How The Huang Brothers Bootstrapped Guitar Hero To A Billion Dollar Business

Editor’s note: Derek Andersen is the founder of Startup Grind, a 35-city event series hosted in 15-countries that educates, inspires, and connects entrepreneurs. He also founded Commonred (acquired by Income.com) and is ex-Electronic Arts. There are virtually no companies in Silicon Valley that exit north of $100MM or create a billion dollar business, that don’t raise Venture Capital funding. Charles and Kai Huang, the founders of Red Octane are the exception having done both. They went on to sell more than 30MM units of Guitar Hero becoming one of the top videogame franchises of all time. Recently I sat down with Charles at Startup Grind and heard this fascinating story. In 1999 Charles and his brother Kai founded Red Octane. Launching six months before Netflix, the goal was to be the Netflix of videogames. But six months after they launched the dot com bubble burst and so did their business. As funding completely dried up, the capital intensive rental business became unfundable. Of that time Charles said, “It looked like the whole valley was just going to die and go away. So that’s when we scrambled and looked at video game hardware, and eventually videogame software. That was the beginning of what was many lives of Red Octane.” Startup Survival. 2 Weeks Of Cash. They were gamers and were playing a lot of Playstation 1 games, especially the pirated stuff out of Japan. Dance Dance Revolution was just making it’s way to the States so they stated selling dance pads. “We realized the dance pads that we were buying and reselling were garbage, because they were breaking down and we thought we could make better dance pads than this,” Charles said. “I literally packed my bags, went to China, visited a few of these factories that made dance pads, figured out how they made them and took a bunch of suggestions that users had given us and incorporated them into new designs and so we started coming out with our own dance pads and believe it or not, that kept the company afloat (from 2001 to 2003).” Everything was sold online due to lack of cash. “We had to start that way because we couldn’t afford to sell to stores due to cash flow. The way it works is you sell to Gamestop and they don’t pay you for 60 to 90 days. We didn’t have the money to do that, so we had to sell everything

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