Self reliance: Seth Priebatsch started software company Scvngr when he was 19. It is building a mobile-phone payment network.
Seth Priebatsch comes to his office door in bare feet and a wrinkled orange polo shirt. Even at 6 p.m. on a Saturday, this isn’t normal garb for the CEO of a company of 100 people. But Shoeless Seth isn’t your typical CEO. For one thing, he’s 23. For another, his formal title is Chief Ninja.
“We had to go raise money, so I Googled ‘how to raise money,’” says Priebatsch. “It said VCs negotiate against CEOs. I was willing to bet they’d never negotiated against a ninja.”
Four years ago, Priebatsch was a 19-year-old freshman at Princeton studying math and computer science when he dropped out to start Scvngr, a Boston company that developed a gamelike application for mobile phones; it let people “check in” to stores and restaurants and do something—like taking a picture of their food—in exchange for discounts or loyalty points.
After an initial burst of interest in the phone app, Scvngr changed its focus and is now concentrating on a payment system called Level Up, which lets merchants accept payments from customers’ cell phones and expanded to eight cities this month. The company has taken in $20 million in venture capital, most recently a January 2011 round of $15 million that valued it at $100 million.
Like Bill Gates or Steve Jobs before him, Priebatsch thinks he’s in the early stages of what will be a billion-dollar company. But it’s a competitive field, with other well-funded startups—not to mention giants like Visa and Google—racing toward similar goals.
For Priebatsch, that means a life of few distractions. He doesn’t have a car, a girlfriend, or even his own apartment. He sleeps in the office most nights near a dog-eared copy of Ayn Rand’s novel Atlas Shrugged, and occasionally at his parents’ house in Boston. If he were tempted to date, he says, he hopes his board would talk him out of it.
Priebatsch’s work habits epitomize the advantage young CEOs often have: brilliance and focus. He’ll be at his computer until one or two in the morning most Saturdays, the day he dedicates to product development. Then he’ll catch a rest for a few hours, get up, go for a run, and start working again. (Friday nights, he cleans out his e-mail in-box.)
Another advantage: Priebatsch hasn’t been alive long enough to know what he can’t do. He hasn’t worked in a job for years and been told that things get done in certain ways. “People who’ve been through the grinder might not challenge assumptions,” says Rich Miner, a partner at Google Ventures, the venture capital arm of the search company, which invested in Scvngr in 2009.
Miner, who’s been at Google for seven years—with two decades of experience before that—is used to top executives who dress as if they’re at a beach party. And he slept in his office plenty of times when he was running his own startup. So Priebatsch doesn’t faze him. What he notices are things like this: Priebatsch can probably do most jobs that need doing at his 100-person company, but he has delegated them, and then kept his hands off.
Miner says the main pitfall of young CEOs is that “they just seem to take more risk, on bigger bets, than others might.”
So how risky was it to invest in a company with a CEO who was 19 at the time? Not as risky as you’d think, says Peter W. Bell of Highland Capital Partners. For one thing, Priebatsch had started his first company when he was 13, outsourcing programming to India. For another, Bell says, “a proven CEO is probably not going to have the skills to run the company when it’s three people, because there’s not really anything to run.”
Bell says older CEOs tend to be good at managing things like profit margins, and they have more friends to tap for key positions. Young CEOs like Priebatsch can compensate by using other people’s networks. For jobs like sales and operations, Priebatsch has taken advantage of his investors’ networks to hire experienced people who can also handle Nerf-gun battles before meetings. But many key jobs can’t be filled that way—the company is pushing a new technology where experience simply doesn’t exist yet, Priebatsch says.
Bell, by the way, is the VC who first negotiated with the Ninja, and he apparently handled it well: Priebatsch says he gave away more of Scvngr than he should have. Control is always a big deal for company founders, though few of them can keep it, the way Mark Zuckerberg has done at Facebook. Today Priebatsch shrugs his shoulders at the fact that he sold investors more than half the shares in Scvngr.
“It’s not control that matters—it’s winning,” he says. “I think about control in a very Randian way. If I believed someone could do a better job at that than me, I’d step aside, absolutely.”
Priebatsch does point out something older CEOs have over young ones: they don’t have to tell their mothers they’re dropping out. He says telling his mom he was leaving Princeton was a delicate conversation. At one point, “it was as if my mom had collapsed on the phone,” he remembers. “ ‘My son gets into Princeton and he’s dropping out? What the f—?’”
By the end of the call, though, she had just one question for him.
“Can I invest?”