Peter Adkison Presents…

Blog Entry 3, Wizards of the Coast, Equity Distributions: Part 2

Like most startups, Wizards of the Coast was severely cash-strapped in the early years, from the founding of the company in May 1990 up until Magic: The Gathering started generating significant cash flow in late 1993. To compensate for our lack of cash, we offered stock in the company in exchange for services or assets.

In the beginning we priced our stock at $0.50 per share. We sold stock at that price, and if someone worked for sweat equity we’d establish an amount they were to be paid, like you would in any company, and then convert the dollar value of that amount to stock using this price. Sometimes it got a little silly. I think it was my old friend from Walla Walla, Franc Sawatzki, who donated a drafting table that we valued at something like $100. Given that the sale to Hasbro yielded over $1,400 per share, that $100 “investment” yielded something like $280,000 a decade later. Not bad! This led to some interesting discussions later on, with comments like “It’s ridiculous that the shareholders ended up paying $280,000 for a drafting table!” If Franc had invested $100 in cash and we had spent it on a used drafting table, Franc would still have gotten a return of $280,000, but that would’ve seemed okay. Even professional accountants and lawyers sometimes stumbled over this, failing to see how it was the same thing.

At the very beginning, I wanted all my friends to be shareholders. If I had a deep, intellectual conversation with someone, I’d give them 10 shares. At $0.50 per share, that was only $20 of fictional value, certainly a fair trade at the time! This turned out to be a great way of getting my extended circle of friends and family excited about the company. Almost everyone I knew felt a sense of belonging; it was “our” company and “we” would build it together. And it was fair. Everything you did for or donated to the company was recorded and paid for in stock. The records were clear, you could see exactly what your position was as time went along and, amazingly, there were never any significant disagreements about this point.

In the spring of 1991 we hired Lisa Stevens, the current owner and CEO of Paizo Publishing. She was our first salaried employee and the only one among us who had actual experience in the tabletop games industry (before joining us, she was VP of Sales and Marketing for White Wolf). We’d been issuing stock at $0.50 a share for nearly a year and we’d come a long way in that time. No longer just a group of gamers hanging out in my basement, we were now well into development with several products, and Lisa brought an established RPG product line with her (Talislanta). This seemed a good time to increase the sale price of Wizards stock, so I doubled it to $1 per share. We did no mathematical analysis of how the stock should be priced; we didn’t have the skill to do that. Besides, when a company has no revenue and everything is about future potential, that sort of analysis eventually turns into an “offer a price you can get” sort of arrangement anyway.

Ask anyone who contributed work or equipment for equity in these very early years and they’ll tell you some crazy story of how someone made a ton of money by essentially winning the right-time, right-place lottery. My favorite story along these lines has to do with a Boeing janitor whom I’ll call Mary.

For the first three years of Wizards of the Coast (from 1990 until 1993, on the day after we returned from the Magic: The Gathering release at Gen Con), I worked at the Boeing Company. Since Wizards didn’t have much money, I kept my day job. Boeing was kind enough to let me start the day at 6 a.m., work through lunch, and leave off by mid-afternoon. Because we didn’t even have good computers and printers in “the office” (my basement), I would often work on Wizards stuff at Boeing, staying well into the night. Well, Mary the janitor was one of the sweetest, most talkative people I’ve known. She came by each night, and we became great friends. She’d ask me about how my new company was doing, I’d give her an update, and we’d chat and chat and chat. One of the topics of conversation that often came up was my efforts to raise money. As any startup company CEO knows, you spend at least half your time raising money during this stage. It’s the second-worst part of the job (the very worst part is firing people).

One night Mary asked me, “Would it be possible for me to invest in your company?” I was really torn about this. I was desperate for money—struggling to make payroll—and so I had to say yes. But I felt very guilty about it. She said, “I see how hard you work, staying late almost every night. You’re usually still here when I leave! I don’t know anything about games, but I know your company will be successful.” She wrote me a check for around $1,400, if memory serves, and said, “This is all I can afford; it’s my life savings.” Oh, my! I almost refused, but it’s a good thing for her I didn’t. Honestly, I don’t remember if she invested at the $0.50 per share price, or later at $1, or even later at $4 (which is where we set the price once Magic: The Gathering was on the horizon). Doesn’t matter; it was a helluva return no matter which price you use. Mary told me years later that her children thought she was crazy for making that investment. I’ve always wondered how her life changed after that payout!

In later years I would often take flak from professional business types who would come into the company later in the game, after it was obvious to everyone that Wizards was a success, and complain about how all the wealth generated from the sale would go to “all these small shareholders.” The implication was that it’s okay if a wealthy person invests a few thousand dollars and makes millions, but that shouldn’t be the case for the average Joe or Jane. What a bunch of bullshit! This line of dialog usually came after they learned that the company was worth hundreds of millions of dollars but was capitalized with only $300,000 of actual cash investments.

Over time I was able to refine my response to something like this: “That $300,000 was important and sorely needed, and it yielded spectacular returns. But most of the value in this company came from two things: Richard Garfield creating Magic: The Gathering, and the employees. Not investors. It’s only appropriate that the distribution from the sale reflects that.”

I’m suddenly aware that I’ve been a bit harsh in talking about the suits. Yeah, there were some real jerks who tried to get into the hallowed halls of early Wizards of the Coast. But there were also some amazing professionals like Vince Caluori, Rick Arons, John Jordan, Brian Lewis, Arlen Prentice, Jeff “Death March” Christianson, and Tom Des Brisay—professionals who “got it.” They realized Wizards was a special company, in a special time, doing special things, and focused their energy on rolling up their sleeves and working alongside us gamers to make it the company it’s become. They also mentored me. I was successful as a CEO not because of my own brilliance, but because I built a team of people far smarter than me who were willing to buffer my shortcomings.

For me personally, the most influential professional on that list was Vince. In my next blog, I’ll tell you about this amazing man!

Peter D. Adkison

May 22, 2013



  1. tyler tinsley
    June 25, 2013

    Thats a great tale and you tell it well. oddly appropriate that i read it today.

  2. Frank
    June 26, 2013

    Very nice story – have you ever reached out to Mary? I’d love to hear how her investment changed her life.

    • Peter Adkison
      June 26, 2013

      Tyler and Frank, thanks for commenting. I’m glad you’re enjoying these trips down memory lane.

      No, I’ve totally lost track of Mary. Items like shareholder contact lists and such were considered company proprietary data and I didn’t take them with me, and this was before the days of social media. Maybe she’ll hear about my blogs and say hello!

  3. Travis
    July 5, 2013

    “I’d give them 10 shares. At $0.50 per share, that was only $20 of fictional value…”

    Quoting your previous post: “my day job as a ‘rocket scientist’ at Boeing.” A rocket scientist that can’t multiply it seems. 10 shares * $0.50 / share => $5.00. 😉

    • Craig
      October 22, 2014

      Well done Travis. You got one over on a real life rocket scientist. That’s your quota of smugness filled for at least the next week.

  4. Cory Magel
    April 2, 2014

    I often remember sitting on the couch BSing with you guys in your basement in Kent and being offered that $1 a share stock. I had a $100 to my name at the time. Wish I’d given it to you hindsight being 20/20 and all…

  5. Eric Watson
    October 22, 2014

    I’m a big fan of the thought process behind your strategy.

    Mainly, the goal of getting your friends to feel like part of the company and make it a ‘WE’ type of attitude early on.

    Those early supporters deserve what they got it seems!

  6. This is a great description of a dynamic equity split! Dynamic models are by far the best way to divide up equity. The drafting table is as important as any other contribution. Startups need all kinds of things. Especially in the early 1990’s when there wasn’t as much access to incubators and free server space.

    Thanks for this article!

  7. M. Berberick
    October 22, 2014

    Very cool. Thanks for sharing such a great story. Much respect.

  8. Ian P
    October 22, 2014

    The story reads like a typical American movie: Embraces you and leaves you with no conclusion(s). However the learnings are that both capital and ideas share a common ground in a venture. This story in the end tries to bias the higher value on the ideas than the capital but if you are a financial guy you are going to argue that ideas encompass most of the risk. Given that only a fraction of startups (possibly less than 5%) ever make it, it is not unreasonable to say that the liquid cash available as risk money is worth every bit as much as the idea.

    The fact that in this case as in many others, capital is raised in small parcels, no one dominant capital investor is going to take advantage of the ‘control effect’ and use their position to dictate every way forward. This leaves the control to the ideas person which may or may not be a good thing. That depends very much on the person and the other elusive factor: Good luck.

    When investors and the ideas people come together as one, respecting each other duly, great things can happen. When they loose the vision and fight as is so often the case, it’s all over rover and it may be for someone else to pick up the pieces and make a good thing out of a failure.

    This is my take on it after many years of being up and being down including being involved in so many different ventures: some highly successful and others total disasters!

  9. Damien Donnelly
    October 23, 2014

    How many shares were created when you started issuing at $0.50 – what was your imaginary market cap?

  10. Qeric Koten
    October 23, 2014

    if you will, please look into my invention: The QuadraClicks Mouse

    I think I have a winner, everyone I met tells me it’s a winner, but I’m having a hard time raising enough funds to have it fully developed.

  11. Norah Vuong
    October 23, 2014

    What an amazing story. An inspiration for my startup. And your persistance is admirable! And yes i’d love to hear more about Mary too. Hope she reads this.

  12. Justin D-Z
    October 23, 2014

    My dad made me return a $20 beta Time Vault to the store once when I was a kid. I lost the argument with him about how he put baseball cards now worth five figures in his bike spokes. Luckily, I still have enough cards to maybe put one kid through college.

    Thank you and the crew for almost two decades of awesomeness.

  13. […] How to Distribute Equity :: Wizards of the Coast […]

  14. philleo
    February 25, 2015

    I installed computer cable in these guys first office back in the early 90s and the owner of the company i worked for his dad invested few thousand in the company and after hasbro bought it i was told he made close to $10 million in return… I remember them offering stock to some of us … Man wish i would of took it .. Just think 10 years later . The return on it .. Amazing

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