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A business school grilling for Curt Schilling?

Posted by Scott Kirsner  February 1, 2010 10:19 AM

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The "Founders' Dilemmas" course at Harvard Business School hosts a high-wattage visitor tomorrow: retired Red Sox pitcher Curt Schilling, who'll be talking about his videogame start-up, 38 Studios.

Founders' Dilemmas, taught by Noam Wasserman, focuses on "the tough, early choices that founders face that have important, long-term implications for them and their ventures." Wasserman recently published an amazing HBS case study on Schilling's transition from the world of professional baseball to the start-up sphere. It focuses on Schilling's decision to fund the Maynard company's first several years of development himself, and his thus-far unsuccessful efforts to bring in other investors to help bankroll 38 Studios, which is developing a massively-multiplayer role-playing game code-named Project Copernicus. (I wrote about Schilling's fund-raising efforts last July.)


The case study is astonishing for how much financial (and psychological) detail it shares about Schilling's experience trying to get the business off the ground. From the opening paragraphs:

It was April 2009 and Schilling felt he had taken 38 Studios to the brink, extending himself and his family both financially and personally. ...He admitted [while considering the acquisition of another gaming company, Big Huge Games], "I have put the majority of the money I've earned in my life on the table. If I make another financial investment, I will have crossed the point of no return from a personal investment and company standpoint."

BaseballReference.com estimates Schilling's career earnings at about $114 million. Want to guess how much it cost him to operate 38 Studios, a 65-employee company, from 2006 to 2008?


Nearly $20 million, according to the case study. And when 38 Studios decided to acquire Big Huge Games of Maryland for an undisclosed sum in mid-2009, it nearly doubled the company's headcount, to about 140 employees, taking the overhead costs even higher. (Gaming execs I spoke to last year who had run similar size companies estimated the company's current annual operating costs at $15 to $20 million.)

The case study on 38 Studios is being presented for the first time at Harvard tomorrow, and it was just published on Harvard's Web site ($6.95 for the PDF.)

Some interesting tidbits: 

- When Schilling made his initial $5 million investment in the start-up in 2006 (38 Studios was initially known as Green Monster Games), he hadn't yet told his wife about his decision.

- In 2007, Comcast was ready to pay $10 million for 20 percent of the company, and exclusive digital distribution rights to the game it was working on. But "...Comcast senior management decided to pursue a different strategic direction for games and pulled the term sheet." Comcast executive Jennifer MacLean, who'd tried to make the deal happen, later joined 38 Studios as head of business development.

- When Schilling was trying to recruit a CEO for the company, he was reluctant to give up any equity. "Curt wanted to maintain 100 percent ownership," said Brett Close, the CEO he eventually recruited. Close persuaded him to change that position.

- Ever conscious of creating a strong team culture, Schilling has at times been reluctant to fire employees. Close: "Curt said, 'I don't want to be the kind of company that just fires people." Schilling: "The employee lacked the proper people skills... I hired him, it was my mistake." Schilling and Close eventually came to terms and axed the employee in question.

- In the spring of last year, Schilling looked back at last six months of pitching the company to potential investors. "Sitting across from people at investor meetings, I wonder, 'How can you not understand this? How do you not see what we are doing? And if you do see it, why aren't you writing a check?" In the case study, Schilling does acknowledge that his decision to fund the company himself, and his reluctance to give up his controlling stake, may have made the company less appealing to venture capitalists. (In a capitalization table included with the case study, Schilling is listed as owning 82.5 percent of the company's stock; the next largest shareholder is videogame entrepreneur and board member Douglas Macrae, with 4 percent.)

Interestingly, since Wasserman, the HBS prof, finished writing the case study, chief executive Brett Close resigned, and was replaced by Jennifer Maclean. (Close is pictured above, to the left of Schilling.)

Maclean will join Schilling in Wasserman's Harvard classroom tomorrow, to answer students' tough questions about 38 Studios.

Wasserman's excellent blog on Founder Frustrations is here.

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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