“He gave us six months to live”: when NVIDIA was about to go bankrupt and SEGA became the only savior

NVIDIA is already one of the most valuable companies on the planet. The US technology company recently reached, and for the first time in its history, a market capitalization of more than a trillion dollars, which has allowed it to rub shoulders with greats in the industry such as Apple, Microsoft and Google. However, he did not always enjoy this enviable financial health.

In its early days, shortly after its founding, it was close to being put out of the graphics card business, but received the help of a Japanese company that allowed it to stay in the race. Without that event, the fate of the creators of the famous GeForce products could have been very different. Let’s go back in time to learn more about this story.

SEGA, the partner that ended up being much more than that

On April 5, 1993, NVIDIA was founded by three engineers passionate about technological innovation and computing. Jensen Huang, who had been a director of LSI Logic and a microprocessor designer at AMD; Chris Malachowsky, who had been at Sun Microsystems, and Curtis Priem, who had designed graphics chips at IBM.

The founders envisioned a future in which video games would play an important role. But the development of this sector would require specialized hardware, and it is precisely there where they wanted to stand out. As Huang recognized in one interview with Fortunethat dream began with just “$40,000 in the bank” (about $93,000 today).

With a mission to create 3D graphics hardware for games and other multimedia applications, the company was established in a small office in sunnyvale, california. The goal was ambitious, but the work space was rather modest. Employees ate lunch around a ping pong table and shared bathrooms with other companies.

Through additional outside investment, NVIDIA secured the resources to launch and introduce its first commercial product: the NV1 graphics card. This is a proposal that offered 2D and 3D graphics, integrated sound and even compatibility with Sega Saturn games and controllers (one of its advantages was that it promised to take advantage of console games ported to PC).

The NV1 graphics reached the consumer market in 1995 by Diamond under the name Diamond Edge 3Dbut it was far from a commercial success. One of the reasons that it is believed that this NVIDIA proposal could have been unfavorable was its high price, due to the integration of sound and video on the same board.

By then, the manufacturer’s financial balance was beginning to show numbers in the red, but a contract with SEGA became a hope. The American firm became responsible for developing the graphic system of the next-generation console of the Japanese firm (console that would end up being called SEGA Saturn).

The project progressed well for the first several months, but there came a time when NVIDIA faced one of the most difficult crossroads in its history: it discovered that all the technology they had developed I had the wrong approach and that he was heading together with SEGA towards a dead end.

NVIDIA RIVA 128

“After a year of development we realized that our architecture had the wrong strategy. It was technically poor, and Microsoft was about to announce Windows 95 Direct 3D with inverse texture mapping and triangles (reverse texture mapping)”, Huang remembered in a commencement address at National Taiwan University.

Until that time, NVIDIA technology was based on a completely different concept known as forward texture mapping (direct texture mapping). If they adopted a different path than Windowsthey would end up putting on the market a graphics solution that is incompatible with the dominant operating system and, possibly, with the rest of the industry.

SEGA Saturn

The graphics card company’s problems, however, did not end there. They weren’t in a position to go through with the partnership with SEGA, but they couldn’t get out of their contract either. Without the settlement money, NVIDIA faced an economic abyss.

“We contacted the CEO of SEGA and explained to him that our approach was the wrong one, that he should find another partner. And we could not complete the contract. We had to stop, but we needed to be paid or NVIDIA would end up going bankrupt”, added the current head of the graphics company.

Despite the circumstances, SEGA decided to support them. “He gave us six months to live,” Huang recalled. During that period of time, NVIDIA channeled its resources to redesign its strategy in record time and thus managed to develop a new graphics processing unit, the RIVA 128, which embraced Direct3D compatibility and ended up being a success. SEGA, for its part, built the Saturn console with graphics solutions, NEC and VideoLogic 2. The rest is history.

Images: fritzchens fritz | SEGA | NVIDIA

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