The Ayn Rand-loving, feet-baring, efficiency-obsessed savant behind SCVNGRMay 2, 2011: 5:00 AM ET
Who is Seth Priebatsch? How did his tiny company, based on turning life into a video gaming experience, wind up with a $100 million valuation?
FORTUNE -- As I walked through the front door of SCVNGR in Cambridge, Mass., a $100-million company that makes location-based apps to rival Foursquare and Groupon, a painted canvas of the cover of Ayn Rand's "Atlas Shrugged" greeted me. Standing beside it was the the man who hung it there, SCVNGR's CEO -- ahem, "Chief Ninja" -- Seth Priebatsch. He was not wearing shoes.
No reason to put on shoes when you're walking around your apartment, which is what the office is to Priebatsch. He spends every night there, pulling sheets out of a desk drawer like he's Don Draper grabbing a fresh Oxford. He doesn't have an apartment, he says. "If I need laundry done, I outsource my laundry to my parents, it's very efficient. They get to borrow the board room, and I don't have to figure out how the hell the laundry machine works."
As you've likely gathered, Priebatsch is 22 years old. He's also worth millions. And not just because he's had a "Projects" folder on a hard drive since he was 8, made tens of thousands of dollars every month on a startup when he was 16, and dropped out of college after freshman year. He's the man in charge because he sensed something three years ago that most of the rest of us did not: that a generation raised on video games would want to keep playing a game in real life. "I found out that basically the real world was essentially the same game as Civilization [an old computer game], just with slightly better graphics, maybe, and slightly slower."
The story of SCVNGR begins with the story of Priebatsch and that game of Sid Meier's Civilization. His aunt gave it to him when he was a kid, and its premise was simple: Build an ancient civilization strong enough to take over the world. Priebatsch, the son of a biotech entrepreneur and Morgan Stanley VP, was forbidden from watching TV, but could play on the computer. Spending hours with the game, he quickly became addicted not to conquering the world but conquering the game. "The fact that the game was designed by someone always made me think that someone had built it with their own biases," he says, "I would essentially mine the game into a series of algorithms and know exactly what to do at any given time."
Priebatsch, like an undergrad reading Marx for the first time, started to look at everything through this new worldview. "I have a much broader definition of game than most other people," he says, explaining that games are just systems of challenges, rewards, and biases. After years of playing games, Priebatsch felt ready to actually build one. But Priebatsch wasn't much interested in designing a video game. He wanted something bigger. He wanted a social game. He thought as he was dropping out of Princeton, "if I don't build what I want to build, which is this thing called a game layer, someone else will. And that would really piss me off."
The flagship of this "game layer" (a concept Priebatsch layed out in a well-attended SxSW keynote earlier this year) is SCVNGR. For those who haven't used the app, SCVNGR is slightly more useful than Foursquare, which is to say it's still not especially useful. Unless, that is, you're one of the millions of people who want to tell your friends where you are all the time. If that's the case, SCVNGR will be abundantly more fun for you than Foursquare. Like Foursquare, SCVNGR lays out incentives to get you to check-in. But there are no badges and mayorships in SCVNGR. There are points, and you get these points by not just checking-in, but also by doing various crowd-generated "challenges" while you're at the place you're at. These usually involve tasks like playing with your food, the kind of things that those who are bored with traditional social norms really enjoy. This is how Priebatsch plans to help local businesses solve what he calls the "very, very real problem of loyalty."
Investors think he might be right. SCVNGR has raised $20 million so far, most recently with a $15 million round led by Balderton Capital. It has over a million users (compared to Foursquare's 8 million), is about to nearly double its payroll with 55 new employees coming this summer (some are interns who will stay on after the summer is over), and it's actually making money. Priebatsch says it took SCVNGR the first 6 months of 2010 to make $1 million. It took only six weeks of 2011 to make the same.
Even raising venture capital is a game to Priebatsch. "You look at the VC world, there are some great cheats you can do there. VCs for whatever reason don't value your company on anything intrinsic. They value it on how much they want to own, and divide by that and that's your valuation. And it's stupid and insane. But that's sort of a failed algorithm that someone built into the game that I and a lot of other companies can take advantage of to increase the gold in our account."
About the only thing Priebatsch cares about as much as games is efficiency. By my count, he mentioned the word eight different times in our hour-long conversation. It's the mark of a math major, certainly, but it's also of utmost importance to someone who elects to have too much on his plate. When I asked him what a typical day is like, Priebatsch, in a typically sociable but scattered monologue, first explained that his weeks are 10 days long, outlined the inefficiency of the number seven, and then told me his mornings go on for 11 hours. To give you a sample, I've condensed his 2 minute, 20 second answer into the version below:
"My days are all the same, always. I've given up on the week system. So I operate on decadays now, which are 10-based days…I haven't been doing weekends forever. But especially since SCVNGR started I just literally don't do them. I can divide by 7 pretty well but it's kind of a weird number. Actually, the fun thing about 7 is if you go through the seven divisions, it's always .142857 and as you go up the numbers it's got 7 repeating digits, as you go up each version of 7 it iterates once through the cycle. So that's pretty cool, but also really inefficient. So I switched to decadays, which are 10 days. Every day I get up at 5, work for an hour or two. Grab a bite, head over to MIT. I've convinced them I'm a student. They have the best gym facility on the planet. They've got like a double Olympic pool, a full outdoor track, they've got three levels of workout machines, one that's got loud music, one that's got soft music, one that's got no music. And of course it's MIT so none of the students use it, they don't know what to do with the gym. So I'll go there and run, generally, or swim, because they have a pool which is cool. But generally run. And then bike back here and then from 8 til 10 or midnight work. And the morning is generally—and I define the morning until up about 4—is generally pure engineering. Product design, product development, consumer testing, actual coding, just working with the engineering team. And then after that is a mix of sales and marketing. And I tend to leave that until probably 8 or 9 or 10."
Eventually he goes to bed. In the office. This is not the routine of somebody who strives for balance. This is the routine of someone who thinks he has something to offer the world, the routine of a man who loves Ayn Rand. He says it isn't a political thing -- he voted for Obama and is against whichever party is in power. But it is a lifestyle choice. Rand's characters are infamous for turning their work into their life and their life into their work. Priebatsch has done the same. "My social scene is comprised of the coolest people in the world I could find, all of whom work here," he says, "I don't even know what I would do on Saturday nights. But I work here, and it's awesome."
Lately he's been working on LevelUp, a game-centric rival to Groupon. Priebatsch was frustrated that no matter how successful SCVNGR became, it was going to have trouble ensuring that people kept coming back to the local businesses they were checking-in/playing at. So he started a pilot program in Boston and Philadelphia that gives users better and better deals as they continue to come back to a restaurant. Priebatsch doesn't say it explicitly, but it's pretty clear he sees LevelUp/SCVNGR mashup as the company's future. "Pure checking-in isn't going mainstream," he says, "Mainly because it gets boring." LevelUp is a way to get around that.
As we finished up our conversation, Priebatsch walked me through the office -- which is littered with dogs, scribblings on the wall, and NERF guns -- and made sure to give me a set of flash cards. Each card, and there are more than 50 of them, has a different game mechanic that makes SCVNGR -- and all the other startups contributing to the game layer -- tick. They're various principles that Priebatsch collected through years of reading about games (he says he reads a dubious 5,000-10,000 pages a month), and they're just as much about behavioral psychology as they are about Farmville.
One of the first cards is "Achievement," defined as "a virtual or physical representation of having accomplished something." This gets me thinking about what Priebatsch, a man who confesses that he can't help but see the world as a game, has given me. This deck of cards is, essentially, my party favor, a thank-you gift for swinging by and chatting about SCVNGR for a bit. I page through the cards and see one called Reward Schedule, "the timeframe and delivery mechanisms through which rewards are delivered."
Said schedule features three parts. 1.) The Contingency, "the problem that the player must overcome." 2.) The Response, "the expected action from the player." 3.) The Reinforcer, "the reward given if the expected action is carried out."
I think back to my hour with Priebatsch. My task—or should I say my contingency—was to crack him, to get him to share his inner workings so you all could better understand the way his mind works. I responded to the challenge with a mix of ingratiating questions and subtle challenges. And in the end, Priebatsch reinforced my efforts by offering what I was looking for: a glimpse into an intriguingly strange mind.
But Priebatsch had his own agenda. He needed to convince me of SCVNGR's worth by offering hard data and quirky stories that would distract me from any weakness. The reward is a positive story, one that paints SCVNGR and the man who runs it as a kind of visionary.
And so, as I walked past that painting of Atlas Shrugged and out the door, I started to wonder: Just who played who?
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