Career Advice Nov 28 2011

Microsoft No Longer Alone Playing Games in Seattle

By joseph walker

Randy Chung and David Tsai, co-founders of the start-up games maker Zhurosoft, are both 28 years old, both grew up in Los Angeles, and both studied engineering at the University of California at Berkeley. Not until they both moved to Seattle to work at Amazon did they meet and decide to start their own company.

Chung and Tsai (pictured left to right) founded Zhurosoft in the kitchen of their Seattle apartment in 2009. Gaming wasn't their original focus, they just happened to create a start-up at a time when mobile gaming apps were exploding.

"We thought iPhone apps were a good way to generate some cash flow while we worked on bigger Web projects," Chung says. "Next thing you know, you wake up one day and you've got the game going out and it's making money and feeding everybody." Since being released in early 2010, the company's flagship game, High School Hero, has been downloaded over 1 million times, and its three titles have an average of 100,000 daily active users, Chung says.

Seattle has added gaming to its hub of expertise along with software, online and discount retailing, coffee shops and grunge music. It may be only a matter of time before a game company gains the status of other Seattle-based innovators such as Microsoft, Amazon, Costco and Starbucks. The city's vibrant gaming ecosystem boasted at least 150 gaming companies or corporate divisions and 15,000 employees in 2007, according to the latest estimates from enterpriseSeattle, the economic development organization for the area.

A 2010 survey found that of the 75 largest companies, employment had grown 33% from 2007. Those numbers often miss small companies like Zhurosoft, which has eight full-time employees, says Kristina Erickson Hudson, director of the Washington Interactive Network, an economic development organization.

Hudson has been trumpeting Seattle as a gaming mecca since 1995, when she began working as a program manager at the state's Interactive Media Program. Washington has no personal or corporate income tax, she points out, helping make the cost of business much cheaper than in Los Angeles and San Francisco, the West Coast's other big gaming cities. The gaming business has added $8.3 billion into the state's economy, she says.

"What Broadway theaters are to New York and what movie studios are to L.A. is what video game distribution is to Seattle," she says.

The area's large game companies are Big Fish Games, a closely held company with annual revenue of more than $100 million from selling downloadable PC games. Another is Valve Corporation, which was founded in 1996 by former Microsoft employees, and in 2003 released the Steam platform which also sells PC game downloads.

Located in Bellevue, Wash., Valve has 285 full-time employees. One of them is Robin Walker, 36, who moved to Seattle from Australia when his small start-up, Team Fortress Software, was acquired by Valve 13 years ago. The city's gaming community has expanded since then, Walker says.

"There are a lot more developers here than there used to be," he says. "There's more of a network, too, and more industry get-togethers."

Behind Seattle's rise is Microsoft, whose Windows operating system has dominated the PC market for over 20 years. Being close to the software company gave game publishers like Valve "an inherent advantage," Walker says. Game developers then followed the publishers. "There was a natural network effect where there was an incentive" to be in Seattle, he says. When Microsoft released its own gaming console in 2001, Seattle's lure only increased.

The city's other tech sectors have also grown over the past decade, led by Amazon. It's one reason why Chung and Tsai decided to move Zhurosoft into a loft-like office in Seattle's Pioneer Square neighborhood earlier this year rather than move to a more well-known city to the south.

"There's a large pool of people you can hire. Amazon, Microsoft and Google [which has a large office in the city] are all feeding you people who want a change and to build something new." Not to mention Digipen, the gaming college in Redmond, Wash. Zhurosoft has hired three of its employees from the school.

About a year ago, when Chung and Tsai considered raising seed funding, they looked at commercial real estate in San Francisco, where venture capital seems to flow like wine at a Sonoma vineyard. The closer proximity to the tech money flow was offset by a higher cost of living and greater competition for talent.

"Rent alone would have cost three times what we were paying" in Seattle, says Chung. Eventually, the pair decided to forgo equity financing and keep full ownership of the company -- and the idea of moving vanished. "We said, 'Who cares about San Francisco?'" he recalls.

Write to Joseph Walker at Joseph.Walker@dowjones.com



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