Before Zynga, Pincus Thrived as Investor

Posted by: Rachael King on December 12, 2011

By Douglas MacMillan

As Mark Pincus enters the final days of Zynga’s road show, he’s aiming to sell investors on the prospects for the social-gaming startup, set to raise $1 billion in an initial public offering later this week.

It’s a reversal of roles for Pincus, a finance whiz who once worked as an investment banking analyst and who has, over the past decade-and-a-half, amassed a portfolio of early investments in some of tech’s hottest startups.

Pincus is one of the earliest and most consistent backers of social media. Through an acquaintance with Peter Thiel, Pincus got a chance in 2004 to participate in the first outside funding round of Facebook, as I wrote in a profile this week.

According to Thiel, Pincus and Reid Hoffman were the only angel investors who were interested in taking a chance on the startup at the time. Pincus was also an investor in Friendster, the social media pioneer that was quickly overshadowed by MySpace and Facebook. While that bet soured as Friendster fizzled, Pincus may fare better from his stakes in three social-Web up-and-comers: Twitter, Buddy Media and LikeALittle.

A few of the bets placed by Zynga founder have already paid off. Impulse Buy Network, an e-commerce service provider, was acquired in 1999 by Inktomi for about $112 million. Spam blocker Brightmail, another Pincus investment, was bought by Symantec in 2004 for about $300 million.

Other startups he’s backed include Napster, Xoom, Seesmic, Grockit, EVDB (later renamed Eventful), Technorati, Feedster, Socialtext, Nanosolar, Mahalo and 360buy.

Pincus is also an avid investor in the public markets, and has described his investing strategy on his blog. “I love investing, especially in public securities where you get an immediate score card of how you’re doing,” he wrote in 2005. “My reality is that I will always be a macro investor, meaning I invest in big picture themes rather than based on detailed fundamental analysis.”

He got in on Google’s IPO in 2004, a bet that has netted fivefold returns. In 2005, he recommended buying Amazon.com and shorting eBay, writing, “it seems clear that Amazon should one day be worth more than eBay.” Six years later, Amazon’s $86 billion market cap is more than double eBay’s. Pincus also bragged in 2007 that he sold Yahoo when the stock was trading at $32. It’s now trading at less than half that.

Pincus is not one to shy away from sharing investing insights. In late 2002, he called his friend and fellow tech entrepreneur Auren Hoffman, advising him to buy shares of Corio Inc., a little-known software outfit then trading at about 50 cents. Hoffman shrugged off the stock tip, and then watched as Corio shares rose seven-fold over the next year. It was later bought by IBM.

“He’s incredibly perceptive financially — much more so than any tech entrepreneur I know,” says Hoffman, who now runs Web analytics firm Rapleaf. “You should always bet on Mark.”

Reader Comments

Patrick

December 13, 2011 3:36 AM

Is Business Week just re-printing PR puff pieces for banks when they IPO new stock? Where's the Journalism?

>> Did you interview the founders of these companies he 'backed' to see what his VC involvement was? D
>> Did you research all of his investments to see which one's went sour and what his total win / hit ratio is? >> Did you research what other businesses he'd set up and their outcomes?

- Pincus may be a good entrepreneur, and Zynga may have better prospects than most social IPO's but a little more depth to your journalism would help.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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