Charles is a co-founder of RedOctane, the company behind Guitar Hero. Most of his interests lie in hardware, and he serves on the board of various businesses as well as philanthropic groups for education and culture. He is currently a lecturer for entrepreneurship at his Alma Mater, UC Berkeley.
In our interview, he talks about his story and interests, as well as what he thinks made Guitar Hero a success and what other companies should do to find their own success.
886: What are your recent interests?
Charles: “Well some personal interests are that I’ve been running marathons recently, as well as a lot of travelling. I used to travel to go around and see different things but now I mostly travel to see people and spend time with friends and relatives. On the more professional side, I’m doing more philanthropy now. I’m on the board of several groups at Berkeley and at the Asian Art Museum. I also have been co-teaching a class on entrepreneurship at Berkeley for the past five years.”
886: How would you describe entrepreneurship?
Charles: “At the most basic level, you are trying to create a product/service but at the same time build a company. There’s multiple dimensions to it. You have to first build a product that is successful. You also have to build a company that is successful. Sometimes those two don’t necessarily align. You are also trying to find the right employees, partners, vendors, investors, markets.”
886: What motivates you to become an entrepreneur?
Charles: “I like to build interesting products, I think no matter what I work on it has to be intrinsically interesting. If somebody told me that my company would not be super successful- but I would be able to make games for the rest of my life and get my paycheck, I would still be happy doing it. One of the great things about making games, specifically Guitar Hero, is whenever somebody tells us they played our game, they’re usually smiling when they say it because it was fun to them. And it’s very rewarding that we were able to bring that element of joy to their lives. There’s this reward for that which you wouldn’t get for doing something else.
886: What are elements that make a good or successful game?
Charles: “What makes a game successful is different from what makes it good. I think that success is a completely different story. To build a good game, you need to build a world-class product. To be successful, you need to have a world-class product and a lot of luck.
When I was at Activision, the CMO once said: ‘we have 12 games at this company that are all pegged to be top 10 this year.’ But when you think about it, the math doesn’t really work out. How can you have 12 top 10 games in a year? What I think you can do is you can always make a good product. For a startup to be successful, they need to be able to make a world-class product. To me, that means top 3 in the industry. In tech, the number 1 and number 2 have a disproportionate market share and will survive. Number 3 maybe survives. Everybody else is just waiting to get killed by 1 and 2. You need to be able to have a team that is capable of creating a world-class product in a specific category.
In our case, we specialized in making a hardware-software company in a time when many people didn’t do that. This was 15-16 years ago where you were either a hardware company or software company, not both. And it wasn’t until Apple came around and did both pretty well that people saw the value of doing both. But when we were doing it, I thought that our software couldn’t even compete with the software in the industry. Same with our hardware. But since we were doing both, we were the best since there weren’t many other companies willing to try. And that gave us the shot to build something world-class.
In the games industry, it’s hard to be a monopoly. Like if you’re building an OS for mobile phones, it’s unlikely you can take down Apple or Android, there’s just no opportunity. But games can come and go, there will always be an opportunity to take down the top. Just like we did- we came out of nowhere to take the best selling game in 2007 and 2008. So for some industries like games, you have the opportunities, and in others you have no chance at all. But what I like to emphasize over and over is that you have to build a great product. And whether or not it will be successful or not depends on luck. You need to find the right investors, customers, timing. If you can’t build a world-class product you have little chance at being successful.”
886: How do entrepreneurs overcome mental barriers, particularly in regards to funding?
Charles: “Speaking from my experience with Guitar Hero, we were somewhat fortunate in regards to funding because we started in a time where VCs were just not looking to fund anything. This was during the Dotcom bust, and they weren’t investing in any startups. Because of that, it was easy to just give up on looking after 6-8 months, since nobody was ever going to invest in anything and we didn’t want to waste our time. So we were able to build our company focusing specifically on what people would buy and how we would make money. Because of that we cut out a lot of useless stuff that we would have done and lost us money. That’s why I feel when a lot of startups raise money, it kind of clouds that clarity of what they need to do.
When we started, we did a lot of things that were not that innovative or exciting. When we started, we were selling dance pads for Dance Dance Revolution. People would tell us that there was no future in dance pads. And they were right, we weren’t stupid- but it made us money and helped to keep the company going. And while we’re selling we’re also learning things which can help us build the next product, then the next. Which eventually allowed us to build our own dance game and then Guitar Hero. But when we started out our business wasn’t that flashy. We didn’t have the funding to build the things we thought people might want, so we had to get it right to keep the company going.
Silicon Valley has convinced the world that the way you run a startup is starting with an idea, then getting seed funding, then building something, then funding and scaling through VCs. But many people forget that it’s possible to build something on their own. I’ve found that a lot of entrepreneurs break rules in their industries- except when it comes to funding. I always find it funny that they can find ways around market problems and product problems, but when it comes to funding, they all think the same which is to go to VCs for money.”
886: What are products or features of products that excite you?
Charles: “A lot of what I like is building hardware. I’m on the board of a couple companies and one of the companies that fascinated me was working with Nintendo to create Mario Kart Live. It was an AR product, essentially the Mario Kart game but there was a physical drone with a camera attached that you played through. You could use your physical location and create your own race track and play Mario Kart. It was probably the most sophisticated AR product that has been built to date, and I always think those are pretty interesting. AR isn’t too popular right now but it was interesting to see how they built it to craft a Mario Kart experience.”
886: How do you feel when all new startups are trying to implement the new technologies like web3, AI?
Charles: “Many years ago there were two startups I was advising. One company was building a FitBit/health tracking tool for dogs that predicts potential health complications. When they went to the customers like veterinarians, they weren’t super excited because it would take years to collect all the data from the dogs to train their AI. It wasn’t useful to the customers yet, so they were told to come back when they had the technology. But when the company went to VCs, the investors loved it because it involved AI, big data, pet health all that.
The other startup which was also pet related was taking pet medical records, which were on paper, and digitizing them using OCR to make it more accessible to owners and veterinarians. When they met with their customers, the vets were super excited because it saved them so much time. But the VCs didn’t care for it because they weren’t using interesting technologies. They were using OCR, so what’s to stop another company from competing in their market?
So for the first company, the customers didn’t really like it but the investors loved it. For the other company, the customers loved it but the investors not so much. And it made me realize that sometimes there’s a big disconnect between what investors want and what the customers want. Right now, AI is super hot to investors and a lot of people are getting funded, but many of these people actually have no idea what customers want. I also see a lot of good companies with product-market fit but don’t have the new technologies, so investors aren’t interested.”
886: How do you see difference in growth between these two companies?
Charles: “I would tell the company that is doing the pet medical records that they probably aren’t going to get that much funding, and need to figure out how to scale properly and naturally. They need to manage their costs, and can’t hire a ton of people. But as long as you are profitable, you will likely grow since people like your product. Later down the line when you have more profits, you can create more products that may be more attractive to investors.
So I think you can survive in both tracks, but you just need to know the best way to grow your company.”
886: What is the most difficult decision you had to make for your company?
Charles: “By far the toughest thing that we ever had to do was layoffs. Particularly in 2008 when the economy crashed. It’s a very emotional process because these are the people that you hired, built a company with and you’ve gone through everything with. You’re probably very close since you’ve worked with them a long time and might know their family. And for me, the first time we had to do that in 2008, was really, really difficult. We had to call people into meetings and take the time to talk with them about their situations, it was very emotional and personal. I had employees who had financial goals such as purchasing a house and we had to assess what we needed to do. These are some of the things where you think it’s just a business decision but when you know them as humans you know it’s much deeper than that. They had lives and invested their effort in the company and we invested in them. So I would say that the hardest decisions are almost always the emotional and personal ones rather than for the business.”
886: What do you think about starting a company with a friend or relative considering you started a company with your brother?
Charles: “I always start with the positive: we know exactly how each other thinks. Since we’ve known each other our entire lives, we know how each other thinks, we don’t need to guess, which is very helpful. There’s also trust between us, I trust what he’s going to do and he trusts what I’m going to do. The trouble comes from how we behaved with each other. If I was interacting with someone professionally and they said something not so smart, I would respond politely. But if it was my brother Kai, I would say ‘that’s the stupidest thing I’ve ever heard.’ And then we would start arguing like we were twelve years old. There’s less formality between us and that sometimes would waste a lot of time when we got into arguments. It became a bit of a problem for business because we learned that when we disagreed, the rest of the company would just freeze since they didn’t want to disagree with either of us. And so we had to learn and act more professionally since we realized that it also affects other people, usually negatively.”