How I Nearly Built a Successful Startup by Accident

My wife disagreed with me immediately when I presented the idea. We had just moved into a room in my parents' house in Montana. I decided that I would no longer pile on student loan debt while my wife and I worked so many hours to avoid eviction from our ridiculously expensive, yet tiny apartment near Malibu. I was missing too many classes, and learning almost exclusively from textbooks. I should have dropped out earlier, but I was taught that meant failure, and that I should fear failure.

I really enjoyed video games while growing up. Cheat codes were cool, but they were far too limited. Then, I learned how to hex edit saved game files in a game called Lords of the Realm II. A guide online only showed how to hack gold and supplies, but I knew right away how powerful hex editing could be for hacking video games. I was able to manipulate nearly every meaningful factor in that game and many others afterward.

When I became interested in online games, I realized there were no saved game files stored locally that I could hack. I wasn't about to stop hacking video games though. I just had to learn new ways. I learned that duplicating items and currency was like the Holy Grail of online game hacks. However, dupe methods were really difficult to discover. Another way to gain an advantage was to have your character play the game even when you didn't have time to do it. For that, I learned how to build game bots with a scripting language for automation in Windows.

Just before college, I came across a website that was selling online game items. I knew players wanted the items, but I had no idea they had real world value. I utilized dupe methods until they were fixed and then bots to gather massive amounts of valuable items and sold them on Ebay. It was perfect for me because I didn't have a car, but wanted to earn enough money to visit my girlfriend (now wife) in Brazil during summer breaks. I made enough from that game to visit Brazil over three summers, and to pay for our wedding there.

Soon after, Ebay stopped allowing auctions for online game items. I didn't know how to build a website, and the game was losing popularity anyway which significantly decreased the value of items. So during that time, I worked in a campus office, tutored high school kids, and explored my interest in game development by doing volunteer work on a cool open source game.

Just before I dropped out of college and moved in with my parents, a new extremely popular mmorpg was released. I discovered a method to duplicate items right away. I just didn't have a website to sell items or gold. So I would supply websites that did sell gold to players. I was selling at wholesale prices on just a few servers, and earning less than I would have at a full time job.

So there I was; a 22 year old married college dropout with over $100,000 of debt and living with my parents. I was a complete failure. It was humbling to say the least, but after having seen overwhelming poverty in parts of Brazil, I was grateful just to have a place we could go to try to rebuild a better life. That's when I decided to go big, and build my own website to sell game items. I told my wife, and she told me it was a terrible idea; that I should just get a normal job and try to move up the corporate ladder until we were earning enough to move into our own place. "You're always dreaming too big." she said, "You need to put your feet on the ground, and just do what everyone else does."

So just like very few sane people would do, I ignored her conventional advice, and built a website anyway. I had no idea if customers even wanted what I was building because nobody sold items, just gold. I did know that some of the valuable items weren't always available though, even if a player had enough gold and wanted to buy them. So I spent a couple weeks learning and building the first iteration of the website while I also gathered seed items that I could duplicate.

When I launched the website, it was terrible and just barely functional. I had items for sale on 3 out of ~200 servers. The first day I received zero visitors, so I searched online for a solution. The next couple days were a crash course on PPC/CPM marketing campaigns and SEO. I optimized the site for better search rankings, and set up an Adwords account with bids on what I would search for if looking for a site like mine. I got cheap clicks because no other site like that existed to compete with me. I was extremely lucky that there actually were people searching on Google for a website like mine.

In the next couple days I started getting visitors and a couple orders came in. I delivered them quickly and easily. I didn't have live chat built into the website, but I did list my instant messenger handles in the contact info so I started getting customer feedback through MSN and AIM. A lot of people wanted the items I was selling, but they played on a different server. I tried to gather seed items on another server, but it took nearly a week just to get half of what I needed. So I had to find a better way to scale up.

The game developer had just began a new service to transfer to a new server for $25. I figured I could level up a character to meet the transfer requirements, duplicate a new set of seed items, and transfer the items to stock a new server. The problem was, I didn't have any money to invest in server transfers. To solve this, I added a new feature, and created the first promotion on the website. Customers could pay the transfer fee, and I would deliver their order on the server of their choice. If a customer ordered $150 or more, then I'd transfer the items with no extra fee. It worked great, and the customers started paying the cost to stock new servers.

The next problem was that almost all of the orders were for servers I had no items on. So the work to prepare characters and duplicate new seed items became overwhelming. With all the orders coming in, my wife started to believe the idea may have had some merit after all. She began helping me to finish the work faster. Even with her help, we were falling behind.

I had the problem that few startup founders will probably get to experience. I needed to slow down the amount of orders I was receiving so I could keep up. With a combination of higher prices and longer delivery times, we balanced the demand quite well. As we stocked more servers with seed items, we were able to handle way more orders and process them faster.

I decided to purposely limit growth, making it more of a small business than a startup. When I read about Paul Graham or another YC partner emphasizing the importance of making something people want, I always think back to this time in my life. We had no idea what we were doing, our website was awful, and I was decreasing the quality of our service while increasing the price. Everything seemed to be going just fine though because our customers wanted what we were offering, and nobody else was giving it to them.

Then a new patch came out that fixed our dupe method. I was scared, but I found a new method in less than a week, and we had no problems fulfilling orders. About a month later, I found a new more efficient way to duplicate items. So I only used one method, and saved the other in case one was patched again.

I handled all the customer service. I had almost no customer service experience before that, but I learned fast. Live chat was part of the website by that point. One thing that always bothered me is that, just as the squeaky wheel gets the grease, the customers who nagged the most were often served the fastest. The best part of being able to create value out of nowhere relatively quickly was that I was able to reward all of the patient and kind customers with the surprise of many more items than they ordered.

Within a year from when I started, we were able to pay off our credit card debts, and make a decent down payment on a house. We remodeled it to be exactly how my wife wanted. Later, we were able to pay off all of my student loan debt. We did all this while continually working fewer hours for higher profits. The freedom from financial stress was incredible. The business lasted almost four years in total. It grew steadily (8.5% avg. monthly growth) until the end. Clone sites were popping up trying to compete, but most of them ended up buying items from us at a small discount in order to fulfill their orders.

At that point, most of the Chinese gold-selling websites learned that stealing game accounts, and taking the items and gold was far cheaper than paying employees to gather them in the game. This caused the workload of the game developer's QA department to skyrocket. So the game developer retaliated with rigid enforcement against gold sellers. We assumed we were safe as we had never directly stolen from another player.

Then, in a single day, all of our accounts holding items stocked on just over half of the servers were closed. It was completely unexpected. In my online game hacking history to that point, I'd had seven dupe methods patched across four different games, but never had an account closed. We thought we were prepared with over $300,000 worth of items in stock in case our dupe methods were patched and we couldn't find another. In that case, we'd planned to sell off those items as we smoothly transitioned into another source of income. But life has a funny way of making plans seem ridiculous in hindsight. We refunded all undelivered orders, and the business ceased to exist overnight. That marked the beginning of the period when I faced the most intense adversity in my life.