Most people think of the Disney empire as a sparkling, inevitable success story born from a single mouse sketch on a train. It wasn't. Honestly, it was a mess. If you want to know how did Disney begin, you have to look past the theme parks and the multibillion-dollar acquisitions. You have to look at a series of failed businesses, a stolen rabbit, and a nervous breakdown.
Walt Disney wasn’t a corporate titan when he started. He was a kid from Missouri who was obsessed with drawing and had a knack for getting people to follow him into bad financial decisions. Before the mouse, there was bankruptcy. Before the fame, there was a tiny office in Kansas City where Walt and his crew were so broke they shared a single pair of decent shoes.
The Kansas City Failure That Had to Happen
Walt’s first real attempt at an animation business wasn't in Hollywood. It was in Kansas City, Missouri. He called it Laugh-O-gram Films.
He was only 20 years old. He managed to raise about $15,000 from local investors, which was a decent chunk of change in 1922. He hired a team of young animators, including Ub Iwerks—the man who would eventually become the technical genius behind Mickey Mouse. They made "Laugh-O-grams," which were short, modernized fairy tales. They were clever, sure, but the business side was a disaster. Walt was a visionary, but at 20, he was a terrible accountant.
The studio went belly up in 1923. He was literally living in the office and eating cold beans out of a can. It’s a famous piece of Disney lore, but it’s true. He reached a point where he couldn't pay his staff, and his main distributor cheated him out of his share of the profits. This failure is actually the most important part of the story. If Laugh-O-gram had been a moderate success, Walt might have stayed in Missouri. Instead, he packed a cardboard suitcase, bought a one-way ticket to Los Angeles, and left his failures behind. He arrived in California with $40 and a half-finished film called Alice’s Wonderland.
The Garage and the Brother
When people ask how did Disney begin, they usually focus on Walt, but the company really began because of Roy O. Disney. Roy was Walt's older brother. He was steady, practical, and recovering from tuberculosis in a veterans' hospital in LA when Walt showed up.
Walt didn't have a studio. He had a dream and a reel of film. He convinced Roy to chip in some money, and they set up shop in their uncle Robert’s garage. This was the true birth of the Disney Brothers Cartoon Studio. October 16, 1923, is the date historians point to because that’s when they signed a contract with a New York distributor named Margaret Winkler to produce the Alice Comedies.
It’s worth noting that they weren't making "Disney" movies yet. They were making live-action/animation hybrids. A real little girl (Virginia Davis) was filmed against a white backdrop and then placed into a cartoon world. It was technically impressive for the 1920s.
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Roy handled the books. Walt handled the art. This partnership is the only reason the company survived. Walt wanted to spend every dime on making the cartoons better; Roy was the one who made sure they could actually pay the rent on their first real office on Kingswell Avenue.
The Oswald Disaster: A Brutal Lesson in Business
By 1927, the Alice Comedies were running out of steam. Audiences were bored. Walt and Ub Iwerks (who had followed Walt to LA) needed something new. They came up with Oswald the Lucky Rabbit.
Oswald was a hit. He was round, bouncy, and had a personality that most cartoon characters lacked at the time. Universal Pictures distributed the shorts, and for a minute, it looked like Walt had finally made it. He went to New York in 1928 to renegotiate his contract, expecting a raise.
He got ambushed.
The distributor, Charles Mintz, told Walt he was actually cutting the budget. When Walt balked, Mintz revealed the truth: he had secretly hired away almost all of Walt’s animators. Furthermore, Universal—not Walt—owned the legal rights to Oswald.
Walt was devastated. He had lost his character and his entire team in one afternoon. Most people would have quit. Instead, on the train ride back to California, Walt started sketching. He knew he needed a replacement. He needed a character that he owned.
The Birth of the Mouse (No, it wasn't a Train Sketch)
The story that Mickey Mouse was fully formed on that train ride is mostly PR. The reality is more collaborative. Back in the studio, Walt and Ub Iwerks went into survival mode. They needed a character fast. They tried a cow, a horse, a frog. Nothing worked.
Eventually, they settled on a mouse. Why a mouse? Walt remembered the "tame" mice that used to hang around his desk back in Kansas City.
Ub Iwerks did the heavy lifting on the design. He took the basic shapes of Oswald—the circles, the rubber-hose limbs—and tweaked them into Mickey. The first two Mickey cartoons, Plane Crazy and The Gallopin' Gaucho, actually failed to find a distributor. Nobody wanted them. Silent cartoons were on their way out.
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Walt realized that the industry was changing. "Talkies" were the new thing. He decided to risk everything on a synchronized sound cartoon: Steamboat Willie.
This was the turning point. When Steamboat Willie premiered at the Colony Theatre in New York on November 18, 1928, it blew people away. The sound wasn't just a gimmick; it was part of the gag. Mickey whistled, the animals made music, and the timing was perfect. Mickey Mouse became a global sensation almost overnight.
Scaling Up: Beyond the Short Film
Once Mickey was a hit, the question of how did Disney begin to dominate changed. It wasn't just about one character anymore. Walt launched the Silly Symphonies series in 1929. This was his playground for experimentation.
In 1932, he released Flowers and Trees, the first cartoon to use the new three-strip Technicolor process. It won the first-ever Academy Award for Best Cartoon. Walt was obsessed with realism. He brought in live animals for the animators to study. He set up an art school inside the studio to teach his staff how to draw human anatomy and weight.
He was pouring every cent of Mickey Mouse merchandising money—which was massive by the early 30s—back into technology. He developed the Multiplane Camera, a massive contraption that allowed for layers of depth in animation. It made cartoons look like three-dimensional worlds instead of flat drawings.
The "Disney's Folly" Gamble
By 1934, Walt was bored with shorts. He wanted to make a feature-length animated movie. Everyone in Hollywood thought he was insane. They called it "Disney's Folly."
The industry consensus was that nobody would sit through a 90-minute cartoon. They thought the bright colors would hurt the audience's eyes. Even Roy was skeptical. The budget ballooned from $250,000 to nearly $1.5 million—an astronomical sum during the Great Depression. Walt had to mortgage his house to finish it.
Snow White and the Seven Dwarfs premiered in December 1937. It wasn't just a movie; it was a cultural earthquake. It became the highest-grossing sound film of all time (until Gone with the Wind).
The success of Snow White allowed Walt to build the massive studio in Burbank that still serves as headquarters today. It moved the company from a boutique animation shop to a powerhouse of the entertainment industry.
What Most People Get Wrong About the Early Days
There’s a common misconception that Walt was a lone genius. Honestly, he couldn't even draw Mickey Mouse very well by the mid-1930s. He was the "ideas man" and the ultimate editor.
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- Ub Iwerks was the technical engine. He could draw 700 sketches a day. Without his speed, the studio would have folded in 1928.
- The "Nine Old Men" were the legendary animators who actually developed the principles of animation we use today (squash and stretch, anticipation, etc.).
- Roy Disney was the financial backbone. He was the one who negotiated the deals and kept the banks from foreclosing.
Walt was the storyteller and the risk-taker. He had a singular vision for quality that often bordered on obsession. He would frequently scrap months of work if he felt a scene didn't have enough "heart." This perfectionism is what defined the Disney brand from the very beginning.
Actionable Takeaways from the Disney Origin Story
If you’re looking at the history of how this company started, there are actual lessons you can apply to modern business or creative work:
- Ownership is everything. Walt lost Oswald because he didn't own the copyright. He never made that mistake again. Always ensure you own your core intellectual property.
- Failure is data. The bankruptcy in Kansas City taught Walt more about distribution and contracts than any school could have. Don't view a failed project as a dead end; view it as a pivot point.
- Find your "Roy." Every visionary needs a pragmatist. If you are the person with the big ideas, find a partner who understands the spreadsheets.
- Reinvest in yourself. Disney didn't take the Mickey Mouse profits and retire. He bought better cameras, hired better teachers, and built better studios.
The beginning of Disney wasn't magic. It was a grind. It was a combination of midwestern work ethic, a lucky break with a mouse, and a refusal to stay down when the industry tried to kick them out. By the time the 1940s rolled around, the foundation was set for everything from Cinderella to Disneyland. It all started with a guy who refused to accept that a cartoon was "just for kids."