Jensen, originally a developer at IO Interactive, drew sketches in 2004 that led him to the idea for Limbo. Having tried programming the game himself, he eventually sought for additional help through an art-based teaser for the game in 2006. This led to a meeting between Jensen and Patti. Patti soon realized the project was larger than the two of them, and together they founded the company, initially using their private funds and government grants before obtaining larger investments. Playdead eventually came to have eight employees during Limbo's development, with temporary increases of up to 16 through freelancers. Limbo's success led them to be able to reacquire the company back from investors, and making Playdead fully owned by itself.
According to Patti, as of October 2010, Playdead is currently working on its second game; the game, partially funded by the Danish Film Institute. Initially developed under the working title Project 2, the final title Inside was revealed at the 2014 E3 convention.Inside is described by the Danish newspaper Politiken as a spiritual sequel to Limbo. It is a 2.5Dplatform game, using three-dimensional graphics while the playfield remains in two dimensions, and utilizes the Unity engine; Playdead opted for the existing solution instead of their custom-built engine they had created for Limbo, to reduce their efforts. While the game is in color, the title remains dark and nearly monotone in color. It is planned for release on Microsoft Windows, Mac OS X, PlayStation 3, Xbox 360, and Xbox One systems in 2015, with the Xbox One version having a time-limited exclusive release. According to an August 2011 interview with Patti, the title's development cycle will take about three and a half years.
^Vigild, THOMAS (2011-12-21). "Her er fremtidens danske spil (Here is the future Danish games)". Politiken (in Danish). Retrieved 2012-06-13. ""Den største samlede støtte kommer dog fra Det Danske Filminstitut, der i år har støttet syv større spil heriblandt den dystre sjælelige efterfølger med arbejdstitlen 'Project 2' til det prisbelønnede 'LIMBO' instrueret af Arnt Jensen fra udvikleren PLAYDEAD." ("The largest total support comes from the Danish Film Institute, which this year has supported seven major games including the bleak spiritual sequel with the working title 'Project 2' to the award winning 'LIMBO' directed by Arnt Jensen Developer PLAY DEAD.")"