Exploding Kittens, a kitty-powered version of Russian Roulette, has become a household staple. The company launched on Kickstarter and has never lost its edge. However, despite much success, the company’s founding team decided to accept a $40 million investment, which it has yet to use.
Sand Hill Road Host Scott McGrew spoke with Elan Lee, the creator of one of the most successful card games in history, to learn more about the company’s history and success.
A transcript of this episode is below.
0:10
I like this picture, the one that says Exploding Kittens because like he’s like because he’s gulping this this bomb thing. He’s gulp, he’s chugging it like.
0:23 That’s the sound of my niece and nephews and me playing a card game called Exploding Kittens. I figured I’d have to explain to many listeners what Exploding Kittens is, but the CEO of the company, the game’s co-inventor Elon Lee, says in his experience, most people already know.
0:42 Exploding Kittens is the thing that when I say people’s faces just light up. I heard the stat the other day, we sell a game every 4.6 seconds. Like it makes no sense to me that that is a statement made about a card game, but that rate gives you an idea of how fast this thing is spreading and how many people love it and how many people are talking about it.
1:10 I’m Scott McGrew, welcome to Sand Hill Road.
[Ad Break]
2:52 If you don’t know, the game is a bit like Uno. With reversal cards and draw three and that kind of thing. The cards are illustrated with absurdities like attack of the back hair and cheetah butt and bat farts. All crudely drawn by the cartoonist Matthew Inman.
3:11 Let me ask you the toughest question. Is Matthew Inman a good artist? Because I mean, you know, objectively I couldn’t do it, but I think somebody probably could.
3:22 Matthew Inman, if you would ask him that question, he would say no, but I’m gonna brag about him first.
3:28 And to the person who’s not seen, let’s describe it. It’s, you know, they’re simple characters They’re very funny and you know the minute you’ve seen something that he’s drawn. But also it has a seven year old quality to it.
3:41
Yeah, it’s crude, it’s crude for sure.
3:45 So here’s what I’m gonna brag about that he never brags about. Matthew Inman is a finely trained artist. If you were to actually see his like production art pieces like the stuff he hangs in his house, right, they’re gorgeous, like stunning, but that stuff doesn’t sell. And so I’ll also say about Matt, he is hands down the most creative person I have ever met in my life. Like he is the audience whisperer. If you, if you come up with a product, he will figure out how to make audiences adore that product I’ve never seen anyone with that skill before. It’s, it’s astounding.
4:26 Let’s talk about the investment that you have taken. We’ve talked to many companies about venture and the investment they’ve taken. This was a big one: $40 million. You are already a successful company, right? Why did you take the money?
4:43
Well, at first we didn’t want to. Sso this company was started on Kickstarter.
4:49 And the biggest Kickstarter in history at the time.
4:52 It still holds the record of the most backers in history. No one has been able to pull that title from us. 219,000 backers. And what’s kind of amazing is Kickstarter, because those are pre-orders and not investors, you walk away with 100% of your company, but you got to fulfill a whole lot of orders.Ever since then, investors would come to us constantly saying, really want to invest in your company, really. Want a piece of this thing and we were in this unbelievably fortunate position to say we just don’t need money. We own 100% of this thing and we don’t have any reason to take on partners. That was our line and we kept saying that over and over again for years, literally for years. And then Peter Chernin and his team showed up and their pitch was: OK, you’ve grown this thing probably as big as you possibly can. Like you are the largest independent game developer in the world right now. What comes next is not more games. What comes next is franchises. You have to, you need a TV show and a movie.
5:58 You know, what comes to mind is Angry Birds. Remember how Angry Birds went from a game to it was everywhere.
6:04 Exactly right. Because they realized like we can’t just keep cranking out games. You have to expand, you have to expand horizontally, in order to grow this thing. And Peter Chernin said exactly that to us and then he said, it turns out I’m the best one in the world at that. And I looked at my co-founder, Matt, and he looked at me and we’re like, hell, he’s right. Like that makes a lot of sense and it’s the first pitch we’ve ever heard that was like, oh this is actually gonna help us. So we took on that money. I’ll tell you like it was instantly a good idea like just I cannot believe how fortunate we were to take on the training group as a partner because […] OK, so first meeting, right, we signed the deal with them. First meeting was he says, OK, we’re gonna build a TV show. If you could meet, if you could partner with any producers in the world.
7:03 I laugh because I know who your producers are. Yeah, so we of course said Mike Judge and Greg Daniels, right The Office and Butthead, King of the Hill on and on. And Peter turned and kind of laughed and it’s like, whoa, you guys really ain’t big and we’re like, you said anybody. So there you go. That’s, that’s our favorite. And he’s like, well, OK. And that was the end of the meeting.
7:23 And the next day he called us up and said, “Can you come over to my house? I want to chat with you.” And we’re like, “sure.” And so we get in the car and we go over there and sitting on his couch, Mike Judge and Greg Daniels, and they look at us and they said, “So Peter tells us we’d be really stupid not to work on a show with you.” And that was how we met them and then we went off and made a show together.
[Exloding Kittens TV show audio]
8:05 Holy crap, was that a good idea to take on Peter Chernin as an investor.
8:09 I get the enthusiasm. Is there a risk of bloat of some sort, you know? I mean, you’re a card game manufacturer, you know.
8:18 You know what’s funny is he put in $40 million or his group, put in $40 million. That money is still sitting in the bank. So we’re exploring multiple ideas there. There’s always the idea to go public, I don’t love that. There’s some buyers out there that are really interesting There’s also just acquiring other companies, to grow it that way. And what’s amazing to me about TCG is they’re open to all of that. TCG has basically said, look, we didn’t invest in your company, we invested in you. And what that means is you tell us where you want to take this thing. You wanna grow it larger, we will support that. You want to take it public, we’ll support that. You want to go acquire a bunch of other companies, we will support that. And if you want to just sell it off, we will line up the buyers, they are banging on our doors. Who has that story, right? Like nobody gets to tell that kind of story. And I just could not have asked for better partners.
9:12 You’ve said, you going public is not your first choice. And then that really does give you bosses. You have many bosses if you are a public company.
9:21 Yeah. I mean, look, we have a games company. It’s supposed to be fun. So taking this thing public is really not high on my list of priorities.
9:29 Tell me about the first day that you saw the game in Walmart or Target.
9:35 Yeah, that was, that was really really surreal. And so for me, this was I remember I saw it on Amazon first, which was, it just it blew my mind, right? Like I made that thing like that’s, that was a computer file like 3 months ago and there it is, it’s real. And the same thing happened at Target, but I get a little bit jaded.
10:01 So I’m gonna tell you a different story, yeah. I now have a 7 year old daughter, but when she was 5, I was so excited for her to turn 5 because I was like, oh, we’re gonna play games together, we’re gonna right? And so I go out and buy all the games for 5 year olds. And it turns out they all suck, like just the worst, most boring brain dead awful things ever. And she saw that I was having a miserable time playing these games with her and she said, “well, you know, let’s let’s fix them.” and I thought, oh, this is maybe the smartest person I know, holy crap. So I sat down with my daughter and we designed 4 games together and one of them. Just outsold exploding kittens and it’s called Hurry up Chicken Butt. It is a game for 4 year olds designed by a five-year old. It is glorious and beautiful and she is such, she has such a sharp design mind.
10:58 I want to tell you the story of walking with her through Target and seeing her game on the shelf. Because what I thought it was gonna be was, oh, her jaw’s gonna drop, and her eye aare gonna get wide and “Look, daddy, there’s my game.” Right? And instead,, we walked up to the shelf and I showed her the game and she said, “oh, cool. Where’s all my friends’ games? Because in her brain, she thought, oh this is just the thing you do. Everybody does this. So just show me, this is my section, got it. Show me, you know, where’s my friend Amanda’s section. Like that’s her reality now. This is easy. You make a game and it’s in Target.
11:34 You did a podcast with Maëlle Gavet of Techstars, who’s been a guest on this podcast, as well as discussing your use of AI. I also want to point out, by the way, she, she used to be a birthday clown. I don’t know if you knew that. In France. So to our listeners who, you know, want to hear more about birthday clowns in France, I encourage them to look in the archive.
11:59 What are you using AI for?
12:05 First, I should say I use AI so much at this point that I constantly am fighting with the quotas on whatever system I’m using. Like they’re just shutting me down because you know they I am apparently a very expensive user. What we use it most for right now is not having to start with a blank page. So we have to do all this stuff, like we have to design games, and we have to write instruction manuals, and we have to design physical pieces inside the games and we and the box art and the design and the marketing. Starting from a blank page on all that stuff is really devastating. Like it’s just, it’s an impossible hurdle. So what we’re starting to use it for more and more is training it on the 45 games that we already have out in the market, but doing really deep dives on not showing it the instructions, showing it per game here’s the 100 revisions of the instructions like here’s where we started and here’s here’s where we ended up, and here’s the the decision tree every step of the way. And we do the same thing for box design and we do the same thing for components. What we try to do now is use AI to say, “All right, here’s the game. He’s just a description of the game, go turn it into a product for us. Like what should it be called? What are the instructions? What does the box look like? What are the components look like?” And it’s not going to ever give us final product. But it removes the horror of a blank page and it’s a pretty good first draft, probably lets us skip like the 1st 20 revisions and starting at that point is such an incredible luxury.
13:42 I’ve done that with even podcast titles where you’re staring at the wall. You ask it to come up and it’s not the answer, but it, it inspires
13:51 Exactly right, right, and you don’t have to start from scratch and that is like the best assistant imaginable.
14:03 You started in video games. You have a deep history in video games. Do you ever think you would be best known for a card game?
14:06 That’s a weird path life has taken. I was on the original design team for the Xbox. The first one. And the original design team for Halo. And I thought, well that goes at the top of my resume, like, there we go, right? And now, it is so, so overshadowed by exploding kittens. And as a result, it is now my icebreaker, right? It’s the thing that I talk about instead of the Xbox and instead of Halo, it’s like, hey, yeah, I’ve got this card game Exploding Kittens, ever heard about it?
14:39 I don’t want to overthink it. But it, it’s taken kids away from the screen, at least for a little bit.
14:45 That was by design. Yeah, before Exploding Kittens, I was a chief creative officer at Xbox Studios and I’ve been there for a long time like I was building digital products for most of my professional career. And really I remember there was this moment I didn’t have kids at the time, but I went to my brother’s house and he’s got two kids and they’re both like, you know, at the time like 12 and 10 I think. And I walk into the room and I’m like, “hey everybody, nice to see you nieces, nephews. Hey, here we are, let’s play, let’s play,” and they don’t even look up. And the reason they don’t look up is because they’re playing on the TV. To add insult to injury, it’s a game that I designed, and it’s terrible, right? And I remember within two weeks, I resigned from Microsoft after that event because I was like, I can’t be part of this problem anymore.
15:39 My memory of games as a kid is sitting around a table and laughing and throwing food and cheating and kicking my brother under the table. Like all the all the like face to face, let’s form relationships, interactions and I realized that by building video games I was creating the opposite kinds of memories and I’m not saying there’s not a place for that. I spent a lot of time doing that but I just didn’t want to build any more of those.
16:07
The last thing I want to talk about and is Where the Hell is Matt.
[Music from Where the Hell is Matt]
16:13 Yeah. That’s a deep cut.
16:18 So the very first time I came across Where the Hell is Matt, which is this young man who who dances his way around the world. I popped the very heavy, very thick because this is what, like 2004, 2005, laptop in front of my dad. My dad’s a super smart guy, PhD, amazing. I showed him, and he, what I wanted to show him was look at this, and of course, I think I don’t think YouTube has even been invented yet. But the the the viralness of it, the entire, the the word viral hadn’t been invented yet. And what I wanted to show Dad was the power of the internet where this young man has done this thing and everyone knows who he is. And he did it not by himself, but he did it on his own, you know, no major Hollywood production. Now today we know that’s just, I mean that’s every day, right? That somebody’s well known from YouTube, etc.
17:24 You were behind the scenes on that.
17:27 Well, I wasn’t at first. Let me, let me be clear. So like you, like your dad. I started out as a fan. Like I saw those first, that first video.
17:35 And describe it to somebody who’s never seen it. It’s it’s a young man dancing his way around the world.
17:40 Yeah, I would say dancing poorly around the world. So all he does is he sets up a camera, stands in front of a famous landmark somewhere in the world, and does this very terrible, terrible hoppy dance like bouncing up and down, pumping his arms because that’s all he knows how to do. But it’s charming and it’s, it’s it’s vulnerable and he travels around. Eventually, what starts happening is he gets so popular doing this that when he goes and dances places, people join him, right? They show up.
18:19 So I saw all of this and I saw that he, he posted that he was coming to Seattle where I was living at the time to film another video. He actually lives in Seattle, so it was not a not a long commute for him. And I showed up at the event and, after we did, everyone did their dance, right, and he caught it all on film I went up and introduced myself and he surprised me. He was like, “You don’t need to introduce yourself. I know exactly who you are. I’ve played all your games.” This is all Xbox stuff at the time, And I said, well, basically, like, “Let’s be friends like, you’re just so cool.” And that started a really wonderful friendship and for the next two years as he was filming his next video just traveling around the world. I traveled with him as his cameraman, which is not a hard job.
19:08 Yeah, I stand there, and my job is basically just not to get in the way, like to make sure the cameras are rolling, and that’s about it. But I got to see incredible places and I got to see more than anything, I got to see people’s reactions to Matt, who’s just this like nexus of joy. People walk up to him in tears saying your videos have changed my life and the world is a smaller place now and I cannot believe how much exuberance there is out there that you have shown me and watching that. I mean, look, I want to be careful, I don’t want to take any of the credit. I was literally the guy setting up a tripod and that’s it. But I got to witness the incredible effect he has on people.
19:50 Lastly, I need a ruling on Exploding Kittens thing, and that is that Declan, and Declan knows he’s my nephew, that when he’s putting the Exploding Kitten back in the deck wherever he wants to he can’t take it over to the corner because you know he’s looking at the other cards. Because you know what, Declan, he cheats the cards.
20:11 This is a hotly contested issue. Declan, listen, here’s, here’s the deal. You cannot leave the table, but what you can do is hold the deck under the table. Now, this means that you should not be able to see the cards. But I think if you put maybe 5 seconds of creative thought into this, you can find a way to sneak a peek at 1 or 2 cards with no one noticing. But you are not allowed to leave the table, that’s the official ruling.
20:40 Oh my god. Jackson keeps looking at my cards. Oh, that’s hilarious. Hey uncle Scott when I, when I look at my cards, can you make sure Jackson doesn’t look.
21:03 Elan Lee, co-inventor and CEO of Exploding Kits, taking $40 million in venture capital money and not spending it.
21:12 I mentioned an interview we did with Maëlle Gavet of TechStars.
21:16 Like I was a fabulous clown, believe it or not. Uh, and I had a, I was actually pretty good at, um, doing puppet shows.
21:24 You can find that in our archive along with hundreds of other venture investors we’ve talked to over the years.
21:30 Sand Hill Road is produced and edited by Andrew Mendez. Sara Bueno manages NBC Bay Area’s digital platforms. Stephanie Adrouny is the news director. If you’d like to get in touch, email us at SandHillRoad@nbcuni.com.
[Ad]
