Parents play a critical role in facilitating children's physical activity, as they are an important source of modeling and support. While Human-Computer Interaction (HCI) researchers have explored exergame design for children or adults separately, an important open area of work is identifying design guidelines for family exergames. One question that researchers have increasingly posed is, how can exergames be designed to avoid potential negative consequences of competition? To address these questions we designed Spaceship Launch, an exergame for parents and kids in lower income neighborhoods, where obesity is most prevalent. We describe our iterative design process: the formative study to identify design opportunities, our resulting system, and our field evaluation of the tool. Our findings highlight the impact of SL on physical activity intentions, and how parental preferences for in-game competition were aligned with the psychological needs of relatedness and competence. We conclude with design recommendations for future family-focused exergames.