20VC: Zynga's Mark Pincus on When To Ride Your Winners and Cut Your Losers, Why People With "Broken Resumes" Make The Best Hires & The 2 Biggest Lies Told In Silicon Valley By Founders and VCs

Mark Pincus is a serial entrepreneur and investor, best known for founding Zynga, the first company to introduce the mass market to social gaming. To date, more than one billion people around the world have played Zynga’s games, which include hits like FarmVille and Words with Friends. Mark is also known for his investments in some of the internet’s largest and most successful companies, including Facebook, Twitter, Airbnb, Snapchat and Xiaomi. One of the earliest pioneers in social networking, Mark founded multiple startups including support.com and tribe.net, before going on to create Zynga. A fun fact - recognizing the importance of social networking, in 2003 Mark teamed up with his friend Reid Hoffman, the founder of LinkedIn, to purchase the fundamental Six Degrees patent – which broadly covers social networks – in order to keep it out of the hands of patent trolls and guarantee that all players could innovate on this technology. In Today’s Episode You Will Learn: 1.) Having founded one of the first social networks, Tribe and seed invested in Facebook, what convinced you that 2007 was the right time to start a social games company, Zynga? 2.) Having mastered distribution with Zynga, does Mark believe we are in a "fallow" period for consumer with a lack of distribution channel availability? If distribution is not the core problem, what does Mark believe is the fundamental issue? 3.) What have been Mark's biggest lessons when it comes to assembling truly great teams? What does Mark mean when he says that he looks for people with "broken resumes"? Why is that so beneficial to potential candidates? 4.) When investing, how does Mark determine timing on when to ride winner and cut losers? What does Mark really mean when he says, ''you have to instill a mindset of expected value over loss avoidance"? 5.) What are the 2 biggest lies in Silicon Valley told by founders and VCs? How can founders truly test the alignment with their VC? How did Mark do this in pitches with Zynga? What were Mark's learnings on optimising board composition and performance? Items Mentioned In Today’s Show: Mark’s Fave Book: Ready Player One As always you can follow Harry, The Twenty Minute VC and Mark on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC. Available in carry-on and check-in sizes, Raden is the case for better, smarter travel. By pairing the lightest and most durable materials with technology, travelers can charge their devices on the go, weigh, and track their cases. Visit Raden.com to use code 20VC at checkout. With purchase, receive credit towards Tablet Hotels for the next year. If a UK listener, head over to Selfridge’s and shop Raden today. The Simba Hybrid. The most advanced mattress in the world. With a unique combination of two thousand five hundred conical pocket springs and responsive memory foam, it offers the perfect support for two people. A mattress that responds to you and your partner’s sleeping patterns. Delivered free, with a one hundred night sleep trial, free returns and a ten year guarantee. Start your free trial at simbasleep.com

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Hello and welcome back to the 20 Minute VC with me, Harry Stebbings, at H Stebbings with two B's on Snapchat. I always love to see you there and hear your thoughts and feedback on the show. However, to our guest today, and you all know I love doing the show, but it's episodes and guests like this with truly incredible and inspiring people that make me really appreciate just how far the show has come and really be thankful for being able to do it. With that in mind, I'm so honoured to have Mark Pincus on the show today. Mark really needs no introduction, but in the theme of tradition, Mark is a serial entrepreneur and investor, best known for founding little-known Zynga, the first company to introduce the mass market to social gaming. To date, more than 1 billion people around the world have played Zynga's games, which include the likes of Farmville and Words with Friends. Mark's also known for his investments in some of the internet's largest and most

• 0:44Harry Stebbings?

  successful companies, from Facebook to Twitter to Airbnb, Snapchat and Xiaomi, just to name a few. One of the earliest pioneers in social networking, Mark also founded multiple startups, including Support.com and Tribe.net, before going on to create Zynga. A fun fact, recognising the importance of social networking, in 2003, Mark teamed up with his friend, Reid Hoffman, the founder of LinkedIn, to purchase the fundamental Six Degrees Patent, which broadly covers social networks, in order to keep it out of the hands of patent trolls and guarantee that all players could innovate on this technology. I do also want to say a big thank you to Bing Gordon at Kleiner Perkins for the intro to Mark today, without which this episode would not have been possible. But before we dive into the show today, as I've said before in past episodes, after I had Josh at Raiden on the show, I bought

• 1:28Harry Stebbings?

  a Raiden, and we've discussed some of their awesome features previously, but there are also some other benefits that make it such an incredible product. It fits on every plane, my favourite for this, of course, being the carry-on. It also has an extremely strong, durable shell, and is super lightweight, and it comes with a free five-year warranty with free shipping and returns. And for those in the US, when you purchase your Raiden with the code 20VC, that's 20VC, at checkout, you'll get a $25 of Uber credit this season. That's enough to pay for the ride to the airport and back, maybe, depending on where you live. And for listeners in the UK, you can head over to Selfridges.com or Farfetch.com. I really cannot recommend Raiden enough, it's changed the game for me in travel. And speaking of super high recommendations, I'm sleeping particularly well at the moment. And before you suggest that's due to mojito consumption, all credit has to be

• 2:13Harry Stebbings?

  given to my new Simba hybrid. It's the most advanced mattress in the world with a unique combination of 2,500 conical pocket springs and responsive memory foam. It offers the perfect support for two people, a mattress that responds to you and your partner's sleeping patterns. Delivered free with a 100-night sleep trial, free returns and a 10-year guarantee. It's an absolute must and you can start your free trial at simbasleep.com. Likewise, if you follow me on Snapchat @HStubbings with two Bs, you'll see my love for both Simba and Raiden very visibly in our Snapchat stories. It'd be great to see you there. However, you've heard quite enough from me, so now I'm delighted to hand over to a legend of Silicon Valley, Mark Pincus.

• 2:56Speaker 01

  You have now arrived at your destination.

• 2:59Harry Stebbings?

  Mark, it's such a pleasure to have you on the show today, having heard so many great things from both Bing and Right at Outpost, so thank you so much for joining me today.

• 3:06Speaker 02

  Yeah, I'm happy to share whatever I can.

• 3:08Harry Stebbings?

  So I want to start the day with a little about you. And you created one of the first social networks in Tribe, maybe a little early, and you were then a seed investor in Facebook. So talk to me about this and what convinced you that 2007 was the right time to start a social gaming company?

• 3:24Speaker 02

  Well, I don't know if it was exactly the 2007 moment as much as. I think that in 2002 and 2003, a few of us started getting together and really thinking about the potential for a people web, a web that was about people connections and not page connections. And something that, in really building off of Napster, which I was a first investor in, a bunch of us saw this potential where the people become the nodes in the network and it's not about us having a one-way relationship with a bunch of databases. And Reid Hoffman and I got excited about that. We both, kind of at the same time, discovered Friendster and put up the original money for Friendster and both started our own networks, LinkedIn and Tribe. LinkedIn has done a lot better. And so we got the bug and got excited and

• 4:09Speaker 02

  we saw that there would be so many potential industries that would come from that. And it was through that experience with Tribe, I started seeing that fundamentally, all of these social Social networks or social experiences are cocktail parties. And they're hosting cocktail parties and they have different themes and flavors. And sometimes they're great and sometimes they're not. And what I saw is that people were enjoying hanging out with communities. And the whole time, my lesson with Tribe, there was lots of lessons. But the fundamental thing I saw was that people were kind of hanging out and I thought they could have more interesting things to do. And so the reason social gaming came about in 2007 really was that first Facebook and then the other social networks started opening up their networks

• 4:52Speaker 02

  because they saw the potential to bring more innovation more quickly to all their users. And so when Facebook opened up in May of 2007, there was this interesting opportunity for people to try lots and lots of kinds of apps. And I had always been interested in games as this interesting liquidity for these social marketplaces. And thought that poker, the first one I did, I thought could be this kind of always on bar, that everyone who wanted to hang out on Facebook or MySpace or any of these could go hang out in. That was the one piece. The other innovation that was unlocked by MySpace and Facebook and all these was the ability to really rapidly iterate and test and try out new ideas and get them to a potentially broad consumer audience and skip many, many steps.

• 5:36Speaker 02

  And even skip raising money because of it. And so you could, in a matter of days or weeks, be bringing an application out to a whole user base. And before that, it would have taken an entire company with venture backing. And it might be a year or two before you even got a product in front of a consumer.

• 5:55Harry Stebbings?

  Can I ask with that, I've had a lot of VCs on the show that suggest that we're in a fallow period for consumer due to the lack of available distribution channels with them being so expensive, with incumbents paying up for them. How would you respond to this fallow period for consumer? And do you think there really is a lack of distribution channel availability?

• 6:13Speaker 02

  That is a problem, but I wouldn't say that the problem is that there isn't distribution. I was listening to Evan Spiegel talk about his decisions in the early days to grow Snapchat. And everyone at the time thought it was amazing that he didn't base it on Facebook or even have a Facebook Connect option. He held up the phone and he said, you know, this is the most viral network that we've ever seen. And anybody can send anyone a text message or push notifications show up on their front screen and everyone's all connected. And it was just a good reminder that there is more people connected and with less friction and more ways to connect to each other than ever before, but we're not seeing a lot of organic virality occur. So that's why you can look at

• 6:56Speaker 02

  both sides of that question on distribution. The distribution is there bigger than ever, but there are not easy proven paths that people can follow. And maybe that's good because we don't want text messaging to get like email where people start ignoring it. These channels can open up, become valuable, then get overused and get destroyed in terms of their value to everybody. So the fact that that channel is so protected is probably why it's still valuable, but it's also why it feels impossible to get this organic growth like we've seen in the past.

• 7:25Harry Stebbings?

  Absolutely. You said there about the value itself. I did my homework and a little birdie, maybe called Bing, said to me that you have a very special talent in your realization and willingness to accept expected value, not loss avoidance, with your willingness to sell real estate at market rate. So tell me about this and your thesis behind this strategy and really when to cut your losers, so to speak.

• 7:47Speaker 02

  Well, there's a bunch of potential points or insights in that. And the first part of what you said, expected value over loss avoidance, it gets more to a desire and a need to instill cautious optimism into our teams and ourselves. And we need reminders. And I find that the more successful you get, the more risk averse everyone gets, or everyone knows that, right? And it feels like there's more to lose by doing something wrong and screwing up than there is to gain. And so the one thing that I try to ask myself and my teams is what will it look like if everything goes right? And let's make sure we're spending more time on what if everything goes right than what if everything goes wrong? So that's the first part of that

• 8:28Speaker 02

  point for me, expected value over loss avoidance, because I think you can waste a lot of time making sure that you don't do something stupid at the expense of doing something smart.

• 8:40Speaker 02

  On real estate and selling losers. I'm not sure what he was referring to other than I have purchased real estate, both personally and Zynga, the company bought our headquarters. And Bing has been a big proponent of that. And every time that we were making the purchase, the economics were not obvious. It did not look like an obviously smart investment or good deal. But if you believe that there will be a better future ahead, as there has been and isn't always, it ends up looking really smart in retrospect.

• 9:08Harry Stebbings?

  I'm really interested. You said about instilling cautious optimism within your team. I'd love to touch on the aspect of team and how you build world-class teams. And if there are any rules of thumb that you insert into hiring and managing that talent.

• 9:21Speaker 02

  Lots of different answers I could go into on that. First of all, on hiring and recruiting, I have a bunch of thoughts that have served me and some have not. It's also important to know your weaknesses. And so first I'll say, I have a weakness that I'm not very good at interviewing people. And I'm not good at asking those tricky questions and really figuring out who you are and how you'll do from an interview. And in fact, I try to tune to my own instincts on that. I have seen a few things that have really served me. One is, I like to hire people who have what I call broken resumes. So someone who has seen greatness, touched greatness, come close to greatness, but then fallen because things just didn't work out. I find that those people are more humble and curious and more hungry. They might have a chip on their shoulder and something to prove.

• 10:06Speaker 02

  Then they're more willing, because they've experienced some level of intense failure, they're more willing to come in and be ready to try new things and learn. And sometimes the opposite can be painful. If someone has such an impressive resume, they're almost doing you a favor by coming to work for you. And they're just going to walk around sharing their brilliance of what happened at Google or Facebook or wherever. And that can just be annoying to hear. And you kind of, in so many ways, you're trying to convince this team to take a hill that might seem impossible. And it needs extreme resourcefulness and creativity and willingness to fail a lot and try a lot. And so you have to be very present in mind and curiosity. And it's great to bring world-class experience.

• 10:50Speaker 02

  But not try to recreate those or rely on those. So all that is involved in this question of how do you hire and create great teams? And at the same time, wanting to bring in some weird quirky people and have a culture that allows for them. So that you get some good diversity of the people. Because as soon as you have a spec for who's the kind of leader person, you're kind of doomed because you're going to kind of be narrowing your DNA and not expanding your DNA.

• 11:18Harry Stebbings?

  I had a startup founder on the show the other day. He said that startups are hard enough. We need everyone thinking in the same direction like me. How would you respond to that sort of thought process?

• 11:28Speaker 02

  Well, there's one part of it I love and one part I hate. The part I love is, I think one of the ingredients that I think was really key to making Zynga successful in the early days was alignment. And we had such powerful alignment between the investors, first the CEO and founder vision. And not just vision for the product or company, but the vision of the way we wanted to play this out. We wanted to remain an independent company and never sell the company. And we wanted an investor base that wanted that kind of journey. And likewise, the kind of people who came in, we said, we're going to give you huge amounts of responsibility early on and credit and exposure.

• 12:11Speaker 02

  But this isn't going to be some kind of quick flip company or short ride. And it's been a long ride. Obviously, those people have been there 10 years now. So the first part of it I like of, I think that this alignment and having alignment with your investors is so key too. And your board and having everybody signing up for the same mission and journey turns out to be really powerful. Because one thing you don't realize until later, sometimes into to your detriment, is that even though you're hiring all these people and you're bringing in investors and board members and hiring your team potentially quickly, you're really bringing your constituents and stakeholders. And you're kind of creating this democracy of sorts. And they all need to be happy and in the boat. So if they came on really thinking they're signing on to some different program,

• 12:56Speaker 02

  you know, it's not going to help you when you face tough decisions. The part I don't love is you have to be careful as a strong founder and CEO not to just want to clone yourself and not to just want to bring in people who will think and act like you. You want them to share your vision and commitment intensity, but you're better off if they are bringing some additional DNA that you and others don't have.

• 13:21Harry Stebbings?

  I do have to jump on one element you just spoke about there being investor alignment. I'd love to hear your thoughts on this, maybe some lessons that you've learnt and how founders can really determine the strength of investor alignment when every investor often says the same.

• 13:33Speaker 02

  The two biggest lies around startups are founders saying, I don't care about the valuation and investors saying, we don't care about control. It's like dating and no one's being really honest and upfront with each other. And if they just were, they'd get to know much faster and when they should get to know. And when I was first raising money for Zynga, I started off by saying to investors, let me tell you the top 10 reasons you're not going to want to back us. And if you still want to talk after that, we will, but then we won't waste time. And 95% of investors thanked me and said, I don't want to meet. Thank you. And it's a little painful, but less painful than getting there after a bunch of meetings and engagement.

• 14:12Speaker 02

  And I said things like, I will always have an equal seat at the table and have some element of control in the company so that we can stay true to our long-term vision. We have no interest in ever selling the company, things like that that I put out. And we had very strong financial metrics, which is rare for a startup. And I didn't want to get false positives and it could have sounded arrogant, but I refused to share anything about our financials until very, very late in the process. And I just said, you'll have surprise and delight at our financials, but I don't want you to invest because of them.

• 14:44Harry Stebbings?

  I do have to touch on one thing you said there about the vision itself. And you've invested in many early-stage founders and aligning that to the vision. How do you balance between vision for the product roadmap, for the kind of meta landscape that you're painting? And then also comparing that to stubbornness when something isn't working, when product market fit isn't quite there. What's the balance to you?

• 15:05Speaker 02

  I don't think there is any single formula or balance. You're getting to just the heart of the top. Toughest part of what we all do and the way that I've thought about it and talked about it is that as entrepreneurs, we're on this long journey. And a lot of it is about self-discovery and self-awareness. And one of the biggest parts of it is, I think we all have to develop this ability to separate our winning instincts from our losing ideas. And when you can separate that, it can set you free. And so we have underlying instincts and I believe they're pretty much always right. And you're tuning to these instincts, you're just like, I know this makes sense and that the world needs this and doesn't have it. But you might be instantiating it as one particular idea. It's either bad or the only thing worse than bad is a B plus. An idea that is good, but not great is the worst thing because you're not going to fail with it.

• 15:50Speaker 02

  And you're going to get some positives back enough to keep going. And if that's based on a killer instinct that you just religiously believe in, that's kind of the formula for a lot of wasted time. And it's why you might almost succeed and not completely or not be the winner. So that's the tough part and you have to develop this intuition and be able to separate these and be able to see enough signs that your idea, you know, just isn't good enough.

• 16:14Harry Stebbings?

  Before we move into the quickfire round, I do have to touch on that winning instinct, losing idea. What would you say is your biggest winning instinct and then your biggest losing idea?

• 16:23Speaker 02

  Well, you know, I had, I think, a very, very big winning instinct around this people web. And it started when I invested in Napster in probably 1999 or 2000. And I had this, it was like my matrix moment when I first got on Napster and it said, there's four and a half million people or computers connected to you right now. And there was no Barry Diller branded, you know, mash.com database in the middle of all of us. We were just connected to each other. And that's when I saw more of the potential of what this internet could be like and far more power. And that led to me starting Tribe and started Tribe and, you know, other things that were more successful.

• 17:02Speaker 02

  But that instinct around this network that can allow people to connect in life-changing ways, that was the biggest instinct. And the most failing idea was Tribe. I stubbornly stuck with one iteration on a social network for four years and I got it so wrong. It's so painful to me to think that I tried one iteration of this and it was clearly wrong and I just stuck with it. And I could have tried in four years. I can't think of how many more I could have tried. And that lesson was burned into me. And I think so much of success today is starting with a winning instinct, but then testing more good ideas in a week than the rest of the industry does. And it's not so much that you're competing in a zero sum way.

• 17:44Speaker 02

  It's that we're all innovating in a much more integrated way today. And if you're not learning from what everyone else is doing and then learning quickly on your own, the world doesn't stand still. And even if you get to the right idea once, chances are it'll eventually be wrong and you won't be the one to figure that out. So that's the key learning that I got wrong with Tribe and then got right in the Zynga model and aided by the fact that we could be one of the first app companies and test so many ideas so quickly before we had to build a whole product.

• 18:13Harry Stebbings?

  But Mark, we're going to dive into a quickfire round that we call the 60 second quickfire round. So 60 seconds per answer. How does that sound? Are you strapped in?

• 18:21Speaker 02

  All right, let's try it.

• 18:22Harry Stebbings?

  So favorite book and why? What must I read?

• 18:25Speaker 02

  Ready Player One because it's by far the best way to visualize what this virtual reality, virtual world future could look like.

• 18:34Harry Stebbings?

  What's an investment that you passed on that still haunts you to this day? That one was from Bing. I take no credit for that one.

• 18:40Speaker 02

  I don't know that it was offered to me, but Square, when Jack Dorsey was walking around the hallways at a conference with a dongle and I thought I was too busy.

• 18:51Harry Stebbings?

  What about the biggest mentor to you and how did that relationship come about?

• 18:55Speaker 02

  I wouldn't say I've had a single mentor, but I've had some amazing teachers. And Bing Gordon has been an amazing teacher to me. And we met because his company EA was going to sue my company. And he wasn't even supposed to be in the room. It was just a bunch of lawyers. And I walked in not talking about legal stuff. I talked about how social gaming could be EA's new Walmart and distribution. And then Bing and I connected over that. So it was also a lesson in playing the game you want to play, not the one that's offered to you. And then the other, John Doerr has been an amazing teacher to me for years. He's taught me that venture investors and board members really can differentiate. themselves by showing real courage and leadership.

• 19:32Harry Stebbings?

  Tell me about a story that was an inflation point in your life and how it changed your thinking.

• 19:37Speaker 02

  There's been a bunch or a couple I can think of, but one is I read this book in nineteen eighty nine called Microcosm by George Gilder. And that changed my thinking about the whole future. And and his hypothesis was that it seems obviously obvious now that that this microchip and this network would be in everything around us. And would change our physical world in a more profound way, even than we were seeing at that time with with software.

• 20:01Harry Stebbings?

  Career highlights so far and why many more to come, but so far what's been the pinnacle?

• 20:06Speaker 02

  Well, Zynga by far, I guess, obviously, but it's been.

• 20:10Harry Stebbings?

  Is there a moment though where IPO, where specific brand of financing, where a specific number of users, where it really hit you that you'd made it so to speak with Zynga?

• 20:19Speaker 02

  There's been a bunch of moments and they're all around product releases. And there's no greater high that at least a consumer founder or product creator can have than seeing that people love your product. What we call a bold beat, like a major feature release. And we used to say it was like Christmas morning when we were when we turn on a feature and you would just see everything light up. The metrics would move in a step function way. Twitter would light up with people talking about it. And running into somebody on an airplane or somewhere who's playing your product and feels this intimate connection to you. Because they're really loving some feature that you really thought of on a whiteboard and designed and put out.

• 20:58Speaker 02

  And it's I've also said it feels like communion, like you feel this amazing connection with a lot of other people.

• 21:05Harry Stebbings?

  I want to finish on the final question. What does the next five years hold for you, Mark? What does the roadmap look like?

• 21:11Speaker 02

  I wish I could tell you.

• 21:12Harry Stebbings?

  It's like an interview question. I'm so sorry.

• 21:15Speaker 02

  Right, or a dating question. I don't know where I just follow things that interest me intellectually and emotionally. And and I'm always looking to get outside my comfort zone and to grow. And I tend to think most of the things that I get excited about seemed flaky to other people at the time. And so, you know, people were embarrassed for me that I was doing a Facebook app company in two thousand and seven. And and I hate to tell you, but now. I got involved with cryptocurrencies and Bitcoin early and then I thought it was too early and maybe it wasn't gonna happen and now I'm completely drinking the Kool-Aid and I'm completely enthralled by just the potential of cryptocurrencies to get us to a post-capital, post-investor world and just even a post-corporation world. So I'm gonna

• 22:00Speaker 02

  sound like super flaky again, but and I know it's also kind of, it's unfortunate to really get excited about something at the same time it's becoming a bubble.

• 22:07Harry Stebbings?

  No, I completely agree and and thank you so much Mark for coming on the show today. As I said, I heard so many great things, both from Bing and from Wright, so it really has been fantastic.

• 22:16Speaker 02

  Yeah, well, I'm happy to participate and I love the 20-minute format.

• 22:22Harry Stebbings?

  What a legend and I have to say, of all the shows we've done, that one really was a very special one for me. And if you'd like to see more from Mark, you can find him on Twitter at MarkPinc, P-I-N-C. And you can see more from us behind the scenes at the 20 Minute VC on Snapchat at HDebbings with two Bs. Again, I'd like to say a huge thank you to Mark for giving up the time today to be on the show and a big hand to Bing Gordon at Kleiner Perkins for the intro to Mark today, without which the episode would not have been possible. But before we leave you today, as I've said before in past episodes, after I had Josh at Raiden on the show, I bought a Raiden and we've discussed some of their awesome features previously, but there are also some other benefits that make it such an incredible product. It fits on every plane, my favorite for this, of course, being the carry-on. It also has an extremely strong, durable shell and is super lightweight

• 23:05Harry Stebbings?

  and it comes with a free five-year warranty with free shipping and returns. And for those in the US, when you purchase your Raiden with the code 20VC, that's 20VC, at checkout, you'll get a $25 of Uber credit this season. That's enough to pay for the ride to the airport and back, maybe, depending on where you live. And for listeners in the UK, you can head over to selfridges.com or farfetch.com. I really cannot recommend Raiden enough. It's changed the game for me in travel. And speaking of super high recommendations, I'm sleeping particularly well at the moment. And before you suggest that's due to mojito consumption, all credit has to be given to my new Simba hybrid. It's the most advanced mattress in the world with a unique combination of 2,500 Conical Pocket Springs and responsive memory foam. It offers the perfect support for two people, a mattress that responds to you and your partner.

• 23:50Harry Stebbings?

  Partner sleeping patterns delivered free with a hundred night sleep trial free returns and a 10 year guarantee it's an absolute must and you can start your free trial at simbasleep.com likewise if you follow me on snapchat at H Stebbings with two Bs you'll see my love for both Simba and Raiden very visibly in our snapchat stories it'd be great to see you there as always I so appreciate your continued support and I cannot wait to bring you Wednesday's episode