Walt Disney started his business on October 16, 1923, when he signed a four-page contract with New York cartoon distributor Margaret Winkler to produce a series of short films called the Alice Comedies. But that contract was really the second act of a story that began with failure, bankruptcy, and a cross-country move driven more by desperation than confidence.
A Failed Studio in Kansas City
Before Hollywood, Walt Disney was a young commercial artist in Kansas City trying to break into the animation business. He founded a small venture called Laugh-O-Gram Studio, which produced modernized fairy tales as short animated films. The studio managed to land a contract but couldn’t sustain itself financially. It went bankrupt, leaving Disney with almost nothing.
Rather than give up on animation entirely, Disney decided to head west. He arrived in Los Angeles in 1923, reportedly carrying little more than a suitcase and some unfinished film reels. He had no studio, no staff, and no distributor lined up. What he did have was an idea for a new series that blended live-action footage of a real girl with animated characters, a concept he’d started developing back in Kansas City.
The Contract That Launched a Company
Disney pitched the Alice Comedies concept to Margaret Winkler, one of the few established cartoon distributors in New York at the time. She agreed to distribute the series, and Disney signed the deal in his uncle’s Hollywood home. That single contract is considered the official founding moment of what would become The Walt Disney Company.
He couldn’t do it alone. Walt convinced his older brother Roy to leave a stable career in banking and go into business with him. Together they formed the Disney Brothers Cartoon Studio, with Roy handling the finances and Walt directing the creative work. They set up shop in a small rented space and began producing the Alice Comedies, which found enough commercial success to keep the fledgling studio alive and growing. The brothers hired a small team of animators and slowly built out their operation.
Losing Oswald the Lucky Rabbit
By 1927, Disney had moved on from the Alice series and created a new cartoon character called Oswald the Lucky Rabbit. The Oswald shorts were popular, and from 1927 to 1928, Walt and his team produced 26 of them. But Disney had made a critical mistake in how the deal was structured: he didn’t own the character. His distributor, Charles Mintz, did.
In early 1928, Mintz used that leverage brutally. He not only took control of Oswald but also poached half of Disney’s animators in the process. Disney was suddenly back near square one, stripped of his most successful creation and a large chunk of his workforce. It was the kind of blow that could have ended a small studio. Instead, it taught Disney a lesson he never forgot: always own your characters and your work.
Mickey Mouse and a Calculated Gamble
Needing a new character immediately, Disney and his remaining artist Ub Iwerks developed Mickey Mouse. The first two Mickey shorts were produced as silent films and failed to find a distributor. Rather than keep shopping them around, Disney made a risky bet on emerging technology: synchronized sound.
At the time, most cartoons either had no sound or used crude, poorly timed audio. Disney recognized that fully synchronized sound, where the music, effects, and action matched precisely, could set his work apart from everything else on the market. He put this idea into a third Mickey short called Steamboat Willie, produced between July and September 1928 on an approximate budget of $5,000.
The production nearly collapsed during recording. The first attempt to synchronize the soundtrack with the film on September 15, 1928, was a disaster. To fund a second recording session, Disney sold his Moon roadster, one of the few valuable things he owned. The second attempt worked. Steamboat Willie debuted at the Colony Theatre in New York on November 18, 1928, and was an immediate sensation. Audiences had never seen a cartoon where the sound and animation were so tightly integrated. Mickey Mouse became a star almost overnight.
Building the Business After Mickey
The success of Steamboat Willie gave Disney something he’d never had before: real leverage with distributors. He could now negotiate from a position of strength rather than desperation. Crucially, he retained ownership of Mickey Mouse and every character that followed, a direct result of losing Oswald.
From that point, the Disney Brothers Cartoon Studio grew steadily. Walt pushed into new technical territory with the Silly Symphonies series, which experimented with Technicolor animation. Revenue from theatrical shorts, combined with an early and aggressive approach to merchandise licensing (Mickey Mouse appeared on everything from watches to lunch boxes), gave the studio the financial foundation to attempt something no one in animation had done: a feature-length animated film. Snow White and the Seven Dwarfs, released in 1937, was a massive commercial hit and transformed Disney from a successful cartoon studio into a major entertainment company.
The pattern that defined Disney’s early years, taking creative risks funded by whatever revenue the last project generated, stayed consistent throughout. Walt Disney started his business not with a fortune or a grand plan but with a failed studio behind him, a brother willing to handle the books, and a four-page contract for a cartoon series most people have never heard of.