The Story of Nolan Bushnell & Atari

By: Eli Levi  |  March 13, 2022

By Eli Levi, Business Editor

The founder and original CEO of the gaming company Atari, Nolan Bushnell, was born in 1943 in Clearfield, Ohio. Even as a child, Bushnell had an entrepreneurial spirit, reselling strawberries from the store and teaching himself how to repair televisions. Throughout college, Bushnell had created many sources of income for himself, one of which was working for a carnival. Bushnell was so successful working at the carnival that he was offered quite a few different well-paying positions to stay in the carnival business. Ultimately, Bushnell turned down all the offers to be an associate engineer. During and after college, Bushnell had many different jobs and was exposed to numerous aspects of the new age of computers, such as graphics, video editing, and even the first-ever video game.

Bushnell was one of the first of the new age of young, scrappy entrepreneurs. Most of the entrepreneurs in Bushnell’s days were older scientists and often worked in applied engineering. In 1969, Bushnell formed his first company, “Syzygy,” with his friend Ted Dabney. Syzygy partnered with a manufacturing company named “Nutting Associates” to produce their first game. After only a short while, Bushnell realized Nutting was a terribly-run company. For instance, they fired the head of sales for making too much on commission. In the end, Ted and Bushnell’s first game was a failure. Afterward, Bushnell and Ted founded a new company, Atari, and created the game “Pong,” which was wildly successful.

As Atari grew, all of the distributors who were not already partnered with Atari were looking for its competition to side with. Instead of waiting for distributors to find competition, Bushnell decided to create his own. Bushnell took some people from Atari and had them set up shop across the street posing as a new rival company. Bushnell gave the “new” company the game Atari was working on before they released the game to Atari’s distributors. The distributors that were partnered with the “new” company thought they were getting the scoop on Atari when in reality Atari was now partnered with all of the different distributors. Bushnell realized he could not keep this hidden forever, so he floated the secret that the “new” company had stolen trade secrets from Atari. After a few more months passed, Bushnell floated another secret that the “new” company had settled with Atari and gave up some ownership. Eventually, the two companies decided to merge. In reality, Bushnell was only bringing his two companies back together. By 1975, Atari had captured 80% of the gaming market.

Don Valentine, the founder of Sequoia Capital, approached Bushnell looking to invest in Atari and asked Bushnell for his business plan. Bushnell did not have any plans; he had been running the company himself for the past five years as he saw fit. Valentine set Bushnell up with someone to help him develop his business plan and then Valentine would be willing to invest. At the time Valentine was looking to make his investment, Atari was in some trouble and desperately needed Valentine’s capital. Through a deal with Advanced Micro Devices (AMD), Atari was able to fix most of the issues that were plaguing them, relieving them of their immediate, financial danger. The night before Bushnell was supposed to close the deal with Valentine, he told Valentine he was doubling the price. Bushnell no longer needed Valentine’s money to sustain Atari. Valentine was understandably ticked off, but came back two days later and made the investment at the new price anyway.

Atari had created for themselves a great company culture, which was rooted in their manifesto stating equal work for equal pay. Many women in the company praised Bushnell for his forward-thinking. Partly because of this same culture, Steve Jobs walked into Atari and asked for a job. Bushnell hired Jobs and put him on the night shift because he knew that Steve Wozniak worked during the day and would hang out with Jobs at night. Wozniak would come to hang out with Jobs every night when he was working and help him with whatever he was working on. Bushnell called it “getting two Steve’s for the price of one.” One instance of Wozniak’s genius was him pulling two all-nighters in a row and figuring out how to get the Apple 2 to interface with a floppy disk; this same challenge took Atari seven months to resolve. 

In 1976, Atari needed more capital. Valentine arranged for Atari to meet with Warner Communications. Warner sent the corporate jet and picked up Clint Eastwood along the way. After the jet dropped them off, a limo drove them to the side entrance to the Waldorf Astoria, where the VIPs would enter. Bushnell realized they were being buttered up, but it was nice, and he enjoyed it regardless. Ultimately, Bushnell agreed to sell Atari to Warner Communications for $28 million, marking the end of one era for Atari, and the beginning of another.