn more about you and your fund?

Ed Fries: 1upventures. com or 1upfund. com is our website. Yeah, and you can find me on LinkedIn.

Lizzie Mintus: Thank you so much. Great to talk to you. I had fun today. Thank you.

Thanks so much for listening to the show this week. To catch all the latest from Here's Waldo, you can follow us on LinkedIn. Be sure to click subscribe to get future episodes. We'll see you next time.

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