The End-to-End House
Outsource everything first, find the failure points, then hire smarter people to own each one.
- Difficulty
- Expert
- Time to result
- ~ongoing to results
- Steps
- 5
- Confidence
- 93%
Exploding Kittens went from two or three people outsourcing absolutely everything to roughly a hundred employees, almost none of them creative. The input was a company that had outsourced manufacturing, transport, sales and marketing. The mechanism was deliberately attempting each function, failing, and then hiring far smarter people to own it. The output is what Lee calls an end-to-end house, of which he says very few exist in the world.
Origin
After Kickstarter, Lee and Matt Inman realised they had an incredible opportunity and asked what would happen if they tried to learn as much as they possibly could from it. Rather than optimising the outsourced stack, they chose to attempt everything themselves to find the failure points, and built teams around each gap they discovered.
Core principles
- 01Start by outsourcing everything — manufacturing, transport, sales, marketing — because you do not yet know where your failure points are.
- 02The deliberate goal is to try to be an expert at everything, specifically in order to find where you break.
- 03Fail at a function first, then hire people much smarter than you to run it; that sequence is what makes the hire legible.
- 04Almost all of the resulting headcount is operational — sales, marketing, production, logistics, distribution, accounting, legal — not creative.
- 05Creative work stays with a very small team; it is everything else that needs scale.
- 06Vertical integration is a product capability, not just a cost lever: owning the cardboard stock and the ink is what makes non-standard retail conversations possible.
- 07The moat is conversational — being an end-to-end house means you can propose things external-dependency companies simply cannot.
- 08The cost is real: a hundred mouths to feed, and it takes fuel to grow.
How to run it
- 1
Outsource everything at the start
For a while the company outsourced manufacturing, transport from plant to warehouse, the sales channel, the marketing channels — absolutely everything beyond design, art and rules.
Pro tip This phase is not a failure state; it is how a two-person company ships seven hundred thousand units.
- 2
Decide to try to be expert at everything
Lee and Inman's explicit decision was to try to be experts at everything just to see if they could find the failure points, rather than to accept the outsourced arrangement permanently.
Watch out This is a deliberate, expensive learning programme — treat it as an investment decision, not an efficiency drive.
- 3
Fail, then hire someone smarter
Lee's own summary of the sequence is that they decided to try the other parts themselves, failed at it, hired way smarter people, and then built those teams in house.
Pro tip Failing first means you can describe the role precisely, which is what makes the smarter hire possible.
- 4
Keep creative small and operational large
Of about a hundred employees, most are sales, marketing, production, logistics, distribution, accounting and legal — nothing to do with the creative side, which stays a very small team.
Watch out Scaling the creative function is the reflexive move and, in Lee's model, the wrong one.
- 5
Convert the ownership into product conversations
Because the company deals with Target and Walmart directly and owns the cardboard stock and the ink, it can propose ideas — a huge shipper for a small box, a secret component hidden in the corner with a marketing campaign around finding it — that a dependency-laden company cannot.
Pro tip The test of successful integration is a conversation nobody else in your industry gets to have.
Watch out Lee is clear this is not risk-free: a hundred mouths to feed, and it takes fuel to grow.
In the wild
Asked why the company went from two or three people to about a hundred, Lee explains that most of those hundred are sales, marketing, production, logistics, distribution, accounting and legal — nothing to do with the creative side, which a very small team can handle. Each of those functions had previously been outsourced. The company deliberately tried each one, failed, and hired people much smarter than the founders to run it properly.
→ Mastery of the field and the ability to blaze its own trail rather than doing what other game companies do.
Lee's concrete example of the payoff is that the Exploding Kittens box is small but he wants a huge piece of cardboard around it. With external dependencies the company would fall into the same category as every other game, because nobody gets treatment like that. Because they call Target and Walmart directly every day and deal with the manufacturer themselves, owning the cardboard stock and the ink that goes on it, they can propose putting the display on the retailer's shelves, or hiding a secret component in a corner and running a whole marketing campaign about people finding it.
→ A category of conversation Lee says nobody else in the industry gets to have, available only to end-to-end houses.
Common mistakes
Outsourcing permanently and never learning the function
Companies that never attempt a function internally cannot describe what good looks like, cannot judge a supplier, and cannot propose anything the supplier does not already sell. The failure points stay invisible until they matter.
Hiring before failing
Lee's sequence is deliberate — try, fail, then hire someone smarter. Hiring into a function you have never attempted means writing a job description you cannot evaluate and inheriting the new hire's assumptions unexamined.
Underestimating the fixed cost of integration
Tim names it directly as a hundred mouths to feed, and Lee agrees it takes fuel to grow. Vertical integration converts variable supplier cost into fixed payroll, which requires sustained volume to remain rational.
Is it for you?
Best for
Product companies with a proven hit and enough cash flow to absorb the fixed cost of building internal operating functions.
Not ideal for
Early or capital-constrained businesses that have not yet proven demand, for whom the fixed-cost burden would be fatal.
From the transcript
“what if we just try to be experts at everything just to see if we can find the failure points hire smarter people to then…”
“it's all the other parts that we decided to try ourselves failed at it hired way smarter people and then built those teams in house”
“it's a kind of conversation that nobody gets to have in this industry and the only reason we get to have it is because we…”
From the episode
#653: Elan Lee, Co-Creator of Exploding Kittens — How to Raise Millions on Kickstarter, Deconstructing Mega-Successes, Secrets of Game Design, The Power of Positive Constraints, The Delights of Craftsmanship, and The Art of Turning Fans into Superfans