In September 1997 Valve was a month from its deadline. About 20 people were at work in newly built open-plan offices in Kirkland, Washington, finishing the company’s first game, and, as Edge later told the story, it had “just one problem: their game was no fun”. The monsters looked good and acted stupidly. Valve did not ship it. Half-Life arrived a year late, in November 1998, and Computer Gaming World named it Game of the Year.
What came next was just as unusual. Valve bought the teams behind the best mods for its game and for other people’s, and built its own system, Steam, to deliver its games over the internet. Steam was unpopular at first; by 2021 Wireframe could describe it, without argument, as the “digital storefront monopoly Valve enjoys”.
Fast facts
- Founded: 1996, in Kirkland, Washington, by Gabe Newell and Mike Harrington; later based in Bellevue.
- Called: Valve Software in the 1990s and 2000s; now Valve Corporation.
- First game: Half-Life (1998), published by Sierra.
- Engines: a reworked Quake engine, later called GoldSrc (see id Tech); then Source, from Half-Life 2 (2004).
- Games from mods: Team Fortress, Counter-Strike, Dota 2.
- Store: Steam, announced in 2002 and launched in 2003.
- Hardware: the Steam Deck (2022) and other devices.
Two people from Microsoft
Newell had spent 13 years at Microsoft. “When Mike Harrington and I started the company we had trouble taking the title thing very seriously,” he told Computer Gaming World in 1999. “There were just the two of us, and having one of us be ‘president’ and the other be ‘chairman’ seemed silly. Our unofficial positions are ‘prone’ and ‘supine.’” His official title was managing director.
They hired people from across the industry. Arcade listed Harry Teasley, who had worked on Civilization and led the PlayStation version of Doom; the artists Chuck Jones and Doug Wood from 3D Realms; and the illustrator Karen Laur. Many of the level designers came from the Quake fan community, among them Dario Casali from England. Valve licensed id Software’s Quake engine and rebuilt it piece by piece. “The nice thing about starting out two years ago with the Quake engine is that we always had the game running, even on day one,” Newell explained. “The artists were able to be productive, and we could start testing out gameplay ideas months before a particular sub-system was replaced.”
Half-Life
Half-Life told its story without cut-scenes, from the player’s own eyes, in a research base overrun by aliens and then by the soldiers sent to cover up the accident. It came with a map editor, and Valve gave mod makers a development kit to build new games on its engine. Harrington, Valve’s director of development, said in 1999 that the team had “tried to make Half-Life a good game, and didn’t really think about it in terms of it being a PC game as opposed to a console game”. According to Wikipedia, he sold his share of the company to Newell in 2000.
Buying the mods
Valve’s next games came from its players. In Australia, Robin Walker and John Cook had made Team Fortress for Quake, a team game in which each player chose a class such as Medic or Spy. Newell, as Sierra’s magazine put it, “acquired their little company, its technology, and its founders”. Minh Le and Jess Cliffe’s Counter-Strike, built with the Half-Life kit and first released in June 1999, followed: Valve bought the rights in 2000. In 2009 it hired IceFrog, the developer of the Warcraft III map Defense of the Ancients, and released Dota 2 in 2013 (see modding).
The same approach brought in Portal. Its team was “plucked from university”, Edge reported in 2007, when Valve released it with Team Fortress 2 and Half-Life 2: Episode Two as The Orange Box. Newell described the decision to put them in one box as “thinking from the point of view of a customer”. The magazine found Valve’s Seattle-area offices “exceptionally idiosyncratic”. “We don’t really do job titles,” one of the Portal team told it. Valve also owned, for a time, Turtle Rock Studios, the makers of Left 4 Dead.
Steam
Counter-Strike was the reason for Steam. It was free, and Edge reported in 2005 that Newell had “long complained that the success of Counter-Strike was actually costing Valve money in respect of support and servers”. Valve announced Steam at the Game Developers Conference in March 2002 as a way to deliver updates, and it came out of testing in September 2003. It also let Valve charge internet cafés for its games, with American licences from $100 a month for ten PCs, and sell games direct. At the 2002 conference, Edge noted, Newell reckoned Valve would make about $30 on each copy sold that way, against $10 or less through its retail deal.
Players were not pleased at first. Newell admitted in 2005 to “two painful periods: one when it went from being optional to being obligatory for updates, and then the Half-Life 2 launch, when we couldn’t handle the capacity”. Half-Life 2, released in 2004 on Valve’s new Source engine, had to be activated through Steam even when bought in a shop, and buyers of boxed copies found themselves “waiting in a never-ending queue”. Computer Gaming World refused to review the game at Valve’s offices and waited for the boxed release; its readers wrote in about “the one- to two-hour, five- or six-step install process”. In October 2005 the magazine graded Steam B+, “showing signs of improvement”, and Newell had no doubts: “It certainly turned out to be a great way to sell games.” Valve was about to start selling other studios’ games through it too, beginning with Ritual’s episodic SiN Episodes.
The dispute with Vivendi
Steam brought Valve into conflict with its publisher. Valve sued Sierra’s owner, Vivendi Universal Games, over the right to supply its games to internet cafés. In November 2004, Edge reported, US District Judge Thomas S. Zilly ruled that the publisher “had not been authorised to distribute Valve’s games to cybercafés for pay-for-play activities”. The two companies settled in April 2005. Vivendi agreed to stop distributing boxed copies of Valve’s games at the end of August 2005 and to tell cafés that only Valve could license them.
Later years
By 2013 Edge found Valve’s core staff in Bellevue, near Seattle, with an office in Luxembourg to serve the European Union. Half-Life 2, the magazine noted, had “kicked off both Steam and the Source engines”, which remained the mainstays of its business. The Half-Life series waited until 2020 for its next game, Half-Life: Alyx, made for virtual-reality headsets.
Valve turned to hardware. The Steam Deck, a handheld PC that plays games from a Steam library, went on sale in February 2022. In November 2025 Valve announced three more devices: a small living-room computer called the Steam Machine, a new Steam Controller, and a wireless virtual-reality headset, the Steam Frame. In February 2026 it said it still had “work to do to land on concrete pricing and launch dates”.
Released source code
Valve published the Half-Life software development kit on GitHub in February 2013, under its own licence, which allows free distribution of modified games built on the engine but not their sale (see Half-Life).
Sources
- Edge issue 105, Christmas 2001: the making of Half-Life (September 1997, the Kirkland offices, about 20 staff, Newell and Harrington as founding directors, “their game was no fun”).
- Computer Gaming World issue 181, August 1999: designer profile of Gabe Newell (managing director; “When Mike Harrington and I started the company…”).
- Computer Gaming World issue 191, June 2000: Newell “after working at Microsoft for 13 years”.
- Arcade issue 2, January 1999, p. 63 onwards: Half-Life feature (Valve’s team and where they came from, Dario Casali, the Quake engine and Newell’s quotation, Mike Harrington as director of development and his quotation).
- InterAction (Sierra), Spring 1999, pp. 48–49: Tom Chick, Team Fortress 2 preview (Walker, Cook and the acquisition).
- Retro Gamer issue 119, October 2013, pp. 84–87: “The making of: Counter-Strike”.
- Edge issue 225, March 2011, pp. 56–57: Dota 2 feature (IceFrog).
- Edge issue 181, November 2007, p. 62: The Orange Box feature (Newell’s quotation, the Portal team, job titles, Valve’s offices).
- Edge issue 144, January 2005: Steam and Counter-Strike, the café licences and Newell’s 2002 margin estimate; the Zilly ruling in Valve’s case against Vivendi.
- Computer Gaming World issue 255, October 2005, pp. 60–71: cover story on Valve (Half-Life 2’s activation queues, SiN Episodes, interview with Newell), and the digital-distribution report card grading Steam B+.
- Computer Gaming World issue 248, February 2005: the editor’s note on reviewing Half-Life 2 and a reader’s letter on its installation; review, p. 78.
- Edge issue 250, February 2013: studio profile of Valve (Bellevue, Luxembourg, Turtle Rock Studios, Half-Life 2 and the Source engine).
- Wireframe issue 51, May 2021, p. 20: Steam as “the digital storefront monopoly Valve enjoys”.
- “Vivendi Settles Valve Suit, Stops Valve Game Distribution”, Game Developer, April 2005, and Valve, “Valve and Vivendi Universal Games Settle Lawsuit”, Steam news, April 2005 (web, secondary). https://www.gamedeveloper.com/game-platforms/vivendi-settles-valve-suit-stops-valve-game-distribution and https://store.steampowered.com/oldnews/413
- “20 Years of Steam: From Half-Life 2 to the Steam Deck”, TechSpot, 2023 (web, secondary): Steam’s announcement at GDC in March 2002 and its launch in September 2003. https://www.techspot.com/article/2742-steam-20-years/
- Wikipedia, “Valve Corporation” (accessed September 2026) (web, secondary): founding on 24 August 1996; Harrington selling his stake in 2000. https://en.wikipedia.org/wiki/Valve_Corporation
- “Half-Life: Alyx Release Date Confirmed”, GameSpot, 2020 (web, secondary). https://www.gamespot.com/articles/half-life-alyx-release-date-confirmed/1100-6473724/
- “Valve’s Steam Deck Handheld Gaming PC Launches February 25”, Tom’s Hardware, 2022 (web, secondary). https://www.tomshardware.com/news/valve-steam-deck-launches-feb25
- “Valve Announces Console-Like Steam Machine, Steam Frame VR Headset, And New Steam Controller”, Game Informer, 12 November 2025, and “Valve announces three new products”, PC Gamer, November 2025 (web, secondary). https://gameinformer.com/2025/11/12/valve-announces-console-like-steam-machine-steam-frame-vr-headset-and-new-steam and https://www.pcgamer.com/hardware/valve-announces-steam-machine-frame-controller/
- “Steam Machine, Steam Frame, and Steam Controller update”, Gematsu, February 2026 (web, secondary): Valve’s statement on pricing and launch dates. https://www.gematsu.com/2026/02/steam-machine-steam-frame-and-steam-controller-update-we-have-work-to-do-to-land-on-concrete-pricing-and-launch-dates
- For Half-Life’s reception, its development kit and its released source code, see the Half-Life entry and its sources.