The company was founded in 2001 by three friends, Chris Delay, Mark Morris, and Thomas Arundel, who met as undergraduates at Imperial College London.

Their first released video game, Uplink, was programmed and designed almost exclusively by Chris, while Mark and Tom handled marketing, materials and the other business elements.

Darwinia was released to much critical acclaim and was eventually re-released via Steam on 14 December 2005[2] On 29 September 2006, Introversion Software launched its third game, DEFCON.

A visit to E3 2002 saw the team "rinse £10k in a week on speedboats and fast cars", but regret soon set in as they watched their income steadily decline, since "in the games industry, you make 75% of your total revenue for the product in the first 6 months".

[9] By December 2002, then-publisher Strategy First had stopped paying royalties for Uplink; they would later file a Consumer Proposal, but were acquired by Silverstar Holdings in early 2005.

[9] The company hovered on the edge of bankruptcy, with the team selling most of their worldly goods, as their second project and only hope for funds—Darwinia—"slipped relentlessly".

[9] Darwinia was eventually released in March 2005, but despite a strong opening weekend, sales soon slipped too low to sustain the company.

Within six months, the developers were back on UK government benefits until November, when they contacted Valve "on a whim"[10] to try to set up a digital distribution deal on their Steam platform.

[12] At this time the company was so deeply in debt that by continuing operation the Directors faced criminal prosecution under UK insolvency law.

[17] Virtual reality compatibility has been implemented into the game post-release, supporting both the HTC Vive and Oculus Rift, and was released in late June 2017,[18] marking the developer's first (and to date only) foray into VR.