(Bloomberg) ? When Zynga Inc. reached an impasse while negotiating a five-year partnership with Facebook Inc. in August 2010, Chief Executive Officer Mark Pincus demanded a one-on-one meeting with Mark Zuckerberg.
The two CEOs ate dinner at the Facebook cafeteria and held a freewheeling discussion until 2 a.m. Over the course of the meeting and two other marathon sessions that followed, Pincus convinced Zuckerberg that Zynga?s games would help Facebook add users and revenue. They forged a deal that threw Facebook?s support behind Zynga, in exchange for a cut of sales.
Pincus?s negotiating prowess?Google Inc. Chairman Eric Schmidt calls it ?fearsome??helped put his company on course for a $1 billion initial public offering this month. The challenge now is keeping up that intensity at a publicly held company, where Pincus will contend with more scrutiny and less control over the business he started more than four years ago.
?One of the big questions for anybody going public is, ?Can they maintain their long-term focus??? Zuckerberg, whose own company is slated to hold its IPO next year, said in an interview. ?I just don?t think that?s a big issue with Mark because he can deal with the pain of any short-term hit to power through and get to where he wants to go. I hope I?m the same way. That?s definitely something I?ve learned from him.?
Persuading investors to bet long-term on Zynga is the next hurdle for Pincus, a veteran entrepreneur and former investment-banking analyst who is attempting to pull off the biggest IPO for an Internet company since Google?s debut in 2004.
Elder Statesman
At 45, Pincus is 18 years older than Zuckerberg and twice the age of some startup founders in Silicon Valley. He has started five companies and invested in many more over the past two decades, helping him hone his negotiating skills and attention to analytical detail.
Zynga, founded in 2007, is the culmination of a career?s worth of lessons learned, said Marc Andreessen, a venture capitalist and co-founder of Netscape Communications Corp., who has invested in the startup.
?He has built a machine,? Andreessen said. ?Google is a tightly wired business machine. Microsoft is a tightly wired business machine. Apple is too. Zynga is very much in the mold of those other companies.?
Bloomberg LP, the owner of Bloomberg News, is an investor in Andreessen Horowitz.
Virtual Goods
Zynga makes money by offering games for free and then charging for virtual items, such as a puppy in ?FarmVille? or an assault rifle in ?Mafia Wars.? About 6.7 million of Zynga users were paying customers in the first nine months of the year, up from 5.1 million a year earlier. Revenue more than doubled to $828.9 million in the period. Unlike Groupon Inc. and some other recent IPOs, Zynga is profitable, though its net income has decreased this year as Pincus steps up spending on overhead, marketing and product development.
Pincus also has clashed with board members and employees over his career. He has alienated some Zynga staffers by pushing them to work long hours. A few employees were asked to return unvested equity because their potential rewards didn?t match what they were contributing to the business, said Roger Dickey, one of the first 30 workers at Zynga and the creator of ?Mafia Wars.?
?Mark didn?t get where he is by being a softie,? said Dickey, who left the company earlier this year and now works as a startup investor.
?Every Horrible Thing?
Pincus has said himself that he went too far at times, especially in Zynga?s early days.
?I did every horrible thing in the book just to get revenues,? including giving users virtual credits in exchange for downloading software that was later difficult to delete, he said during a talk in 2009 in Berkeley, California.
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