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Newell was born in Colorado and grew up in Davis, California. He attended Harvard University in the early 1980s but dropped out to join Microsoft, where he helped create the first versions of the Windows operating system. He and another employee, Mike Harrington, left Microsoft in 1996 to found Valve, and funded development of their first game, Half-Life (1998). Harrington left in 2000, leaving Newell as the sole owner. As of 2021, he owned at least one quarter of Valve.

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