The Origins and Success of Half-Life (1996-2003)
Valve Corporation was founded in 1996 by Gabe Newell and Mike Harrington, two former Microsoft developers with an innovative vision for the video game industry. With years of experience in software, they decided to start their own company in Kirkland, Washington, creating one of the most influential companies in the gaming industry.
Their first major project, Half-Life, revolutionized the first-person shooter (FPS) genre. Using a graphics engine derived from Quake, suitably modified in GoldSrc, the title introduced an unprecedented level of realism and storytelling. Released in 1998 under the Sierra On-Line label, Half-Life was a huge success, redefining the way FPSs were designed. According to IGN, the game marked a clear division between “pre” and “post” Half-Life FPSs.
Valve expanded the game’s universe by contracting Gearbox Software to develop three expansions: Opposing Force (1999), Blue Shift (2001) and Decay (2001). In parallel, the company acquired the team behind the popular Team Fortress mod, turning it into Team Fortress Classic (1999). Mod support was a strategic move, fostering the development of iconic titles such as Counter-Strike, which initially started as an independent project and was later acquired by Valve.
After consolidating its success, in 2000, Mike Harrington left the company, handing over leadership entirely to Gabe Newell.
Steam, Half-Life 2 and Innovation with the Source Engine (2003-2010)
In 2003, Valve moved its headquarters to Bellevue, Washington, and officially registered as Valve Corporation. This period marked the beginning of a new era with the development of the Source engine, which would power the long-awaited Half-Life 2. Released in 2004, the sequel improved every aspect of the previous chapter, introducing advanced physics and a more immersive storyline. The title was an extraordinary success, selling more than 12 million copies by 2011.
In parallel, in 2002, Valve launched Steam, a digital platform for video game distribution. Initially designed to handle game updates, Steam quickly became a flagship digital store, expanding to third-party titles. This transition made Valve not only a video game manufacturer, but also one of the industry’s largest digital distributors.
As Steam evolved, the company adopted ahorizontal business organization, eliminating rigid hierarchies and allowing employees to freely choose the projects they worked on.
In an effort to release content more frequently, Valve experimented with episodic gameplay with Half-Life 2: Episode One (2006) and Episode Two (2007). Along with these, it launched two successful new titles: Team Fortress 2, beloved in the multiplayer scene, and Portal, an innovative puzzle game born out of the student project Narbacular Drop.
In 2008, Valve acquired Turtle Rock Studios, developers of Left 4 Dead, strengthening its presence in the cooperative shooter genre. However, in 2010, the studio returned independent.
In the meantime, Valve became a financial giant: in 2005, Forbes estimated revenues of $70 million, while in 2010, analysts said revenues were in the hundreds of millions of dollars. By 2011, the company was worth between $2 billion and $4 billion, with 250 employees and higher profitability per employee than Google and Apple.
The Rise of eSports and the Entry into Virtual Reality (2010-2020)
In 2010, Valve hired IceFrog, the creator of the Defense of the Ancients (DotA) mod, to develop the standalone sequel, Dota 2, which launched in 2013. This title not only solidified Valve in the world of eSports, but led to the creation of The International, one of the most prestigious video game tournaments in the world, with prize pools funded directly by players through battle passes.
The company also experimented in the hardware sector, introducing Steam Machines, a line of SteamOS-based gaming PCs, in 2015, but these were not as successful as hoped. However, Valve did not abandon technological innovation and focused on virtual reality, collaborating with HTC to develop the HTC Vive visor (2016).
In the following years, Steam established itself as a leader in the digital distribution industry, generating $3.4 billion in revenue in 2017. However, the increasing focus on services prompted Valve to cut back on new game development, causing disappointment among fans waiting for titles such as Half-Life 3 and Left 4 Dead 3 to be canceled.
The Return to Gaming with Half-Life: Alyx and the Steam Deck (2020-present)
After years of uncertainty, Valve returned to prominence with Half-Life: Alyx (2020), a VR chapter that redefined industry standards. Hailed as the first killer virtual reality app, Alyx marked a turning point and revived interest in the Half-Life franchise.
In parallel, the company launched the Valve Index (2019), its second-generation VR visor, and continued to invest in innovative hardware. In 2022, Valve surprised the market with Steam Deck, a portable console that allows users to play Steam titles on the go, challenging the dominance of Nintendo Switch.
In recent years, Valve has also explored the entertainment industry, collaborating with Netflix on the animated series Dota: Dragon’s Blood (2021).
The Future of Valve Corporation
After more than 25 years of innovation, Valve continues to be one of the most influential companies in gaming. With Steam, virtual reality, and new development strategies, Gabe Newell’s giant is poised to meet the challenges of the future, with the ability to bring back iconic franchises or launch revolutionary new experiences.
The video game industry is constantly evolving, and Valve, with its ability to innovate and adapt, remains at the center of this change.
