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Posts Tagged ‘Mark Pincus’

Zynga Cofounder Andrew Trader Out

One of the cofounders of Zynga, the company’s executive vice president of sales and business development Andrew Trader, is no longer with the company, we’ve confirmed. He has been quietly removed from the company’s management page. Remaining cofounders – Mark Pincus, Michael Luxton, Eric Schiermeyer, Justin Waldron and Steve Schoettler, remain.

As of a month ago Trader’s title had been downgraded to VP of Partnerships and Studio Services, although no top sales or business development replacement executive has yet been named.

Why is he gone? No one is saying. CEO Mark Pincus says only “AT [Andrew Trader] and zynga have parted ways. He made an awesome contribution. We need to continue scaling the company.” Trader hasn’t yet returned a phone call asking for his comment.

Zynga’s revenue growth has been nothing short of astronomical over the last 18 months, so it would be hard to blame him for not bringing in the dollars. Perhaps he took the fall for the Scamville saga although that has largely blown over now.

Trader was with Zynga nearly three years, so he’s vested on a lot of his stock. Given how much money is at stake, the whole story about why the first cofounder of Zynga has left the building may never come out. Zynga raised $180 million in December 2009, at a rumored valuation of above $2 billion.

And no, I have no idea why he’s holding a banana in the picture.

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Do Commercial Vendors Deserve Equity?

If you asked startup founders whether they would rather give away 5% equity in the company or one of their toes, many would choose the toe. CEOs like Zynga’s Mark Pincus have always argued for startup founders to “own their destiny” and maintain control and ownership of their company. That’s why it was surprising to read VC Deal Lawyer Chris McDemus’s recent article entitled If You Provide a Strategic Technology or Outsourced Service, Consider Taking Some Equity in Your Fee Structure.

Sponsor

Early-stage startup companies are used to giving away equity to advisors, IP lawyers and key staff, but McDemus argues that those vendors who provide core technologies should also build an equity agreement right into their service contracts. McDemus gives the example of Mint’s acquisition by Intuit and how if Yodlee had taken some of Mint’s equity for providing the backend of the service, the company would have made great money on the sale. While this might sound like a good idea for service providers who risk abandonment, the idea is likely to ruffle the feathers of many a startup founder.

The fantastic thing about startup companies in 2010 is that they’re iterating faster. Rather than stumbling in the dark for a few years before launching a product, many have launched in a mere six month engineering cycle. In fact, we’ve even featured companies being built in a week or a weekend. If vendors asked for cash AND equity as part of the commercial license, I wonder how this would change development.

While service providers risk abandonment after startups get acquired by bigger companies, they may also risk abandonment for pursuing the equity route. Alternatives to an equity-seeking vendor might include open source technologies, using competitors who do not demand equity, or in a worst case scenario, building the core technology from scratch.

If the bulk of your business’ technology is built in association with a commercial vendor and that vendor asked you for equity, would you give it to them? If yes, why? If no, how would you cope?

Discuss

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Zynga Investor Calls Scamville Debate Irrelevant And Unfair

Zynga investor Fred Wilson remained mostly quiet during the Scamville debacle in October. But he’s starting to talk now, and he isn’t happy.

In a post about Etsy a few days ago a commenter brought up the Zynga/Scamville stuff. Wilson replied “Citing techcrunch on the zynga stuff is a joke.” He waded into the subject again today on another of his posts, saying in a number of comments “i’ve tried hard to stay out of that debate because it is a false debate…zynga makes almost all of its revenue on virtual goods…the “scammy ads” thing is total red herring that everyone got excited about but is almost entirely irrelevant” and “nobody who got involved in that shitstorm took the time to really do the work and look at what Zynga did and did not do. or compare it to Google and everyone else who does way worse on a daily basis…the whole thing totally annoys me. it’s not fair.” He also said numerous times that we didn’t have our facts straight, and that we didn’t take the time to understand what really happened.

Hogwash. Fred Wilson is a brilliant investor, but he’s conflicted and wrong yet again.

There were a total of 22 Scamville posts (see updates) on TechCrunch alone. For the most part we left Zynga alone, until we were slammed in the face with CEO Mark Pincus on video saying “I Did Every Horrible Thing In The Book Just To Get Revenues” (how do you take that statement out of context?). Pincus also said “we need to be more aggressive and have revised our service level agreements with these providers requiring them to filter and police offers” in a post about Scamville. And Facebook took one of their games offline for a few days for a violation of their terms of service around scammy offers.

Zynga had claimed in the past that fully 1/3 of their revenue came from offers. Some of that wasn’t legitimate, likely tens of millions of dollars, and other companies have said that the bad stuff tended to push out the good stuff.

There is an excellent argument that you can continue to find most of these scams on Google and other search engines. But a big difference is the incentive that social games give users to enter into these scams via virtual currency, as well as the fact that they targeted teens without credit cards by pushing mobile subscription offers. Google is wrong to post these ads. But that doesn’t make what Zynga has done right.

I think Pincus took the right steps to move his company in the right direction, and I think the industry is on the right track now, and Zynga looks to be a legitimate business even without scammy offers. I support Pincus as an entrepreneur. But to deny that there was ever a problem is irresponsible. And to suggest that we didn’t take the time to understand the facts is outrageous. In addition to the 22 posts where we spoke to dozens of sources on and off the record, I asked Pincus to go on video with me to tell his side of the story without editing. He declined.

Zynga continues to be a very close partner to Facebook. They share a major investor, DST. A facebook board member, Marc Andreessen, is also an investor in Zynga. And Zynga is Facebook’s largest advertiser. The fates of these two companies are deeply aligned, and there has been more than a little evidence of wrongdoing. The relationship between Zynga and Facebook needs more scrutiny, not less.

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Entrepreneur Corner Roundup: The disappearing office and battling inertia

Here’s the latest from VentureBeat’s Entrepreneur Corner:

Answering entrepreneurs most vexing questions – Running a start-up means making big decisions every day – and never being certain you’ve made the right one. Angel investor Jason Cohen writes of a new place for entrepreneurs to seek advice – from each other and industry experts.

What happens if the business sale falls apart? – Lots of start-up sales get as far as the escrow phase, but surprisingly few make it out. John Ovram, CEO of Exits and Answers, a social community for entrepreneurs selling their companies, says the best way to ensure a sale does happen is to keep working as if it never will.

Is the traditional office becoming extinct? – In less time than you might imagine, the morning commute could be little more than a memory. RingCentral, a cloud computing based business phone system provider, surveyed 350 small- and medium-sized businesses about their office structure and found a growing shift away from the traditional on-site centralized work force.

The start-up chronicles: Newton was right. Inertia matters. – Convincing customers to change their habits is, at best, an uphill battle. When serial entrepreneur Bruce Judson saw lots of traffic that wasn’t translating to sales at his new start-up, he diagnosed this inertia as the problem. Learn how he’s trying to fix it.

Want to be a CEO? Try product management first – Mark Pincus held a few jobs before becoming CEO of Facebook game maker Zynga. The one that he draws from the most, though, was his stint as a product manager – where he learned the importance of roadmapping, prioritization and customer understanding.

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Zynga’s Mark Pincus: I got kicked out of some of the best companies in America

(I’m live-blogging from Startup School, a daylong program from startup incubator YCombinator held at Berkeley today. Mark Pincus is the CEO of social gaming company Zynga. If these notes are a bit scattered, it’s because it’s paraphrased and Pincus is doing a stream-of-consciousness style talk.)

So Pincus starts his talk by outlining his pretty conventional career right out of college — he went into banking. Then to business school. Then he said he hadn’t really succeeded at any of those companies. “I got kicked out of some of the best companies in America,” he said.

“I thought I was washed up at 28 or 29. And then I started my first company called Freeloader. My first advice is you should set a goal. At first I wanted to just show that I had revenues. I think we sell ourselves short and give ourselves permission to fail.”

He went and built the company up. Sold it.

“It was really a disaster. The CEO had a breakdown. He was doing weird stuff I won’t even talk about. Yossi, I’m sorry. He’s now a CEO coach. So anyway, I locked in the success of a company and everybody was proud of me. But I had nothing to show for it. My investors were happy. Now I had my green card to go and be an entrepreneur. I had $8,000 in savings which everyone should do when they start a company. But I shorted three Internet stocks as they quadrupled in price. So I lost all my money.

So then I did the cliche thing with all the credit cards. But the company got bought for $38 million. I had no idea what to do with my share of that, which is not $38 million. People always ask you what did you get? But usually you just get a small share of the total. So I had a career. I moved the company and myself to San Francisco, which I thought was the motor city of the Internet. Then I did nothing for awhile, which everyone should do. Then I started attracting a different group of friends — it’s like that a ghetto version of the show Entourage. You go out on Monday at 1:30 a.m. Then they show up at your house on Tuesday. But that gets old after a few months.

So then you kinda realize there was some other reason you were doing that. You weren’t trying to go out and make money. There was something else. When you achieve things, you start to realize those weren’t your real goals. Then I thought I wanted to build a great company. So I spent a whole bunch of time and I accidentally built this company Support.com. I won’t bore you how I got there. We created this service that nobody wanted. We luckily figured out that no one wanted it. John Doerr talks about this idea of failing fast. And that’s important.

I’m going to diverge on that for one minute. I have this one friend like on this dating show. They have some harebrained idea for a startup. And they keep sticking with it, and think if the world doesn’t see it, they will one day. They confuse stubbornness with great entrepreneurship. We should all intervene with these friends. If they can’t get funding, it may be a good idea. Or a bad one. You should give your five to seven friends a pitch. Ask them if they want to buy stock in that company. First off, consider that there’s going to be a grade inflation. But use that as your sounding board.

Anyway — I had a bad idea and then I shifted it into a good one. ….

I find that we all occasionally end up building companies that we ultimately don’t want to work with. You find out that the big venture capital firm backs you and you feel like you can’t say anything if you’re not totally sold on your own idea. All my friends gave me 5’s out of 10’s but this guy’s giving me $5 million. We ended building some tech support software we ended up selling to a bunch of companies. We became profitable.

…..

The other thing with VCs is that their junior guys are pretty conservative. They’re more worried about the downside. So what happens is that you end up being successful after that junior guy didn’t believe you. So now what happens is they say is the company could is so valuable — then they say you’ve never run a big company before. So then what they do is they talk about hiring a COO. And you think, hell yes. Someone else to do my job. Then you find out that there’s no really good, world-class COO who will work for a twenty-something. (Unless you’re Mark Zuckerberg.) You probably won’t be in that situation.

Then you think: I don’t like this. And then the happy-smiley thing goes away. And then it’s witchhunt time. And the junior VC guy comes in and has meeting with your entire team and says they’re really concerned about your leadership. Now your company’s successful but they might change your leadership. And then the new CEO’s kind of weird. The company culture’s changed. And you realize you don’t like it. And then you’re back where you’re started. You’re back at your home, drinking booze with all those old friends. Or you could get married and have kids.

Anyway, I was out again and I wasn’t fulfilled. I started thinking. I wanted to build something that will matter in people’s lives. That was a big goal. But I was going to hold myself to it. I went through a bunch of ideas and ways to get there. Set very high goals but be willing to take any path to getting there. I realized that the only way I was to have a chance at building an Internet treasure was to control my own destiny.

That’s part of the reason of why you guys are becoming entrepreneurs. You don’t want some boss controlling your destiny. You want to live or die by your own efforts. There were a couple things I realized I needed. First, I needed capital. Well there are not a lot of people who are just going to give you capital and then call you a few years later.

So I realized I needed to be profitable right away. It was 2007. If we’re going to start a business, it can be profitable. We don’t have the luxury of building a great feature. You can connect all the dots and you should.

We’ll skip forward to a few things. One is control your destiny. If you’re profitable, you can control your board. This is another thing entrepreneurs get wrong all the time. You control your board. The valuation is not what matters.

Who gives a shit what your valuation is? That’s your ego. Your future will be impacted more by a bunch of white men who don’t know anything about your customers than your valuation. You’re having lunch all month long trying to convince them of what you want to do. It moves faster if you just tell them what you’re going to do.

The second thing is you ought to all aspire to be a great CEO. And that is going to have greater impact on bringing great products to the world than being a great entrepreneur. It’s not just about the ideas and the strategy. If your company is successful like Mark’s been and Tony’s been, you will have many more people than 10 people. You can be a great entrepreneur with 10 people. You’re not going to be a great entrepreneur with 100 or 1,000 people.

You should always be trying to learn and raise your game. If you guys want to create world-class products, it’s probably going to be 10 years of learning and flailing and one year of getting it all right.

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Startup School: Mark Pincus Talks About Becoming A Great CEO, With Tony Robbins’ Help

Zynga founder Mark Pincus is the final speaker at Y Combinator Startup School 2009. My notes on his talk are below.

Pincus kicked off his talk by asked the audience how many wanted to become a great entrepreneurs (much of the room raised their hand). But fewer raised their hand about becoming a world class CEO, which is something Pincus says they need to address.

Out of college, Pincus says he went into banking and then business school, after which he worked in major corporations. He says that sometimes entrepreneurs are born after finding that nothing lese works for them, explaining “I got kicked out of some of the best companies in America”.

Pincus’s first lesson: You should set a goal for what you want to accomplish. Pincus says he was Fred Wilson’s first consumer deal (”he loaned me $250k and gave me four months to do something”). He started FreeLoader. The company was acquired, but the CEO of the company that bought it “had a nervous breakdown”. At this point Pincus says he had his ‘greencard’ to be an entrepreneur.

Pincus said that after selling FreeLoader, he had some downtime — ”And then you get a new group of friends… A ghetto version of the show Entourage” — friends go out on Monday night at 1:30. But that gets old after a couple months.”

Pincus then started another company, called Support.com. “We created this service that nobody wanted, figured out quickly that nobody wanted it.” Pincus says that when you have a friend who has a ‘hairbrained’ idea that they think nobody understands yet — you may want to have an intervention. If you have an idea that can’t get funding, it may be a good idea, but it may be a bad idea. “What I would do is find five friends, give them your pitch, write a powerpoint as if you had $30 million in funding, and come back and tell me here’s what my service will be when this is spent.”

Support.com had core technology that let you clone old PC into new PC called MoveIt. Interviewed people on the street, and they wanted a way to move kids’ games to their new computer. So they actually had something people wanted, even if it wasn’t the core focus of the company.

Pincus says the second lesson he’s learned: not having a clear goal when you set out leads to death by a thousand compromises.

Death by a thousand compromises
Pincus says there’s no such thing as an independly controled company. Your VCs get some board seats, they say let’s both select an independent guy. You find out at the first board meeting the independent guy looks to the investors and says “it’s their money”. Someone else is running your company, and because he’s backing you and he’s a first time netrepreneur, you’re not getting the head of the firm. First day as the VC, and they’re proving themselves on you. And junior VCs are junior for a reason. If you have a conversation with John Doerr, he’ll say yeah, let’s do that. Junior guy is more nervous about the downside. So when you’re successful, they say this company is so valuable, you’ve never run a big company any more, so they talk about hiring a COO. Then you find out there is no world class COO who would work for a 20-something year old (except for Mark Zuckerberg). So then you have to make them CEO. Death by a thousand compromises. Pincus says after an ordeal like this, he was left with a public company that was profitable but he wasn’t fulfilled.

Pincus says he then went to Tony Robins (seriously). Attendees at the conference consisted of 4000 out-of-work realtors. But it works. Robbins says to set very high goals but take any path to get there.

With Zynga, Pincus says he wanted to make a company that put out a consumer service that would be around and would matter for a long time. As Tony Robins says, “Control Your Destiny”. In 2007, he says you don’t have the luxury of just building a feature, you have to build the whole thing.

Referring back to his issues with the board, If you’re profitable, you can control your board. He says we negotiate for the wrong thing because we don’t know what our goals are. “Who gives a shit what your valuation is? At the end of the day your valuation will be more impacted by a board made up by a bunch of old white men who show up once a month for half a day. It’s a lot easier if you just tell them what you’re going to do”.

Second Thing.
“You ought to all aspire to be a great CEO”. When you have a big company, you need to either find someone else to be the CEO, or you’re the CEO. He says the odds are more in your favor if you go to a company where you go to a company like Facebook, Zappos, or Zynga, where we help create CEOs.

On Fake CEOs:
Pincus says a fake CEO is someone who goes out, does talks and photoshoots, while something at the company is “on fire”. Says that he was supposed to be doing a talk at Harvard Business School, but canceled because he had to be there for the launch of Facebook’s changing News Feed.

Crunch Network: CrunchBoard because it’s time for you to find a new Job2.0

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Web 2.0 Summit: Our photo gallery of the top moments

Here’s our collection of photos from the Web 2.0 Summit, which ran from Tuesday through Thursday in San Francisco. It’s also our 30-second summary of what you may have missed at the big digerati event. We’ll start with the last man who spoke at the conference, Tim Berners-Lee, who created the World Wide Web. He never made any attempt to own his creation and gave it to the world for free, he said, because “that was the only way it would have worked.” He said he was concerned about attempts by companies or countries to control the Internet.

Who would have thought the chief executive of General Electric would show up at a tech conference? But Jeff Immelt came to show off a new gadget that lets doctors monitor patients with a portable ultrasound. He also touted GE’s efforts to move into the green technology space.
Carly Fiorina had a close-shorn look because she is recovering from breast cancer. But she was frank in a Q&A where she talked about her ambition to run for Barbara Boxer’s U.S. Senate seat. She actually supported Obama’s policies on a more holistic effort to win the war in Afghanistan and using technology to make government more transparent. Yet she said she was a Republican because she feels government shouldn’t make choices that people should make themselves.
Mark Pincus couldn’t make his slide clicker work. But the chief executive of Zynga says a new era of social apps is coming that will create a vast virtual economy. He touted the integration of charitable donations into the actions gamers can take inside the company’s FarmVille game, which has 56 million monthly active users.

Morgan Stanley analyst Mary Meeker said that leading indicators show we’re climbing out of the recession, but lagging indicators such as the 10 percent unemployment rate show there is still a lot of pain in the economy. She predicts that mobile technology will lead to a huge new wave in computing. And she went through a huge slide deck in 17 minutes.

Justice Department antitrust honcho Carl Shapiro said, “I’m from the government, and I’m your friend.” He explained that Justice hasn’t intervened in all that many antitrust cases, but will act when there are attempts to illegally monopolize markets, eliminate competition through mergers, or fix prices through collusion.
Brian Roberts, chief executive of Comcast, dodged questions about whether he was going to buy NBC Universal from General Electric. But he said that he likes to invest in content because it gives him multiple revenue streams. He politely listened as several speakers complained about Comcast’s high-speed Internet service.

Jonathan Miller, chief digital officer at News Corp., was glad he wasn’t at AOL anymore. But he has his own set of challenges as News Corp. makes sense of all of its different digital properties and tries to restore growth at MySpace, which has lost its market leadership to Facebook.
Sergey Brin, co-founder of Google, was a surprise guest. He showed off his comfy shoes and admitted he was embarrassed about the lateness of Google’s Chrome browser on the Mac platform. But he said that Google wasn’t to blame for all of the old media’s business problems.
Sean Parker, managing director at Founders Fund, founded or was an early executive at Napster, Plaxo and Facebook. He got booted out of all three companies, but he advanced an interesting theory about network effects and why it was inevitable that Facebook would overtake Google in importance.
Tim Armstrong, chief executive of AOL, said that the company’s spinoff from Time Warner is going as planned. He believes that content investments will be key to AOL’s future, and he noted that real-time communication (think some kind of mashup of instant messages and Twitter) is going to be a big part of AOL’s future.
The teens had the next-to-the-last word. They loved Apple and Facebook, but just didn’t grok the value of Twitter. One of them seemed to think that Apple had defeated Microsoft already, saying, “They won when they came up with the PC vs. Mac ads.”

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