Roblox: David Baszucki

In 2003, David Baszucki wanted to go viral. He had already sold a company that made educational software, and now he wanted to build something with mass appeal; with build-your-own avatars and myriad opportunities for users to compete and connect online. So in 2006, he and his co-founder Erik Cassel launched Roblox, a platform where you can play millions of different games, set in a wide array of virtual worlds. You can adopt a pet, escape from jail, build and run your own restaurant, or solve a murder mystery; you can even create games of your own. During the start of the pandemic in 2020, half of the kids in the US were keeping in touch via Roblox, and today, the company is worth over 28 billion dollars. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 5:11Speaker 01

  We had some people play it, but we knew within a week, oh, my gosh, this is not going to go viral. We have a lot more work to do. And Eric and I had to say, OK, we've got another nine months where we're going to have to buckle down. I mean, at times, this has been the hardest thing I could ever imagine. There has been times when we've all thought, oh, my gosh, this is the hardest thing we've ever done.

• 5:45Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 5:56Guy Raz?

  I'm Guy Raz, and on the show today, how David Bazooki pivoted from making physics software into creating Roblox, a virtual gaming platform with more than 200 million monthly users.

• 6:13Guy Raz?

  A few months ago, I was going through emails on my laptop. A nosey 11-year-old, also my youngest son, was looking over my shoulder when he shrieked out, "Daddy, you have an email from David Bazooki." "How do you know who David Bazooki is?" I asked. "Daddy," he replied, "everyone knows David Bazooki. He's the founder of Roblox." Needless to say, a few weeks later, when I interviewed David Bazooki, I had an in-studio guest by my side.

• 6:43Speaker 02

  Hi.

• 6:44Speaker 01

  How are you?

• 6:45Speaker 02

  Good. How are you?

• 6:46Speaker 01

  I'm David, and I'm in Roblox headquarters right now.

• 6:51Guy Raz?

  Okay, it turns out, lots of kids know who David Bazooki is, because he created a world that so many of them are part of. It's estimated that, in the United States, three out of four children between nine and 12 years old play Roblox. I know, insane, right?

• 7:10Speaker 02

  I just wanted to ask, who is your favorite character out of them all? Like Builder Man, Mr. Robot, who are the others? Kenneth?

• 7:21Speaker 01

  Yeah, we've kind of taken this approach. It's almost as if I don't have a million children, but if I had a million children, I would love them all. And we've taken the approach.

• 7:35Guy Raz?

  Roblox is a platform where you can play millions of different games that are set in virtual worlds, or you can create your own games. Now, if you've never seen it, the characters or avatars look a little like Lego figures running through an infinite number of worlds, many of which look like cities. In some games, for example, you have to escape from jail, or you can adopt a pet and even take care of it. And inside these worlds, you can spend and even earn money using a currency called Roblox. To buy Roblox, you have to use real currency: dollars, euros, yen, whatever. And it's how David Bazooki's company has grown into a publicly traded company with

• 8:19Guy Raz?

  a market cap of over 25... Billion dollars. Roblox was actually launched in 2006, and by 2016, about 10 to 15 million people were playing on the platform each month. But then came COVID, and millions of children had no way to play with their friends or interact, except on Roblox, they could. And the company saw a massive spike in growth, starting in March of 2020. Today, hundreds of brands like Nike, Gucci, and Chipotle have built out worlds within Roblox, where they even sell virtual products. And world famous artists like Lil Nas X have even held live concerts inside a Roblox virtual world.

• 9:04Guy Raz?

  It's a taste of what the larger metaverse may one day look like, a world that, like it or not, most of us will take part in, in some way. But when David Bazooki first set out to start a business, he wasn't thinking about game playing for entertainment. His first company was in educational software, and more specifically, it was software for physics students. The concept wasn't scalable, so David and his business partner, Eric Castle, shifted their focus towards a different concept, one that would eventually morph into Roblox. David grew up in Chicago and in rural Minnesota.

• 9:44Guy Raz?

  He always loved math and science, and in particular, he loved building simple computer games.

• 9:51Speaker 01

  I built asteroid-type games, and there was a way to, in a primitive way, go to Radio Shack and buy these knob potentiometers and wire them up to the Apple II and build a primitive game controller. And I can remember having my siblings come down and play this cheesy Space Invader game I made, but have these knobby controllers. It really was inspirational to me.

• 10:17Guy Raz?

  And how did you, I mean, this is, this is, obviously, there's no internet or Wikipedia. I mean, there were physical manuals that you could buy, like sort of trade publications, I guess. Is that how you learned how to write the language?

• 10:30Speaker 01

  Yeah. This was a really early formative time. You would go down to your local PC store. They would have a lot of plastic envelopes with what is the current cool programs of the day, and then buy a bunch of magazines, buy the Apple II manuals, and that collection of information, none of it online, was enough to figure it out. There were, in that time, there were magazines that would list a program, and if you, if you wanted to, you would read the magazine and type the whole program in to learn things as well. I was primarily trying to write in assembly language, but through all these manuals and stuff, I figured it out.

• 11:11Guy Raz?

  Wow. So it's not, not surprising that you, you decided to study computer science when you went to Stanford in the early 80s. What did that, what did that mean? I mean, I mean, presumably, getting to Stanford, there were computer labs, and it was probably a million times more sophisticated than what you had access to in Minnesota.

• 11:31Speaker 01

  Yeah, in the early 80s, this is when the early Fairchild and Texas Instruments and all of these Intel-type companies were just getting going.

• 11:40Guy Raz?

  Yeah.

• 11:40Speaker 01

  And as part of the core electrical engineering curriculum at Stanford, there was actually a course on how a transistor works, the smallest component of these ICs at the time that were, you know, the early 6502 or Intel 8088 chip. At the time, you would go into a facility called LOTS at Stanford. These were all time-shared, very primitive, black and white terminals, programming in Pascal, really very early in kind of how you would learn computer science.

• 12:16Guy Raz?

  All right. So it sounds like you were, you were committed to, to doing something around this emerging technology, right? I mean, you graduated in 1985.

• 12:27Guy Raz?

  It's still not unusual, but less common for people to have PCs in their homes, although it's starting out. And this is sort of the beginning of the PC Clone Wars. You get the Compax and the HPs and the other brands that are starting to emerge. And so people are starting to have them in their homes, but still pre-Windows. So it was still DOS and you had the, of course, Apple Mac, which made things easier. But for people who had PCs, it was still complicated.

• 12:56Speaker 01

  That's right.

• 12:57Guy Raz?

  Big floppy disks. What was your thinking in 1985? What do you remember when you graduated thinking, all right, this is what I'm gonna do?

• 13:04Speaker 01

  I remember thinking the Mac is cooler than the PC because it had that Windows operating system. And by 1985, the very earliest versions of the Mac were coming out with everything on floppy drive. And we can remember those times when using a Mac was listening to that drive, you know, vroom, vroom, vroom, all that kind of stuff.

• 13:28Guy Raz?

  Yeah.

• 13:29Speaker 01

  Also, though, I was kind of unsophisticated in how to find my career. And so I think I ended up having a couple of jobs that were not super fun.

• 13:44Guy Raz?

  All local? Local jobs?

• 13:46Speaker 01

  Yeah, local jobs. I spent the first three years after school really, you know, I can remember, and this is maybe career advice for a lot of people, when you're 22, 23, 24, 25, your career is not over if your first few jobs aren't that fun and exciting. Like, life is long and there's a lot of good things to learn. But, you know, I kind of spent that first two or three years saying, this isn't it. I'm still not doing what is super interesting to me.

• 14:17Guy Raz?

  Do you remember what they were? I mean, were they engineering jobs?

• 14:21Speaker 01

  They were both engineering jobs. One was at a company that made telephone equipment, and I was a digital line card designer. And I was very frustrated that I was not getting to design as much as I want. I wanted to build stuff, and I was getting very frustrated.

• 14:40Guy Raz?

  Right, because when you're in your early twenties, you want to rush into things. It's natural. I remember feeling like I was in a hurry. And it's a natural feeling, yeah.

• 14:50Speaker 01

  Absolutely. I felt, I can remember calling my dad in the second job, just saying, oh, my gosh, my like, oh, my gosh, it's all terrible. My career is over. What am I going to do? And I can remember my dad saying, hey, you're pretty young. You got a lot ahead of you. So just, you know, don't get so upset about all this.

• 15:11Guy Raz?

  So I guess around 1989, you were probably 26, 27. You decide to start your own business, a software company, which we'll get into, with your brother Greg. You called it Knowledge Revolution, which is, I'm not judging you at all, but it's kind of a boring name. A little bit boring. I'm not, no judgment, but it is. But what was it? What was the idea that you had?

• 15:39Speaker 01

  I was going to take two or three months off and decompress after my two difficult jobs. And we were right in the hardcore educational computing transition from Apple II to Macintosh. A lot of schools still had Apple II's. A lot of schools were starting to get Macs. And I immersed myself in the educational software market. Physics, math, history, played with everything. And it's interesting when you immerse in something from the outside, it always looks shiny and mature. But as I got into it, I started

• 16:20Speaker 01

  looking at the physics software market. And at that time, the physics software market, even very awesome, a lot of stuff going on, but typically 10, 50 pre-made simulations to help animate and visualize classic physics things. I started going, oh, my gosh, wouldn't this be cool if instead of these things being pre-canned, this is more like a physics construction set? And wouldn't it be cool if you could build all of these things from one simple system? Students could do it. You could model textbook experiments. That was the genesis of the idea for this product called Interactive Physics and the company Knowledge Revolution.

• 17:05Guy Raz?

  So this is 1989, and I'm thinking, God, ed tech. I mean, this is like. A nascent space, but I guess schools probably were, right? They were among the first to invest in computers and software because they had to prepare students for the future. I'm trying to remember what educational software was in 1989, 1990, because this is pre-CD-ROM.

• 17:28Speaker 01

  It's pretty primitive.

• 17:30Guy Raz?

  Yeah.

• 17:30Speaker 01

  It was Oregon Trail. It was learning typing. It was at a time when schools all around the world were putting in computer labs. A lot of students didn't have them at home. It was kind of this genesis time, both for educational software and Apple as well.

• 17:50Guy Raz?

  So you were, I mean, you were so young, 26, 27, but did you see, I mean, were you looking at this as like, this is a big opportunity? Or were you looking at it like, you know, I know how to make software and I like physics and I think I can make something cool?

• 18:05Speaker 01

  I think it's the latter. It's kind of interesting. I can remember hanging out with various people and my dad and sharing this idea. I was very unsophisticated from a business or a market size. I just wanted to build this physics stuff. I think, I remember this pivotal meeting where one of my dad's friends said, okay, let's look at interactive physics. These are the number of schools, blah, blah, blah. I think the annual market for this is a million dollars a year. And that was kind of depressing to me because I thought the idea was so big and so creative. And I went forward regardless.

• 18:47Speaker 01

  What's interesting is maybe five or six years later, the market for interactive physics was about a million dollars a year.

• 18:54Guy Raz?

  So it was nothing?

• 18:55Speaker 01

  Yeah. But we had to do some fundamental work to get a physics simulator running on a Macintosh Plus. This is collision detection. This is Newtonian physics. This is all of that. If we wanted to fire a cannonball...

• 19:13Speaker 01

  500 yards away at a certain angle and velocity. Any student would do that in interactive physics. They'd draw it, they'd track it, they'd watch it. And so the utility was really broad. But as we got that figured out, that interactive physics product, even though a small market, really swept through the physics education market and got to the point where all the physics textbooks were linked to it. They had a lot of example sets. It was being used very widely, really. And so the order started coming in. We would fulfill them. We had people that helped fulfill them and we essentially cash flowed that business.

• 19:57Guy Raz?

  And I guess you, you know, at this point, it was, it was pretty much just you and Greg who were working on it. But, but then, from what I understand, there was a guy named Eric Castle who reached out to you and, and wound up joining your team. And he was apparently a really good programmer, right? Just out of college.

• 20:16Speaker 01

  That's right.

• 20:17Guy Raz?

  But, but how, how did he find you guys? How did he know who you were?

• 20:21Speaker 01

  He saw us, a knowledge revolution in all, there is a big community of Macintosh magazines, so Mac Plus, Mac user. And we won a bunch of awards, best educational software, best teaching software. So that's where he heard about us.

• 20:41Guy Raz?

  Eric will, will feature prominently in the founding of Roblox and we'll talk about that in a bit. But between you and Eric and your brother Greg, what were you all doing? Was Eric focused on, on sort of the, the technology side? And did you kind of move away and focus more on the business side? Or was it your brother? Or were you all doing all those things?

• 21:01Speaker 01

  Eric and I predominantly coding.

• 21:05Speaker 01

  Greg predominantly marketing and selling. When it was time to go to all of these shows or work with the community, at that point, we would drive or fly and go to all of these conventions. I can remember one National Association of Science teacher shows where we had a booth, there was an Apple booth, and it was really hard work. I think this was a four day show where my brother and I ran both of those booths pretty much eight hours a day for four days. But that's kind of how we got the word out, demoing live to people.

• 21:41Guy Raz?

  But this was, I mean, you were going after a very, very specific slice of people, like a tribe of people, physics teachers.

• 21:51Speaker 01

  That's right.

• 21:52Guy Raz?

  And so I guess, I read at a certain point, you sort of realized that if you wanted to grow that business, you would have to pivot, right? And I guess that pivot was you sort of built a 3D computer assisted like design product for engineers, mechanical engineers, people who wanted to see how something's going to work before it's built.

• 22:15Speaker 01

  That's right. And we entered a whole new market, a whole new type of customer. Kodak, Xerox, Ford, people making mechanical things where our product, which was called Working Model, which I love that name, it really described what we were trying to do. Way back then, when this wasn't widely available, you could simulate how that elliptical trainer would work, you could simulate the car suspension, you could simulate the camera shutter mechanism. And so we built a pretty substantial business around that. We were partners with all of the 3D design software at the time.

• 22:58Speaker 01

  And that's how we ultimately built Knowledge Revolution to the point where it was acquired by another company.

• 23:06Guy Raz?

  All right, so 10 years, a little less than 10 years after you founded it, the company was acquired. By the way, at its peak, how many employees did you have?

• 23:15Speaker 01

  We were in downtown San Mateo. At our peak, we probably had 40 employees and we were, I think we were doing 6 million a year when we were acquired.

• 23:27Guy Raz?

  So, and did you ever hit profitability?

• 23:29Speaker 01

  We were profitable the whole time because we were bootstrapping the company as we went.

• 23:34Guy Raz?

  All right, so acquired by another company reportedly for about 20 million dollars

• 23:39Speaker 01

  That's right.

• 23:40Guy Raz?

  in 1998. So, great outcome for everyone. And in this company that acquired you is called MSC Software. So presumably, under that deal, you went to go work for them for a little, for some time.

• 23:54Speaker 01

  Yes, I went to work for them for two years.

• 23:58Guy Raz?

  And could you have, I mean, at that point, were you, did you feel like you could retire? I mean, were you, I don't, I mean, were you at that point financially sort of independent?

• 24:09Speaker 01

  I think I was right on the edge. And I think, you know, if we were conservative and managed our money properly, I think we for sure could have. And so I was for a while thinking, maybe I will be retired. But at the same time, I think as I kind of, after that was sold and after the two years working there, I went into a two-year sabbatical mode, which more over time, more and more, got me itchy to do something else.

• 24:49Guy Raz?

  And I guess I should mention that at this point, you were married. In fact, I think you also had kids, right? You had, because you had kids in pretty close succession, right? You had like three kids all under the age of four at that point, right?

• 25:01Speaker 01

  Yeah. After I left MSC Software and started thinking what we were going to do,

• 25:08Speaker 01

  We rented a motorhome for three months and went on a round the USA trip for three months with those three little kids. It was an awesome break after all of that stuff, really well remembered. And then came back and did a few other things, but I started getting itchy about a year into this.

• 25:32Guy Raz?

  Right, okay. So you knew that really ultimately you had to start something, you had to start something again.

• 25:38Speaker 01

  That's right.

• 25:39Guy Raz?

  That was what you kind of landed on. And when you, when you kind of came to that conclusion, had you already been talking to, to Eric Castle and, and your brother Greg or others who had worked with you at Knowledge Revolution about what you could do? Like, did you start to like call people up and say, hey, let's get the band back together? Do you remember what, what you were doing?

• 25:59Speaker 01

  Yeah, there was an early experimentation phase where I had a rough idea of what I was interested in. I was interested in the idea of a simulation on top of which people could build puzzles or scenarios. And the idea of, unlike at Knowledge Revolution where we had to be really accurate in what we built because people were designing stuff, I was very interested in the notion, could we make something that's very scalable so it can do a lot of things but not be perfectly accurate? And I started down the, the route of making this simulator more as a puzzle experience

• 26:41Speaker 01

  rather than an immersive avatar type experience. And that's where Eric joined me and we started working on this together.

• 26:50Guy Raz?

  All right. So let's go back to 2004 because this is really the early outlines of what would become Roblox. But, you know, at the time, I'm thinking there were some, I mean, this is still, you know, early internet and most people had dial-up. And there were things like, I think, like Second Life and SimCity, right? Those were already out there at the time.

• 27:13Speaker 01

  That's right. They had all, to some extent, built these systems that would bring people together in immersive 3D environments. While we were in the midst of the very early phases of what we were doing, which was more this super scalable physics puzzle system. We had some people play it, but we knew within a week, oh, my gosh, this is not going to go viral. We have a lot more work to do. And Eric and I had to say, OK, we've got another nine months or 10 months where we're going to have to buckle down, really make this multiplayer avatar-based co-reality

• 27:58Speaker 01

  if we want to get that virality, which was really our vision all along. It was just almost a realization there were no shortcuts to doing that. So we shut that puzzle down and went back to work again for another nine months.

• 28:16Guy Raz?

  When we come back in just a moment, how David and Eric create the virtual world of their dreams, but how it doesn't take off until they add one irresistible feature: virtual money. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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• 32:19Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2003, and David realizes he's working on an idea that has no legs. People are not going to flock to a site where they just get to solve a bunch of puzzles. So he and Eric spend about a year working on something much more interactive, with multiple players and avatars and cool spaces to hang out. And they start with the name Dynablocks, but eventually call it Roblox.

• 32:52Speaker 01

  When you sign up, you're going to join one specific place where there may be 6 to 20 people rolling around, bumping into each other in a place called Crossroads, which was our very first 3D place.

• 33:07Guy Raz?

  And what did that look like? It was like a street or a town?

• 33:11Speaker 01

  Yeah, it was, imagine maybe a space the size of two football fields, side by side. And then in each of the four quadrants, imagine in one, there was a castle, in one, there was a little area where you could put things together, in one, there was a little cave that you could go into. And that was the very first version of Roblox that started this virality.

• 33:37Guy Raz?

  So the idea was you'd log in and then you'd have a character, maybe, and then you would see other characters moving around which were actually connected to real humans through the internet somewhere else.

• 33:48Speaker 01

  That's right.

• 33:49Guy Raz?

  And you could, and initially it was not, it was just like, you could talk to them and chat with them, but really it was still about building structures?

• 34:00Speaker 01

  It was really about hanging out with people, chatting with people. The fun of feeling as if we're in a physical environment. So, oh, let's go over here and stack some blocks up and see what we can build. Ooh, let's put a fun little time bomb over here and watch this thing fall down on us. But it was actually really social. And Eric and I, and then soon John, and then soon Matt, and then Keith, we'd spend a lot of time hanging out, meeting these people and chatting with them. And in those early days, we probably knew half of the 200 or 300 people on Roblox. And we were in there every day chatting with them. What would you like to see? What can we make better?

• 34:44Guy Raz?

  So it's interesting to me because you were, I mean, you were committed to creating like physics, this sort of physics software, and then these kind of puzzles and games. So clearly there was this kind of educational component to what you sort of were passionate about. But it seems like early on, you were kind of moving in a different direction, saying, you know, actually, let's just make a place where people can hang out.

• 35:11Speaker 01

  That's right. We carried the theme of the physics forward in that we wanted the world where people would hang out as much as possible to be like the real world. Because then interesting, cool things would happen. If a building was leaning over and we pulled out one of the supports, the building would fall down. Or the early cars on Roblox, those were really had axles and motors. So if we pulled a wheel off the car, it would scrape along on the ground. That simulated the real world, became this foundation. On top of which, we said, okay, now let's get more social avatar hangout on top of that foundation.

• 35:54Guy Raz?

  So I'm curious. I mean, in that first kind of year, year and a half, when it was just you and Eric, kind of... Designing this, coding it. By the way, did either of you have a background in like, design? Because you were creating a world with graphics and characters and...

• 36:12Speaker 01

  We didn't. There were a lot of people we met in those days that is too primitive, too crude, not going to be fun, games have to be this and that, that we really gently ignored respectfully. There was also a notion that function and making this work so well is so important to us that we're comfortable leaning in on program or art, to the point that the blocky Roblox avatar, that is now just one of many, many avatar shapes.

• 36:46Guy Raz?

  Right.

• 36:47Speaker 01

  If you analyze it, is actually very one by two by one on the arms, the torso is two by two by one thick, the legs are one by one by one. So that classic Roblox avatar is really just an extension of us putting some simple blocks together to get that going.

• 37:10Guy Raz?

  I know this might be a very sensitive question, but I've checked and you've never been sued by Lego, but I know that people must have said, hey, they kind of look like Lego characters.

• 37:18Speaker 01

  Yeah, I think in the early days, we stayed away from the exact Lego form factor. We just said, let's go simple one by two by one. But there was for sure some sensitivity when using, for example, yellow in the avatars, which is this classic Lego look. They were very gracious with us, though, and I think we were able to work out, okay, yeah, we'll make the defaults this way. We'll try to remove any confusion whatsoever that this has anything to do with Lego.

• 37:52Guy Raz?

  Here's what I'm wondering about too, which is you were already in your early 40s. And I think Eric was not too far behind. And when I think of like video game developers, I think of younger people.

• 38:06Speaker 01

  Yeah.

• 38:07Guy Raz?

  I think of people in their 20s and 30s, not, and I'm trying to be careful to say this because there's nothing wrong with being in your 40s. But were any of your friends or colleagues or people you knew, you know, from Stanford, was anyone like, you're doing what? You're making cartoons?

• 38:23Speaker 01

  It's interesting. I think you're doing what thing maybe lasted for 15 years because I think because Roblox has always been under the radar a bit and been used by younger people. It hasn't really surfaced into pop culture, you know, maybe in the last two to three years.

• 38:43Guy Raz?

  Yeah.

• 38:44Speaker 01

  So I do think a lot of friends thought that. I actually thought in a beneficial way, my kids might have thought that as well up until the last two or three years, whereas, oh yeah, dad's working on this video game thing. What I think it gave us was the notion that we're really building platform and system and technology. We're really not building the game. And it gave us a little bit of the humility that we very early on knew that this has to be about the creators on the platform, not us. We want them to be famous, not us. And so I think that mirrored more to Eric and my specialty, which is let's just build great technology.

• 39:30Guy Raz?

  Right. So as you were kind of testing this out, right? And as it became clear that it was going to be this kind of social platform with avatars, where you could, you know, buildings would collapse if you pulled out a brick or you could build things. I mean, did you see it as? As an educational tool, did you see it as something that, I mean, did you see it as something that could be, you know, turned into a tool like that? How were you thinking? Did you see it as a game, a video game? A massive online, you know, multiplayer game?

• 40:05Speaker 01

  Even, even early on, there was a bit of a thesis that if we could mirror and really couple raw 3D cloud-based, we, we used to call it digital stuff, simulated stuff in the cloud, that this is such a fundamental technology that on top of it, people would play, someday they'd go to school or do simulations, they might work together. It was the notion that this was going to be a universal type technology. That happened really early on and then we released Roblox Studio. And the second we released Roblox Studio,

• 40:46Speaker 01

  it was one of those days where you go, oh my gosh, this is going to be absolutely amazing. We cannot believe in a couple of days, this early community at that time of 500 or 1,000 people have all downloaded Roblox Studio and we're seeing creations better than anything we can do. It's just such a fun experience when, when you think that that's going to happen and then you see it actually happen.

• 41:14Guy Raz?

  Cause Roblox Studio basically allowed users to create their own games and sort of experiences on the platform.

• 41:22Speaker 01

  That's right.

• 41:23Guy Raz?

  And, and I think you, this is in like 2006 when you, when you launched that, but, and you, you know, you, as you say, you attracted users, I think within five or six months, you had about 15,000 users, which is pretty good, probably not enough yet to, you know, hang up your cleats, so to speak, but, but pretty good. You're, you're sort of getting some adoption. Did you start to notice early on that most of the people who were using it were kids?

• 41:51Speaker 01

  The, the early Roblox demographic was going viral amongst kids and we reintroduced Roblox Studio. Within a month, we were all working on our very first safety civility system. We could see that everyone, you know, from a range from 12 to 18 on the platform. So, so we did know that because we were hanging out with all of them.

• 42:19Guy Raz?

  One of the things that I know about, because I've got a children's media company that I'm a partner in, and we make a kids podcast called Wow in the World, including other shows, is there's something called COPPA, which is a law that requires companies, it's an online privacy act, you basically have to protect the privacy of kids who are, I think, under the age of 13, can't collect information about them. And you had to kind of become COPPA compliant right away, I guess. Was that in response to this, to the fact that you were attracting so many young users? Or was it, did you know you were going to have to do that even before that happened?

• 43:02Speaker 01

  We knew very early on that to be COPPA compliant, we would have to under-optimize our advertising, which is actually the first monetization thing we ever did. What COPPA means is, part of it is, you're not tracking kids. And in those days, the revenue you would make on advertising was much higher if you would use advertising sources that were tracking the user and doing all kinds of backend stuff. So very early on, we were crimping our revenue on that first advertising model.

• 43:38Guy Raz?

  I mean, I wonder what your, I know you only went to raise money in 2009. It wasn't much. You raised a little over $2 million. But before that time, in the sort of four or five years before you even raised that amount of money, what were your biggest expenses? Presumably, you didn't have to spend money on developers, because it was you and Eric, but you had office rent, but you had server space. I mean, how were you financing it?

• 44:05Speaker 01

  We financed by a range of angel investors. Friend and family did the first round.

• 44:15Speaker 01

  Friends of myself, friend of my brother, friend of my dad's. They got in at a really interesting time in the company relative to where we are right now. And that took us through to our first VC round with Altos Ventures a while later. But yeah, we got pretty far on a small angel round.

• 44:36Guy Raz?

  So, and I mean, am I right, about $2 million, is that what you raised?

• 44:42Speaker 01

  I don't remember exactly, but I think we got very far with 2 million. We then went on for a couple VC rounds, but ultimately, the total amount of money that went into the company to get to the point of profit was about $9 million.

• 44:58Guy Raz?

  Wow.

• 44:59Speaker 01

  And everything we've raised since then is either cash and it's sitting on our balance sheet, or it's been used for very early employees to offer some small amount of liquidity. But yeah, we got to where we are in 9 million bucks.

• 45:13Guy Raz?

  When were you and Eric able to hire some people?

• 45:17Speaker 01

  We were in an office in Menlo Park and right around this time when Roblox Studio was going live, we hired our first two employees, John and Matt. And then I can remember moving to Redwood City, we had 10 to 12 to 14 people. That went up to 16, then we moved to downtown San Mateo. So from then on, it was, you know, build out the team.

• 45:41Guy Raz?

  Right, so I mean, let's talk about the business model at this point. In 2006, 2007, how are you going to make money? What was the business model?

• 45:50Speaker 01

  We had to really figure that out and we went through multiple iterations. We started putting just a few advertisements that were kid compliant on the Roblox homepage. We did not feel good about that. We then moved to a club membership. It was called Builders Club. Which was, you know, if you're in Builders Club, you get some extra cool stuff. You get multiple places to build on.

• 46:19Guy Raz?

  Yeah.

• 46:19Speaker 01

  But we quickly realized, well, not quickly, but over time, realized that wasn't going to scale. And then that led ultimately to our virtual economy, which is Roblox and Developer Exchange and that engine that powers everything. But we did go through multiple iterations of trying to figure out what's really the system that's going to power Roblox as it grows.

• 46:44Guy Raz?

  Right, because as you, you know, sort of began to think about this model that would eventually become your model, which was Roblox, where basically people could buy this virtual currency.

• 46:55Speaker 01

  Yeah.

• 46:56Guy Raz?

  If someone were to ask you at the time, hey, you know, Dave, what can I do with these Roblox? What can I buy with it? What would you have said?

• 47:03Speaker 01

  I would say that what you can buy is almost anything the creators on the platform can imagine. So, you know, work at a pizza place, you can go buy a cool scooter. If you go into bird simulator, you could say, hey, I want to be an eagle sooner than, you know, living my life as a sparrow. In some experiences, they would have their own coins that you could buy, clothing. It was really a full-on economy, and it is to this day, of whatever the creators and their experience can think of.

• 47:36Guy Raz?

  So basically, it was from the, from, once the studio was created, it became a platform, like, for people to kind of, I guess, for lack of a better word, to become their own entrepreneurs. I mean, they would, they could offer products for sale, virtual products, and then the model would be that you guys would get a percentage, you'd get a cut of every sale.

• 48:02Speaker 01

  That's right. And the more flexibility we gave them, the more we were... Just as with the content, we're really creatively inspired by their inventions on how to monetize as well. And all of our creators are always balancing, they wanted bigger crowds on their platform. So if there's too much friction, that would slow down their growth. So they all figured out how to make immersive things that the vast majority of people use without spending any virtual currency. And even to this day, you know, it's only a small portion of the people on our platform who buy Roblox every month.

• 48:44Speaker 01

  And we do quite well on that. Even early on, the developers figured that out and have always balanced kind of growth and engagement with monetization.

• 48:54Guy Raz?

  Right. I remember we interviewed the founders of Riot Games about a year ago or so on the show. And, you know, they did, they had a similar model where you could buy things in League of Legends. And at that time, in 2007, eight, I mean, was it hard, was it hard, like, was it hard to kind of make that argument to people like, hey, you can buy things in the game? I mean, were people at that time saying, but it's not real, it's not real stuff. What am I buying? I mean, was that, I would think that would have been the pushback.

• 49:28Speaker 01

  We, there was a time in Roblox history where we were growing very rapidly on users and hours and all of that was good. But we had a really, it was kind of a difficult time where users were growing, but monetization was going the other direction. And we, we did maybe the first wave of our response is, did we break something? Did we, do we need to tune something? What's a spreadsheet of the 50 little tune-ups that we can do? And those were not successful. And it was, is a little bit scary. We knew in the back of our minds that, well, there's this really big system thing.

• 50:13Speaker 01

  And what that would mean is we have, we take our virtual currency. The developers themselves can bring it into their experience in any way they want. We will then cash out those developers. And so we said, okay, all hands on deck. We're going to build this system, not knowing whether it would work or not, but having a lot of intuition that it felt right and that we sure think it's going to work. And everyone we talked to think it's really cool. And then we had a day similar to when we launched Roblox Studio, where we turned this on. And within two or three days, we had that same feeling, just, oh, my gosh, problem solved.

• 50:58Speaker 01

  So those are the big things that are hard to build that, that power these types of systems.

• 51:04Guy Raz?

  When you, I mean, one of the, one of the best things about, about having kids, you know, as, as customers is that they talk to other kids about it, right? And they're at school or, you know, on sports teams or whatever, and they talk about things. And this is, this is how, this is how toys get popular, Paw Patrol, or

• 51:25Speaker 01

  That's right.

• 51:25Guy Raz?

  Like these huge kind of generational brands become huge because, or even brands that aren't generational, but just get huge for a year or two. It's because kids are playing with them, Bakugan, you name it, whatever it might be. Is that what was happening? I mean, were you spending money on marketing at that point, on advertising?

• 51:47Speaker 01

  We had some interesting learnings along the way. And we received some really good advice from many people. That paid acquisition is a great way to test things. But there's a third way that some platforms grow, which is Creative virality. And I think in the mid 2000s, this was all about, well, invite a friend or push this link here.

• 52:13Guy Raz?

  Right.

• 52:13Speaker 01

  We tried some of that stuff and spent some engineering on it, but we quickly saw the raw virality from product quality was stronger than that. So we had to develop that muscle really of viral growth. We've done experiments along the way with paid acquisition to maybe accelerate here or there, but by and large, everything on Roblox has been viral.

• 52:42Guy Raz?

  It was kids talking to other kids.

• 52:43Speaker 01

  That's right.

• 52:44Guy Raz?

  And teens talking to other teens.

• 52:45Speaker 01

  On the playground, Metcalfe's Law, when the more people in the network, the more powerful the network. And we always wondered if that's, wow, there's a few people in the classroom, they're chatting about it. Now they're going to invite more people.

• 53:01Guy Raz?

  When we come back in just a moment, how Roblox continues to grow, but how the team is suddenly tested in a way that nobody could have predicted. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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• 55:06Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2013, and Roblox has grown to about 7 million users a month. And as it gains popularity, it has to contend with the not-so-pleasant behavior of some of those users. So before we go on, I'm just gonna bring my son Bram back into the mix here for just a moment, because he's a regular on Roblox. And David, Bram has another quick question for you.

• 55:34Speaker 02

  I just wanted to ask, well, not really ask, just say, I think in the games, there should be like a monitor, because there's so many people who say really weird stuff in the game.

• 55:50Speaker 01

  Yeah, it's kind of interesting, because we have a lot of filters, and you see the hashtags and all of those kind of things when we block those people, because we really try to keep this a safe and civil environment. But more and more, that monitoring is getting really, really good and really, really automated. So it's something we're working on all the time. Right now, we just end up blocking a lot of words.

• 56:18Guy Raz?

  Can I just piggyback on that for a sec, David? Because when you first started to do this kind of monitoring, right, early on, it must have been more like a cat and mouse game, right? Like, people doing things that were not what you intended them to do. I mean, you put a bunch of kids in a room together, and eventually, some of those kids are gonna start... Beating the heck out of each other, you know?

• 56:42Speaker 01

  That's exactly right. There was, I remember when it was the four of us, we all ran the moderation system. So we were on the front lines acting as moderators. And as we went, we were constantly building in, you know, any image that's ever uploaded, any sound that's ever uploaded needs to go by human moderators. The tension that for many creative developers who are very brilliant, very smart and very creative, it's actually fun to push on Roblox and see, oh, my gosh, what can I get away with? And it's, it's an area where we continue to, go even further and get even better to this day, but it really started in that first month.

• 57:28Guy Raz?

  How did you and Eric work together? Was it, I mean, you know, you're partners in this, but, but I mean, I'm assuming he had a probably strong views and you had strong views and there were things that maybe you want to try or things that he, would you, did you argue or was it, was it just easy?

• 57:50Speaker 01

  Some areas super easy and some of the core areas of even inside Roblox today, the way we run the in-memory database, the way we do networking, these are, these are still foundational things that Eric put together. Other areas we did disagree on and one was that very first Roblox avatar, which became the Roblox blocky classic avatar. We had a lot of debate. Eric thought, oh my gosh, this is still too rough. We need better looking avatars. But we came together with a notion, it's better to, you know, get this live and get it in users' hands

• 58:32Speaker 01

  as long as it's safe and robust and see what the feedback is rather than spend, you know, another five or six months getting better avatars. That has, that's something we always came together. And I think in general, we were very aligned on this initial architecture. We would, we were probably whiteboarding an hour a day as we would go. So we were able to build things very quickly. You know, generally the alignment was really high.

• 59:01Guy Raz?

  So the, the, the business is growing clearly and it, and you could see where it's, it's headed and meantime,

• 59:10Guy Raz?

  Eric had been battling cancer and quite an aggressive cancer for a few years and unfortunately succumbed to it in early 2013. When that happened, I mean, he was the main, I mean, he had built the backend of this thing. Aside from, I'm sure, everybody being devastated, what did it mean for Roblox?

• 59:39Speaker 01

  You know, he had a cancer that was basically not curable. He knew he had, you know, between one and three years, I think, at the time, I forget exactly. It was just like, oh, my goodness. So what was interesting with Eric was in the midst of that, he took a few weeks off and with his family, but then didn't change anything. It was almost a testament to what we were doing together was his optimal lifestyle, which made me really open my eyes a bit. So Eric kept working for quite a while.

• 1:00:23Speaker 01

  We all knew he was battling cancer. I tried to make it very easy, you know, hey, Eric, if you want to chill out, we got this. He's like, no, no, no, like I, this, I'm enjoying this. But it was a little scary. I'm very, you know, so thankful for Eric because he was almost a template for our values. He really helped me in my understanding of what great technical talent looks like, just working so closely with him and seeing, solving problems from a vision standpoint rather than a tactical standpoint was absolutely amazing.

• 1:01:05Speaker 01

  And in a way, there is also a motivation to me in that after Eric had passed, maybe in addition to other things that would motivate me, I had a huge motivation to want to make Roblox true to his vision almost, but it was very powerful.

• 1:01:31Guy Raz?

  All right, so you've got this game, you've got a lot of users, I mean, you've got this world, this platform, a lot of users, and the pandemic hits. And you begin to see very rapidly this explosive growth, like triple-digit growth, right? Were you anticipating that? I mean, did you, in March of 2020, when the world kind of shut down, that the WHO declared a pandemic, did you know that that was going to happen?

• 1:02:00Speaker 01

  No.

• 1:02:01Guy Raz?

  No.

• 1:02:02Speaker 01

  It was really kind of a week or two in, we were so busy, okay, how are we going to work remotely? And then as we started settling into remote work, things settled down. I think it was April, and we looked at our numbers, and it was almost like, oh, my gosh, this is an interesting byproduct of this pandemic. Look at these user numbers. We got to figure out how to scale and start making sure we have enough servers and all of that kind of stuff, because this might go in a weird direction that we weren't expecting. But all in all, I think we did really well during that last two years.

• 1:02:43Speaker 01

  Probably, you know, I want to guess, half the company has been hired in that last year or two, which is amazing. And as we're starting to come back to our office, it's great to meet all of these people.

• 1:02:57Guy Raz?

  So as you, you know, you become this massive gathering place for kids at home, stuck at home during the pandemic, predictably, and I think predictably is the right word, what comes with that is more scrutiny, rightfully so, and also more challenges around some of the content that is being discovered. It's, is it, you know, I think there's an assumption that many of us have that, like, A company that has user-generated content can really control it. Like, you can just build in algorithms or systems that can automatically eliminate

• 1:03:41Guy Raz?

  it because, you know, you're smart people and you developed the system and so you should be able to automatically eliminate content that's objectionable, or offensive, or scary, or dangerous for kids. First of all, is that, is that possible?

• 1:03:59Speaker 01

  I think that we're always balancing, you know, when a new creator comes on the platform and they're at a computer tech camp, can they share that creation immediately with their friend? We're always balancing, does the average person on Roblox ever run across any bad content? And so we're always balancing the, kind of the control we put on that user-generated thing with, yes, our ability to make sure there's virtually no bad content on the platform. So, it is a balance.

• 1:04:37Speaker 01

  We have made the decision not to filter every single Roblox creation through a day of moderation. And at the same time, we constantly get better through algorithmic, social, human review. And, and right now where we're at is, it's very, very, very infrequent that anyone on our platform runs into intentionally bad content.

• 1:05:06Guy Raz?

  So, I wanna, I mean, this is sort of a question that you might think is weird or puzzling, or, you know, or maybe not. But, I'm, I don't think anyone listening to this show will be surprised to know that I'm not a gamer, I don't play games, and I, and I don't watch a lot of stuff, right? And I think part of it is, I, well, not part of it, is I need to be outside. Because I'm in the studio a lot, you know? And, there's a lot of, you know, there's a lot of talk around the metaverse, that we're, we're moving into this future where that is how social interaction will be, and that it will feel more and more real.

• 1:05:47Guy Raz?

  And I've even seen you sort of quoted saying things like that. And, I don't know, I read some of that stuff, and I'm not, not picking on you, but I read it, and I think- Really? Is that really where we're headed? And is that healthy for us? It doesn't seem like we were emerged from the savannas of Africa to live in a virtual world. I just don't think it's where we were supposed to be headed.

• 1:06:16Speaker 01

  Yeah, I share your sentiments. And at the same time, I tend to be pretty optimistic. I'm optimistic that people over time will balance texting and phone and video and 3D as ways to connect. And I'm optimistic in schools, there'll be a balanced amount of reading about history or using immersive 3D technology to go to ancient history. And I'm kind of optimistic that the dystopian matrix in the VAT-type, that's your world, is hopefully a long, long way off and we'll see a really lovely,

• 1:07:00Speaker 01

  more balanced use of this technology that we would use as a utility and society will come up with a good balance on.

• 1:07:09Guy Raz?

  You took the company public in 2021. You're now a publicly traded company. You are on, you do quarterly earnings reports and your financials are open to scrutiny. The company, if you, you know, one measure of valuing a company is the market cap. It's not the best, but right now it's about $22 billion. It's amazing, right? It's made several people very wealthy, including you. But you also have to contend with a stock price that sometimes is really high and is really low. And as of this recording, it's close to its 52-week low. And I know it's just a stock price. But, you know, does that stress you out?

• 1:07:53Guy Raz?

  Do you, I mean, you are running a public company. Do you, and everybody says, no, I don't worry about the stock price, of course. But, I mean, how can you not worry about it when there are millions of shareholders out there? Doesn't it stress you out at all?

• 1:08:07Speaker 01

  It's this interesting mix where we have these shareholders. We used to have our VCs, then our employees and our angels. And now we have people all around the world. So we have this amazing responsibility for them. At the same time, we

• 1:08:26Speaker 01

  I mean, it's pretty fun to run this company. We have three billion of cash in the bank. We generate cash. We have strong values and amazing people. And so we keep coming back to, for our shareholders, we have to keep having this vision of the future. And just as we did five years and 10 years ago, have those five or six or seven really hard platform strategic things that we've got that this funny feeling that if we do this, they're going to amplify and multiply in multiple ways. And that's just really fun.

• 1:09:03Guy Raz?

  Dave, when you think about where you are, where you started, where you are, I mean, you know, you were going to do OK. You were a really good engineering student. You were into programming really early and went to Stanford and were in the Silicon Valley area sort of before the kind of the internet explosion. So you were at the right place at the right time. And you were probably going, I mean, I would have bet on you when you were 18. I would have been like, yep, he's going to do fine. But I wonder how much of what did happen, you know, $23 billion company and, you know, maybe even more in the future. How much of that do you attribute to just how hard you worked

• 1:09:48Guy Raz?

  and, you know, your skill and intelligence? And how much do you think has to do with luck?

• 1:09:53Speaker 01

  Yeah, I think there was some luck in having the capability, both financially and where I was, to be able to go with my intuition. I think, you know, my intuition pulled me towards interactive physics. And when we were running Knowledge Revolution, we would always chat about what's the next thing. So I'm pretty fortunate in having that time to take that time off and to start hacking around. And then I would say at the same time, I mean, at times, this has been the hardest thing I could ever imagine. This is, there has been times when we've all thought, oh, my gosh, this is the hardest thing we've ever done. This is really difficult.

• 1:10:38Speaker 01

  So it's been a balance. We've seen both sides of that, really.

• 1:10:44Guy Raz?

  That's David Bazooki, founder and CEO of Roblox. David, thanks so much for your time.

• 1:10:49Speaker 01

  Hey, thank you for just such a thoughtful, wonderful framing of the questions. It's been, it's, time has flown right by and I've really enjoyed being with you.

• 1:11:00Guy Raz?

  Bram, do you have any, any last question for David before we go?

• 1:11:05Speaker 02

  Um, if somebody told you like 25 years ago that Dynablocks would turn into like one of the biggest games in the world?

• 1:11:17Speaker 01

  Oh my gosh. When we started Roblox, we, we had both a really big vision of what we were going to try to build, but we never had such an imagination. We never thought that when we started.

• 1:11:34Guy Raz?

  Hey, thanks so much for listening to the show this week. This episode was produced by Kerry Thompson with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Margaret Serino. Our production staff also includes J.C. Howard, Casey Herman, Liz Metzger, Alex Chung, Josh Lash, Sam Paulson, Catherine Seifer, Elaine Coats, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz and you've been listening to How I Built This.