The 38 Studios Inside Story from Boston Magazine: Chafee not at fault

Jul 24, 2012

Now comes Boston Magazine with an in-depth dissection of Curt Schilling’s 38 Studios video game fiasco that has snared Rhode Island taxpayers to the tune of at least $75 million. The article by Jason Schwartz details the mess that was 38 Studios long before the arrival of the $75 million in financing from Rhode Island taxpayers that was pushed by Gov. Donald Carcieri and approved by the General Assembly and the RI Economic Development Corporation.

Schwartz got many former employees and executives to open up about the failings of the company and why, despite the best of intentions, Schilling wasn’t much of a business man. There are telling quotes from  players in the Boston venture capital community, such as Todd Dagres of  Boston’s Spark Capital, one of the top venture capital firms in the country.

Dagres speaks of meeting with Schilling and instantly liking him. But the venture capitalist also thought that the retired Red Sox pitcher was in over his head and lacked the resources to develop a successful product. In the end, Dagres left “with his checkbook closed.’’

Schilling was engaged in a frantic search for investors well before Carcieri showed up with RI taxpayer money. “Hanging over everything…was the fact that there was no new money coming in. As the calendar raced toward 2010- Schilling’s original deadline – Project Copernicus remained years away from completion. If Schilling wasn’t able to track down money soon, the studio would be doomed.’’

The article bolsters Chafee’s argument that 38 Studios was on thin ice well before the governor said anything about the company. “Given the warning signs flashing around 38 Studios, it remains difficult to understand why Rhode Island so freely handed over $75 million. But for Schilling…the guaranteed loan was a godsend. He’d get cash without having to give up even the tiniest slice of ownership. And if everything went bust, it would be Rhode Island that was responsible for the money.’’

The article concludes that Schilling may face a personal bankruptcy because he got in so deep chasing his video game dream. “As a baseball player, Schilling refused to even consider the notion of defeat until the final out, even down three games to none against the Yankees. By his own admission he carried that same attitude into business. One former employee describes it as “rampant and destructive optimism.’’