12.14.11 9:45 AM ET
Zynga's IPO Will Make Mark Pincus Silicon Valley’s Next Billionaire
He had a net worth north of $30 million. He had given birth to two successful tech startups; he owned a house on a hill overlooking San Francisco. He owned, or at least co-owned, a plane.
But in 2004, Mark Pincus, aging whiz kid creeping up on 40 and with crow’s feet deepening around his eyes, felt he hadn’t really made it in Silicon Valley. Charlie Rose’s producers never phoned to have him on the show. Heads didn’t turn when he walked into a room. Strangers didn’t instantly recognize him the way they recognized Google founders Sergey Brin and Larry Page.
“There’s an A-list here, and then there’s everyone else,” Pincus complained to me over dinner at a fashionable San Francisco eatery in August 2004, the same month Google went public. “And I’m not A-list.”
But with Zynga—the online game maker behind Mafia Wars, FarmVille, and other elaborate time wasters that he founded in 2007—poised to go public on Friday, Pincus is certainly A-list now. The company he named after his bulldog, now deceased, is expected to raise around $1 billion, making it the largest tech IPO since Google. And with its public offering, Pincus is set to become Silicon Valley’s newest billion-dollar man.
The success of Zynga has already meant that Pincus was granted his few minutes' session across the table from Charlie Rose. He even got the full star treatment from Vanity Fair, when a writer for the magazine hung out with him at the ranch he owns outside Aspen—mainly, it seems, to introduce its readers to someone who has managed to pull off what few others in Silicon Valley (Brin and Page included) have: he’s made money by taking fun seriously. Pincus, wrote Vanessa Grigoriadis in a long Vanity Fair profile, is “the hottest topic in Silicon Valley” because he created a company “devoted to the concept of ‘play’ in theory, practice, and also as an extraordinarily lucrative business model.”
There’s always been something that’s separated Pincus from his peers. Like professional athletes, tech’s marquee names tend to hit it big in their 20s or early 30s. Pincus is 45. There’s also something about his personality—irreverent, combative, clever, funny—that sets him apart. He’s brash and outgoing among introverts, a man who tends to say too much in a world where people typically stare into their drinks when the topic drifts from tech. In the late 1990s he founded Support.com, a company that provided online tech support. The company went public in 2000, earning Pincus tens of millions of dollars, but he felt so burned by his investors, who he claims plotted behind his back to have him axed as CEO, that he spent much of the next half-dozen years casting venture capitalists as basically a mutant breed of people with deep pockets but shallow brains. In a land where even the brusque and other brainiacs lacking social graces get all gushy and sweet around those who have the money to make their dreams come true, Pincus named names.
“Everyone’s watching everyone else here,” he said back during that dinner in 2004. “Like Hollywood, there’s this pecking order and everyone is fundamentally aware of where they stand ... The difference here is the money people, the venture capitalists, are just as insecure as the talent—the entrepreneurs.” What that meant, he said, is he often ended up talking to so-called risk takers (he mentioned VCs at Benchmark and Mayfield, two of the higher-profile venture outfits) averse to taking risk—unless some other big-name venture capitalist had already sanctioned an area as hot (apps for a smartphone, online games) by investing there.
“I’m just looking for a VC who won’t do stupid things,” he continued. “They never help. I just want to make sure they won’t get in my way.”
I was covering Silicon Valley for The New York Times then, and I made sure to get together with Pincus every month or two—for a meal, for a drink, once at a bar where he was performing stand-up. (Full disclosure: I attended Pincus’s 39th birthday party and also a party at his home shortly after I started with the Times.) How could I help it? He wore failure like a badge, even in that first meeting. He told me about getting fired by a venture-capital firm in Washington, D.C., in the mid-1990s, blaming it on uptight preppies who couldn’t tolerate his refusal to wear khakis or a tie. (He’s a jeans-and-hoodie kind of guy who generally sees dressing up as wearing an untucked dress shirt over a T-shirt.) He had an M.B.A. from Harvard Business School, but he told me he was the only one who didn’t have a job lined up by graduation—a fact he recounted with utter pride.
“Someone would ask me a dumb question during an interview, and”—well, he couldn’t help himself. “I would tell them, ‘That was a dumb question,’” he said. Instead of joining a big investment bank or consulting firm like most of his peers, he and his friend Sunil Paul founded FreeLoader, a personalized, Web-based news service they sold for $38 million seven months after they first had the idea.
At 5 foot 6, Pincus is on the short side. He wears his brown hair a bit long, parting it boyishly on the side and letting his bangs flop down over his forehead, giving him a younger, mop-top look. Twitchy and high-energy, he’s in sensational physical shape, with the help of various coaches (tennis, weights, skiing, yoga), and he has even attended motivational sessions run by self-improvement guru Tony Robbins. Other Silicon Valley pooh-bahs seem to cart their dogs everywhere, but only Pincus would insist that Zynga, while alive, join the conversation. It was the strangest thing, says Scott Dettmer, a longtime Valley attorney who has served as consigliere to the founders of scores of fledgling companies. “We went for coffee and there’s the dog, sitting on a seat like he’s having coffee with us,” Dettmer says.
The story that first got me curious about Pincus was the fight he waged with a venture firm called Vantage Point. To curry favor among the young and well connected of Silicon Valley, VCs invite successful tech entrepreneurs to invest side by side with university endowments, pension funds, and other well-heeled investors in what are called “side funds.” There’s something unholy about the arrangement—in exchange for membership in this exclusive club, you’re expected to use your connections to help any startup in which they’ve invested—but for most Valley entrepreneurs this hush-hush world has always proved lucrative. But then the dotcom bubble burst and Pincus and other side-fund investors (not to mention the endowments, pension funds, and other institutional investors) were facing steep losses. Pincus had committed to investing $500,000 with Vantage Point, to be drawn down over time, but he refused to write another check after the first $100,000. The firm threatened to sue, Pincus said, and he in turn threatened to spend $15,000 a month on a billboard along Highway 101, the main artery through Silicon Valley.
“I told them, 'Go ahead and sue me, I’ll put up a billboard saying I think your fund is so bad'” he refused to give them another dime, he said.
There’s something more mercenary about Pincus compared with the other cool kids of Silicon Valley. Joe Kraus, a cofounder of Excite, an early search-engine company snapped up during the dotcom craziness for $6.7 billion, has known him since the mid-1990s, when Pincus was peddling his first company to potential buyers. For a time, the two owned a plane together (a single-prop six-seater they bought from Google’s Eric Schmidt), and if never quite close friends, they’ve known each other for going on 15 years.
“Mark is definitely more of a hustler than I am,” Kraus told me in 2004. “Mark is really sharp, but he’s always hustling the dollar. I don’t say that in a critical way; in a way, I really admire it. Because there’s no doubt in my mind that no matter how bad the business idea, Mark will figure out how to make money from it.” Pincus was early to social networking with a company called Tribe.net—perhaps too early. But though Tribe proved a bust, he saw enough potential to make sure he was an early investor in Facebook—a deal that has no doubt earned him in the hundreds of millions of dollars, at least on paper.
Pincus and I had one final lunch shortly before I changed beats and moved across the country in mid-2006. He was his usually jittery, wisecracking, affable self as he talked about the various ideas bouncing around in his head. His leg bobbed incessantly in the fashion of an overamped teen; his eyes shone as he laid out several ideas he had for new companies. Near the end of the meal, almost as an afterthought, he spoke about his desire to create an online version of Texas-hold-‘em poker. In time, that would prove to be Zynga’s first big hit. Mafia Wars, FarmVille, and other games would follow. (Through a spokeswoman, Pincus declined to comment for this story, citing the traditional “quiet period” that precedes an IPO.)
It’s not simple seeking potential funders when you hold most of the venture world in contempt and the people of that world know it. But he had deep reservoirs of his own cash and plenty of rich friends—and also the kind of swashbuckling personality that allowed him to bend the rules. In 2009, while speaking to a group of entrepreneurs in Berkeley, Pincus was caught on tape saying, “I knew that I wanted to control my destiny. So I funded the company myself, but I did every horrible thing in the book to just get revenues right away.” His worst sin: offering free credits to players if they allowed third parties to install invasive software programs on their computers that proved hard to delete.
When confronted about the practice by the Times’s Miguel Helft in 2010, a more sober Pincus—whom I viewed as a kind of Mark Pincus 2.0, getting ready for a high-profile IPO—responded, “As the company has had more exposure and visibility, I have had to realize that more people take what I say seriously. I’ve had to grow up.”
Money, however, wouldn’t prove a problem. People can play Zynga’s menu of games for free, but users still spent more than $800 million on Zynga games in the first nine months of 2011 on virtual—i.e., nonexistent—items for a leg up in a game, whether a tractor to work the fields in FarmVille or extra guns in Mafia Wars. Kleiner Perkins (the venture firm that funded Google, Amazon, and Netscape) would invest in Zynga, as would several of the tech world’s braver, more well-regarded VCs. Google is also a major investor in the company, as is LinkedIn founder Reid Hoffman, who owns just under 4 million shares of Zynga. Already a billionaire after LinkedIn’s IPO earlier this year, Hoffman, as an early investor in Zynga, stands to make somewhere around 200 times his original investment when the company goes public. Netscape founder Marc Andreessen is another A-list investor in Zynga. Earlier this year, the company announced it was adding DreamWorks CEO Jeffrey Katzenberg (“Jeffrey and I have been friends for some time,” Pincus wrote in a blog post announcing the news) to its board of directors.
These days, not only is Pincus A-list. Not only does he draw the likes of A-list names like Katzenberg, who will end up owning nearly 400,000 shares of Zynga after its IPO. He even has A-listers wishing they were him. If he had his career to do all over again, Katzenberg said at Allen & Co.’s 2009 Sun Valley media conference, “I would like to be Mark Pincus.”