The studio was founded in February 2011 by former employees of Bizarre Creations, which had been shut down a week earlier.

Lucid Games was founded by Mark Craig, Andy Davidson, Chris Davie, Nick Davies, Craig Howard, Jeff Lewis, Paul Morrissey, Pete O'Brien, Pete Wallace, and Chad Wright.

[4][5] According to Wallace, Bizarre Creations' staff had been aware of impending layoffs but had not expected the studio to be closed.

[5][6] Within its first year, the company grew from eight employees to twenty-eight and moved from a temporary office to a permanent one in the Liverpool city centre.

[7] Lucid Games hired Brian Woodhouse, Bizarre Creations' former studio director, as head business development in July 2016.