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September 18, 2010
Just Manic Enough: Seeking Perfect
Entrepreneurs
By DAVID SEGAL
Cambridge, Mass.
IMAGINE you are a venture capitalist. One day a man comes to you and says, “I want to
build the game layer on top of the world.”
You don’t know what “the game layer” is, let alone whether it should be built atop the world.
But he has a passionate speech about a business plan, conceived when he was a college
freshman, that he says will change the planet — making it more entertaining, more engaging,
and giving humans a new way to interact with businesses and one another.
If you give him $750,000, he says, you can have a stake in what he believes will be a $1-
billion-a-year company.
Interested? Before you answer, consider that the man displays many of the symptoms of a
person having what psychologists call a hypomanic episode. According to the Diagnostic and
Statistical Manual — the occupation’s bible of mental disorders — these symptoms include
grandiosity, an elevated and expansive mood, racing thoughts and little need for sleep.
“Elevated” hardly describes this guy. To keep the pace of his thoughts and conversation at
manageable levels, he runs on a track every morning until he literally collapses. He can work
96 hours in a row. He plans to live in his office, crashing in a sleeping bag. He describes
anything that distracts him and his future colleagues, even for minutes, as “evil.”
He is 21 years old.
So, what do you give this guy — a big check or the phone number of a really good shrink? If
he is Seth Priebatsch and you are Highland Capital Partners, a venture capital firm in
Lexington, Mass., the answer is a big check.
But this thought exercise hints at a truth: a thin line separates the temperament of a
promising entrepreneur from a person who could use, as they say in psychiatry, a little help.
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Academics and hiring consultants say that many successful entrepreneurs have qualities and
quirks that, if poured into their psyches in greater ratios, would qualify as full-on mental
illness.
Which is not to suggest that entrepreneurs like Seth Priebatsch (pronounced PREE-batch)
are crazy. It would be more accurate to describe them as just crazy enough.
“It’s about degrees,” says John D. Gartner, a psychologist and author of “The Hypomanic
Edge.” “If you’re manic, you think you’re Jesus. If you’re hypomanic, you think you are God’s
gift to technology investing.”
The attributes that make great entrepreneurs, the experts say, are common in certain
manias, though in milder forms and harnessed in ways that are hugely productive. Instead of
recklessness, the entrepreneur loves risk. Instead of delusions, the entrepreneur imagines a
product that sounds so compelling that it inspires people to bet their careers, or a lot of
money, on something that doesn’t exist and may never sell.
So venture capitalists spend a lot of time plumbing the psyches of the people in whom they
might invest. It’s not so much about separating the loonies from the slightly manic. It’s more
about determining which hypomanics are too arrogant and obnoxious — traits common to
the type — and which have some humanity and interpersonal skills, always helpful for
recruiting talent and raising money.
Some V.C.’s have personality tests to help them weed out the former. Others emphasize their
toleration of mild forms of mania, if only because starting a business is, on its face, a little
nuts.
“You need to suspend disbelief to start a company, because so many people will tell you that
what you’re doing can’t be done, and if it could be done, someone would have done it
already,” says Paul Maeder, a general partner at Highland Capital. “There are six billion
human beings on this planet, we’ve been around for hundreds of thousands of years, we’re a
couple hundred years into the industrial revolution — and nobody has done what you want
to do? It’s kind of crazy.”
ON a recent Saturday evening, Seth Priebatsch is sitting in his office/bedroom in the 26,000
-square-foot space that houses Scvngr (pronounced “scavenger”), which he founded in early
2009. Dozens of toy race cars fill a bookshelf on one wall; the other is covered with lists and
drawings. The sofa where he crashes in his sleeping bag lies between the two.
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He will explain the genesis of Scvngr, and offer a sort of guided tour of his mind, while
sitting on a stool in his bare feet, wearing jeans and a Princeton T-shirt. A pair of Oakley
sunglasses are perched, as they nearly always are, atop his head — part talisman, part
personal branding.
He is lean, smiley and partial to the word “awesome,” which he uses as a noun — as in “an
extra dose of awesome.” He speaks quickly and with what sounds like a Canadian accent,
which seems odd because he was raised in
Boston.
He first pitched Scvngr as a freshman at Princeton, to a professor linked to an annual
business plan contest open to undergraduates and graduates. “I told him I wanted to build
the game layer on top of the world,” Mr. Priebatsch recalls. “And he didn’t say, ‘You’re
insane.’ So I said, ‘And I want everyone in the world to help me build it.’”
Scvngr won first prize, which came with $5,000 and emboldened him to apply to a seed
financing company, DreamIt Ventures, which gave him $35,000. The victory also caught the
eye of a venture capitalist, Peter Bell of Highland Capital, who read about Mr. Priebatsch’s
prize while surfing the Web one night. Mr. Bell popped off an e-mail.
“It was Saturday night, pretty late,” Mr. Bell recalls. “I said, ‘If you ever come to Boston, I’d
love to meet you.’”
Mr. Priebatsch replied immediately: he’d decided to drop out of Princeton and move to
Boston. The university would be around a long time, he reasoned, but the moment to start
Scvngr was fleeting and couldn’t wait a few weeks, let alone three years.
So, what is this potentially globe-altering enterprise?
“Scvngr is a game that you play on your phone, and playing Scvngr is incredibly easy,” he
begins.
The game allows you to compete and win rewards at stores, gyms, theaters, museums and so
on. A Mexican restaurant, for instance, might offer half off your next soda if you fold the tin
foil on your burrito into origami, then snap a picture of it.
If this sounds like little more than a gimmicky way to lure in consumers, well, you haven’t
listened to Mr. Priebatsch long enough.
“We play games all the time, right?” he says. “School is a game. It’s just a very badly designed
game.” American Express cards, with their escalating status, from green, to gold to black —
they are a game. So are frequent-flier miles.
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“But game dynamics aren’t consciously leveraged in any meaningful way, and Scvngr does
that.”
This, apparently, has enormous implications. “If we can bring game dynamics to the world,
the world will be more fun, more rewarding, we’ll be more connected to our friends, people
will change their behavior to be better. But if this is going to work it has to be something that
anyone can play and that everyone can build.”
This, he says, is the key: Scvngr is both a game and a game platform. Anyone can create a
Scvngr challenge, free, using four default games or tools the company offers. There are now
20 million Scvngr challenges in the United States, according to the company, most of which
are simple tasks, like “stand in this spot and say something.”
In addition, about 1,000 companies and organizations — including the New England
Patriots, Zipcar, Sony and Warner Brothers — pay Scvngr to create and manage their
challenges.
“The last decade was the decade where the social framework was built,” he says — most
successfully by Facebook. “The next decade will be the decade of games.”
Judging this pitch by reading it, as opposed to hearing it in person, is like appraising a song
based solely on its lyrics. Mr. Priebatsch describes Scvngr and the future it portends with
burbling fluency, as if it were a country he has visited and one that you must see. He is
especially good at giving “the game layer” an aura of inevitability.
It is hardly clear, though, that such a layer will catch on or, if it does, whether Scvngr will be
the company to build it. The field of location-based tech games is crowded, and include
standouts like Foursquare and Gowalla.
The particulars of Scvngr seem nitpickable, too. The game’s points will earn you whatever
goodie is offered on the spot, but there is nothing else you can do with them. And some users
have found Scvngr’s challenges to be pretty lame. More than a few of the contests seem like
barely veiled marketing ploys — like retailers that “challenge” you to come up with three
words that describe the store.
Reviews so far have split the crowd. As of last week, a third of the roughly 1,000 people who
had weighed in on the latest version of Scvngr in the iPhone’s App Store gave it the highest
rating and one-third gave it the lowest.
“Not relevant to having fun,” read one review.
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But Mr. Priebatsch’s pitch has worked, at least by the standards of start-ups, most of which
die in the blueprint phase. Part of the reason could be pinned on the investing and tech
world’s raging case of Next Zuckerberg Syndrome — the urge to find another Mark
Zuckerberg before he starts another Facebook.
But nobody inspires N.Z.S. without a promising idea, intelligence and a lot of charisma.
Scvngr today has 60 employees, many of them veterans of very successful tech start-ups. As
of December of last year, it also had $4 million from Google Ventures.
Any list of the qualities that have netted all this talent and money should include Mr.
Priebatsch’s quasirobotic work ethic. He does not socialize. He no longer reads books, nor
does he watch TV or movies. He works from 8 a.m. until 10 p.m., seven days a week. He was
reluctant to have a photographer visit for this article because he worried that it might
distract employees.
Doesn’t he miss going to bars, just hanging out, being 21? Here’s where Mr. Priebatsch starts
to sound like a teenage Vulcan.
“I had friends at Princeton; I’m sure it’d be fun to see them,” he says. “But I know that what
I’m going after is huge and others are going after it, and if they’re not, they’re making a
mistake. But other people will figure it out, and every minute that I’m not working on it is a
minute when they’re making progress and I’m not. And that is just not O.K.”
THE hypomanic temperament is, of course, not limited to entrepreneurs. It’s found in
politics (Theodore Roosevelt) the military (George S. Patton), Hollywood (the studio head
David O. Selznick) and virtually any field where outsize risks yield enormous rewards.
But the business world has contributed more than its share of hypomanics, particularly the
abusive, ornery kind. The most colorful of the breed was arguably Henry Ford.
“He epitomizes the unhinged, entrepreneurial spirit,” says Douglas G. Brinkley, a history
professor at Rice University and author of “Wheels for the World,” a book about Mr. Ford
and his company. “He became monomaniacal in his belief that the internal combustion
engine should be fueled by gas, at a time when everything was electric, and nobody thought
you could put gas on a hot motor.”
Mr. Ford could be both charmer and ruthless jerk. When he visited rural America to extol
the horseless carriage, listeners were often left hoping that he would run for president. With
employees, on the other hand, he was an autocrat who never brooked dissent. He clung so
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stubbornly to his vision — black cars, and only black cars, for the masses — that the company
almost went bust when rivals like General Motors started offering more choices.
Nearly all conversations about contemporary hypomanics start with the Apple chief
executive, Steven P. Jobs. Like Mr. Ford, he is a pitchman extraordinaire with a vaguely
messianic streak, and, like Mr. Ford, he can anticipate what people will want before they
even know they want it.
Mr. Jobs is also routinely described as a despot and control freak with a terrifying temper,
says Leander Kahney, author of “Inside Steve’s Brain.”
“Even the prospect of a chewing out by Steve Jobs makes people work 90 hours a week,” says
Mr. Kahney. He treats employees as tools, Mr. Kahney went on, as a means to an end, with
the end defined as a universe of Apple products and services that are tailored precisely to his
specifications.
“I would argue that Jobs has used his control freakery to advantage,” Mr. Kahney says. “The
hallmark of Apple is the way it controls the entire user experience — the ads, the stores, the
iPods. Nothing is left to chance. That comes from Steve Jobs.”
Scholars in organizational studies tend to divide the world into “transformational
leaders” (the group that hypomanics are bunched into, of course) and “transactional
leaders,” who are essentially even-keeled managers, grown-ups who know how to delegate,
listen and set achievable goals.
Both types of leaders need to rally employees to their cause, but entrepreneurs must recruit
and galvanize when a company is little more than a whisper of a big idea. Shouting “To the
ramparts!” with no ramparts in sight takes a kind of irrational self-confidence, which is
perfectly acceptable, though it can also tilt into egomania, which is usually not.
“We have a grid personality scorecard, across 10 or 12 dimensions, attributes that are critical
to success,” says Michael A. Greeley, a general partner at Flybridge Capital Partners in
Boston.
The goal is to spot the really erratic characters, whom Mr. Greeley calls “rail to rail”:
“One day they get up and their favorite color is pink. The next day, it’s green. I’ve worked
with hypomanics, and where I think it can be quite insidious — people like this turn on
colleagues quickly. An employee could be an incredible contributor, and then, after one
mistake, they are out of the lifeboat.”
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BEFORE Highland Capital invested in Scvngr, Peter Bell gave Seth Priebatsch’s life and
résumé the vigorous frisking that is standard in the venture capital business.
Mr. Priebatsch was 19 at the time, which meant that he didn’t have a lot of former colleagues
or bosses. What he did have, however, was a surprisingly long track record in business.
Scvngr is actually the third company that Mr. Priebatsch has founded. At the age of 12, with
money from his parents, he started Giftopedia, a price-comparison shopping Web site. When
he was in eighth grade, the company had eight employees — six in India, two in Russia.
Nobody who worked for him ever asked him his age, and he never volunteered it. “I wouldn’t
say that I kept my age a secret,” he says. “I just never offered that information. Nobody
knows how old you are on the Internet.”
All communications were handled via e-mail and Skype, often while he was typing on a
laptop while sitting in class. For a long time, his teachers thought that he was simply taking
copious notes, but he was actually sending instructions overseas with a wireless connection.
“One day, I forgot to hit the mute button on my laptop and it started ringing during French
class,” he recalls. The Giftopedia server was down that day, and it was a crisis.
“I got up and told my teacher, ‘I’m really sorry, but I have to take this call.’ ”
Giftopedia was profitable, but a little late to the field, Mr. Priebatsch says. Ultimately, he
sold the domain name for five figures and, at 17, founded PostcardTech, which created and
mailed out promotional mini-CDs on behalf of tourist destinations and universities. For that
company, he rented part of a factory in China, which, he said, was time-consuming but
surprisingly easy and didn’t even require a trip to Asia.
Mr. Priebatsch handed PostcardTech off to some friends, who did little with it, and the
company has since folded. But it left Mr. Priebatsch with a chunk of money — he won’t say
how large — that he has since invested in Scvngr.
Dr. Gartner, the author and psychologist, says he believes that hypomanics come by their
disposition genetically. But it is hard to tease out what Norman and Suzanne Priebatsch — a
biotech entrepreneur and a financial adviser at SmithBarney, respectively — bequeathed
through their DNA and what they instilled in Seth and his older sister, Daniella Priebatsch,
as they grew up.
Because chez Priebatsch sounds like boot camp for the brain.
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“With both my kids, my wife and I pushed them very hard,” says Norman Priebatsch, who is
a native of South Africa. “Very invasive, very intrusive, doing things, planning things
continuously.”
As a child, when Seth started to read along with his father — high-level math, physics and
history books were the staples — the elder Mr. Priebatsch would often turn the books upside
down, adding a degree of difficulty to the experience, and presumably some fun.
The upshot is that Seth can now read as quickly upside down as right-side up, something to
keep in mind if you ever find yourself sitting across a desk from him.
“People assume that if you’ve got a sheet of paper in front of you that no one else can read
it,” he says, “and that is false.”
Vacations, Seth says, made school seem relaxing. He and his sister were expected to research
destinations — Istanbul, Shanghai and Rome, for instance — and then plan most of the
itinerary down to the hour. On the trips, they would tour all day and night, leaving time for
the children to upload photos to a laptop and type up a detailed account of everything they’d
seen.
“We were the scribes of those trips; that was a requirement,” says Daniella, who now works
on a sales team at Google. “Every detail — what it was like at the museum, people we met.
Even the room number of the hotel, in case it was a good room and we ever came back.”
The rigor and intensity of Seth’s upbringing have left him with a peculiar combination of
rarefied skills and mundane deficiencies. He is a gifted software engineer but a terrible
driver. (“I hit things,” he says.) He’s perfectly at ease negotiating with V.C.’s, but has had just
one girlfriend, a relationship that ended abruptly when someone asked how long they’d been
dating.
“We answered simultaneously and she said six months and I said two weeks,” he recounts,
sounding amused. “Two weeks earlier we’d had this conversation, and I said, ‘And so now
we’re dating, correct?’ And she said yes.”
He shrugs.
“I thought I’d been really clear,” he says. “I find business relationships are easier. You have
to sign a piece of paper.”
IN late 2008, as part of the investment process, Mr. Priebatsch had to visit Highland
Capital’s offices and present his plan to the firm’s partners.
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It went well, but there are still skeptics at the firm. Mr. Maeder of Highland still wonders
whether Scvngr is the scaffolding of a major business. At the same time, he regards the
$750,000 investment as a bet on Mr. Priebatsch as much as a bet on his company.
“Seth has such a fertile mind; you just know that he’ll attract great people to the company,”
he says, “and the ideas will continue to flow and morph until he finds something great.”
You also get the sense that Mr. Priebatsch won’t stop, even if Scvngr is a glorious triumph.
“I like winning,” he says. “I’m addicted to the act of winning, the process. When you are in
the act of winning, everything is great. Once you’ve won, that’s boring. It’s cool, it’s better
than having lost, but it’s boring.”
Great piles of money would not slow him down, either.
“I’m not anti-money,” he says. “I like nice bikes, I like nice computers. I like that money is a
representation of success, but the actual entity itself is not interesting for me. There is little
that I would want that I don’t have, and the things that I want money can’t buy.”
Like?
He doesn’t pause.
“I want to build the game layer on top of the world.”
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Entrepreneurship and New Venture Creation
Answer all the three questions. You can refer to any relevant material (provide the references). Submit your completed answers – Drop box in Angel before 5.00 pm on Wednesday, Nov 13, 2013. The drop box will not be available after 5.00 pm on Nov 13, 2013.
Question 1 (30%)
“…. So venture capitalists spend a lot of time plumbing the psyches of the people in whom they might invest. It’s not so much about separating the loonies from the slightly manic. It’s more about determining which hypomanics are too arrogant and obnoxious — traits common to the type — and which have some humanity and interpersonal skills, always helpful for recruiting talent and raising money. Some V.C.’s have personality tests to help them weed out the former. Others emphasize their toleration of mild forms of mania, if only because starting a business is, on its face, a little nuts.
“You need to suspend disbelief to start a company, because so many people will tell you that what you’re doing can’t be done, and if it could be done, someone would have done it already,” says Paul Maeder, a general partner at Highland Capital. “There are six billion human beings on this planet, we’ve been around for hundreds of thousands of years, we’re a couple hundred years into the industrial revolution — and nobody has done what you want to do? It’s kind of crazy.” …( A passage from a New York Times article titled: Just Manic Enough: Seeking Perfect Entrepreneurs, by David Segal, Sep 21, 2010, Article available at Lessons -> Exam Folder) (Angel)
Explain who an entrepreneur is and discuss the characteristics of a successful entrepreneur.
Question 2 (40%) : Please review and analyze the case: Artemis Images available in the Exam Folder.
1. Write a brief narrative of “Artemis Images” as discussed in the case. The narrative should not exceed two pages. While it is up to you to decide what to include in the narrative – it should provide a clear story of Artemis Images, to the reader.
2. Answer the four questions listed at the end of the case. You should provide a logical basis and substantiation for the answers you provide.
Question 3 (30%) : Please review and analyze the case: “MYSPACE: The online Reality Show” available in Exam Folder.
1. Write a brief narrative of “MYSPACE” as discussed in the case. The narrative should not exceed two pages. While it is up to you to decide what to include in the narrative – it should provide a clear story of Artemis Images, to the reader.
2. Answer the five discussion questions listed at the end of the case. You should provide a logical basis and substantiation for the answers you provide.
3. Prologue: As you know MYSPACE which is a social network similar to Face Book, faded and almost vanished into cyber space . Explore what happened to MYSPACE and discuss the reasons for its demise. You should provide a timeline for the last ten years and discuss the mistakes made by MYSPACE.
The evaluation of your answers and grading will be subjective by necessity. The grades depend on the quality of the answers. While there will not be any “right” or “wrong” answers, the quality of the answers will depend on the quality of your logic, reasoning, and substantiation of the points made by you.
