Seth Priebatsch believes puzzles and challenges have the power to change human behavior. A lot of very smart tech investors believe Priebatsch and his Cambridge company have the power to change the world.
I’ve actually known Priebatsch for a long time. I was a classmate of his sister, Daniella, in middle school and high school, and Seth was just four years behind us. I rarely (if ever) spoke with him, but we spent two years on the same Noble and Greenough campus in Dedham. I remember three things about Priebatsch: He ran pretty much everywhere; because of this, everybody at the school knew who he was; and the older kids called him “Pip.” (A former cross-country teammate of his explains: “We were looking for something that said young British chimney sweep.” The subtleties of the English and South African accents were apparently lost on the group.)
Pip was an excellent student at Nobles, perhaps because his parents had been pushing him hard (“encouraging” him, in their words) since birth. Norman, a biotech entrepreneur, says his son was reading by age three or four, and that he taught the youngster to read pages upside down as a challenge. Moving past the standard children’s fare — which Norman found boring — the two tackled biographies, history, and other advanced subjects. Seth developed a particular fondness for the stories of Hannibal of Carthage and the French Revolution. In the Priebatsch household, TV was a no-no.
The family traveled extensively. There were trips to England, France, Italy, Israel, Spain, India, Japan, Thailand, and Australia, plus annual treks to Norman’s native South Africa. On each journey, the children had to keep journals chronicling in “excruciating detail,” as Priebatsch puts it, what they’d seen and done. “It was like ‘Oh my God, I’m in Australia and instead of being on the beach, I’m doing
6 to 10 hours of writing.’”
But in the Priebatsch family, good behavior brought rewards. “We had this cheesy star system,” Priebatsch says, explaining how his parents awarded him credits for cleaning his room or doing homework, and yanked them away for fighting with his sister. “I lost a fair amount of stars that way,” he says. When he earned enough, though, his parents gave him the money to buy a toy. From an early age, then, Priebatsch learned that game structure could be an effective way to influence behavior. His mother, Suzanne, a financial adviser at Smith Barney, used to take the kids to the Museum of Fine Arts. “And in order to keep them entertained, we did mini scavenger hunts,” she says.
So by the time Priebatsch got to Nobles, in seventh grade, he had an unconventional appreciation of the world. English teacher Richard Baker says that in his 40 years at the school, he’s never taught anybody else quite like Priebatsch. “He’s unique,” Baker says, “in the sense of energy, in the sense of entrepreneurial interest and skill.”
The problem was, Priebatsch knew that. Of some of his teachers he says: “Their domain expertise was weak at best. Their teaching style was acceptable but not exceptional by any means. And I’m sure I was difficult to them.”
Throughout high school, Priebatsch always seemed to be putting another business plan into action — and not all of them of the high-tech variety. Influenced by a story in the book Freakonomics in which a guy made a bundle selling bagels on the honor system, Priebatsch decided to open an “underground snack bar” at Nobles. First, he rented out three lockers in a prime location. “I would just hang out,” he recalls, “and when people would open their locker I’d be like, ‘Hey, you’ve got a really nice locker. If I give you 50 bucks, can I have your locker for the month?’” He then stocked them: One locker was for chips, another for candy, and the third was packed with ice for cold drinks. Next, he e-mailed the locker combos to his friends, telling them to just pay for what they took. He says he made $200 on the first day and $600 on the second. On the third he was called into the provost’s office and told to shut it down.
After high school, Priebatsch headed off to Princeton. But he didn’t stay long. The summer after he won the school’s business-plan contest, a tech incubator in Philadelphia called DreamIt Ventures offered him office space and guidance — and $35,000 — to come and further develop his plan. Michael Hagan, a veteran of two startups, worked at DreamIt as a strategist, helping young entrepreneurs find their way. He says that when Priebatsch first explained his vision for building a game layer on top of the world, “I thought it was so nuts — that it had such balls that you couldn’t help but get excited about it.” The two began working to grow SCVNGR, and by the end of the summer had reeled in about $80,000 in revenue.
With the business doing well, Priebatsch decided to drop out of Princeton. This did not thrill his mother. Suzanne Priebatsch was walking down Newbury Street when she got the call from her son. “My instinct was to fall upon the ground and flail,” she says, “but it was a rough sidewalk.”
When the 19-year-old Priebatsch moved the company to his hometown of Boston, Hagan, a Philadelphia native then in his late twenties, followed. He became SCVNGR’s “Chief Rockstar” (that’s COO to the rest of us), and moved into Priebatsch’s parents’ house for a few months until he found a place of his own. That was not Norman and Suzanne’s only contribution to the company: They plowed in $60,000 (still considerably cheaper than three more years of Princeton), making them two of their son’s biggest early investors.
SCVNGR’s big break came one Saturday morning in the fall of 2008, when Priebatsch received an e-mail from Peter Bell of Highland Capital. Highland, which has invested billions in companies over the years, is one of the most respected venture capital firms in the industry. Bell had read a story about SCVNGR on the website Mass High Tech and was so impressed that he did something he rarely does: cold-call an entrepreneur. It was as if a Red Sox scout had, without warning, suddenly showed up at a youth baseball game.
Soon after, Priebatsch delivered a pitch to the Highland board at the company’s Lexington headquarters. Highland eventually gave SCVNGR $750,000 in funding. In typical form, Priebatsch inserted a clause into the deal saying that the cash had to be delivered to him on a poster-size check, even bigger than the one he’d received from Princeton. This time, instead of jamming it into an ATM, he hung it up in the office.
By the end of its first fiscal year, SCVNGR had cleared more than $1 million in revenue. By its second year, Rich Miner — one of the men who invented Google’s Android operating system — had invested $4 million of Google’s money in SCVNGR. And by the end of its third year, 2010, the company had moved to Kendall Square — and had raised $15 million more in VC funding.
SCVNGR now employs 54 people, with plans this summer to add 60 more interns to help it scale up quickly. Each one will be armed, Hagan says, with the standard-issue Maverick REV-6 Nerf gun. That type of quirk, of course, is all part of the Priebatsch brand. It’s the same reason he always wears orange and loves talking about lugging around 19 cell phones and the cacophony that erupts whenever he gets a call. (All the phones are so he can be certain the SCVNGR app is operating properly across all platforms.) He has merged himself and SCVNGR into a single, hyperenergetic entity. “There’s an element of myth-building in Seth, in that while the things he says are true, there’s also a sophisticated sense of image-building,” says Baker, his high school English teacher.
When Priebatsch took the stage for his South by Southwest keynote address, wearing his trademark shades, orange polo shirt, and jeans, expectations were high — because he’d raised them. “There’s one thing that will blow everyone’s mind,” he had told the website Mashable.com before his speech. “The concept is brand new and if it works it will be one of the most epic things that has ever been done.”
That thing was a game he’d designed for the audience of roughly 3,000. Each person was given a randomly colored sheet of paper. At the end of his speech, he instructed the crowd to trade sheets so that everyone in each row held the same color paper. If they could do it in less than two minutes, he’d donate $10,000 to the National Wildlife Foundation. The audience did it. Priebatsch was pumped: “That’s freakin’ awesome!” he exclaimed, going on about how the game illustrated that people who don’t know one another can come together for a common purpose. The crowd was less excited: There was polite clapping and a few whoops, but the reaction seemed roughly that of a school group that had just been forced to play an educational game.
Then again, maybe they were already in a skeptical frame of mind. Earlier in the speech, Priebatsch had argued that his game layer could be used to overcome such intractable problems as climate change and the nation’s struggling schools. Games, he insisted, are the tools of a reformist revolution. And there lies the fundamental disconnect with Priebatsch. He talks with messianic fervor about how game mechanics can help solve the world’s ills…but so far he’s only offering cheap deals on burgers.
And getting those cheap burgers isn’t even any fun. I’m as ambivalent about the SCVNGR app as the crowd was about Priebatsch’s paper-trading game. I’m just not inclined to go to a bar and pull out my phone to take a picture of my food, or take the time to answer inane questions, all in the name of getting two points toward a free drink. Other people seem to like it — the app’s average rating at the iTunes store is three out of five stars — but I feel too self-conscious playing it. I wonder what that girl across the café or at the end of the bar would think of me going around like a doofus, trying to get my photo taken with an employee. Besides, many of the challenges on SCVNGR are very basic and, frankly, not that exciting. One game for the Toscanini’s ice cream shop, for instance, just asks you what your favorite flavor is. Not exactly a brain-bender. You can almost feel yourself being manipulated by SCVNGR’s partners.
When I told Priebatsch I didn’t really like the app, he understood my frustration. He could see how some people might not want to be playing a game all the time. “A large portion of people [who] were playing SCVNGR didn’t quite get it,” he said.
He’s recently launched another app, which debuted in Boston and Philadelphia, called LevelUp. It’s designed to build customer loyalty in people like me, who aren’t quite as into games. It works like this: Boloco, say, offers a deal where you get $10 worth of food for $5. Acting on that deal unlocks another in which you get $25 worth for $10. After taking advantage of that deal, you can get $45 worth for $15. I like LevelUp because, although it utilizes Priebatsch’s game mechanics — the dual incentives of advancing levels and gaining rewards — it’s not actually a game. It’s a transaction. And one that Priebatsch thinks will work better for vendors than Groupon has. Groupon’s partners complain not only that the site’s deals don’t always lead to repeat visits, but also that the company typically takes a 50 percent cut of every offering it does with a client. Priebatsch says LevelUp and its tiered system of deals builds customer loyalty, and provides a better arrangement for vendors: It takes no cut on the first level of deals, meaning SCVNGR gets paid only if customers return for the second- and third-level bargains. And rather than 50 percent, the SCVNGR take is 25 percent.
Boloco CEO John Pepper told me he’s happy with SCVNGR and that he’d work with Priebatsch again. LevelUp also seemed to have its desired effect on me: After buying that first deal at Boloco, I found myself trying to convince a group of friends to go back so I could take advantage of the second-level deal. Priebatsch had won — I’d spent my money where he wanted me to.
It’s still early, but “the age demographic for LevelUp is twice as broad as it is for SCVNGR,” Priebatsch says. The male-to-female ratio, he adds, is much more balanced as well.
Whether it’s burritos or the paper game from his keynote address, Priebatsch says he must start somewhere to realize his vision of changing the world. So he’ll begin by flogging products; the do-gooderism is for later. “There’s no way that the product that we’ve built to date maps up with the theory of what I’m talking about,” he acknowledges. “It is a fraction of a shadow of what I think [the company] will be.” If he can build the foundation for the game layer, he believes, then maybe he and others can start to use it as a tool to tackle bigger problems.
The point of all this seems to be that Priebatsch won’t let his own ideas — even the ones that have made him a millionaire on paper — limit him. He’s always looking for the next iteration of his vision, the next game.
Already, LevelUp has evolved. SCVNGR recently announced a major partnership with American Express, allowing LevelUp deals to be linked directly to AmEx credit cards — meaning that to activate the increasing levels of their deals, users will no longer have to print out receipts or show their phone screens to the guy at the register. That’s a smart idea that has so far escaped Priebatsch’s competition.
To survive, to be the one left standing when the bubble bursts, Priebatsch knows he must differentiate himself from rivals like Groupon, with its deep user base, and Foursquare, with its vaunted “mayor” status. Whatever the ultimate fate of SCVNGR, Highland Capital’s Peter Bell makes it clear that he didn’t invest in Priebatsch just because he liked the idea the company is built on. It was, Bell says, “frankly more a bet on Seth as an entrepreneur. The thesis was, This guy will do something very special.”