He and TSR co-founder Gary Gygax had been friends since childhood,[3] sharing an interest in miniature war games.
Kaye and Gygax were convinced that D&D and similar games were an excellent business opportunity, and together they founded Tactical Studies Rules in 1973.
[6]: 47 In 1965, Kaye, Gygax, Mike Reese, and Leon Tucker created a military miniatures society, Lake Geneva Tactical Studies Association (LGTSA).
[8] In the fall of 1972, Dave Arneson, a wargamer from nearby Minneapolis-St. Paul, demonstrated a new type of role-playing game to the LGTSA.
[11] Sensing the potential popularity of the game, in October 1973 the two men each invested US$1,000 in the venture — Kaye borrowed his share on his life insurance policy — in order to finance the start-up of TSR,[4][12] which was initially run with business taking place in Kaye's dining room.
Now worried that someone who had playtested the new type of game would bring a similar product to the market first,[15] the two accepted an offer in December 1973 by playing acquaintance Brian Blume to invest $2000 in TSR to become an equal one-third partner.
[14] Gygax and Blume were therefore unprepared when Kaye suffered a heart attack before the scheduled date for surgery and died on January 31, 1975.
Gygax stated "After Don died [Kaye's wife] dumped all the Tactical Studies Rules materials off on my front porch.