SCVNGR Founder Burns His Ships and Takes on Groupon

Alexander the Great once set his own warships ablaze to ensure there would be no backing down from a pivotal attack on the Persian army. It was either conquer the enemy or swim home. Nearly 2,300 years later, SCVNGR founder Seth Priebatsch isn’t looking to take over the world. Instead, he wants to build game layers atop it. But he wants to follow Alexander’s example just the same, and he’s already making money doing it.
“I’m a big believer in that ‘burn your ships before facing the Persians’ metaphor. If you’re going to do a startup, don’t half-ass it,” says Priebatsch. Rather than igniting a fleet of ships, the SCVNGR founder dropped out of Princeton at age 19 to try to create a similar high-stakes, all-or-nothing atmosphere for his startup.
Now 22, the Boston-based entrepreneur — who describes himself as “extremely unbalanced” — often sleeps in his tricked out, 26,000-square-foot, industrial office space, which houses his 44 employees (and 30 summer interns) and comes complete with moving walls and nine bamboo gardens. He has no girlfriend, no dog, not even a goldfish. “I do have a pet robot,” says the startup founder,” but I don’t have to feed it.”
And while he probably won’t be invited to speak at any seminars on work/life balance any time soon, it’s hard to argue with the results his focus has achieved. Eighteen months after its launch, the Google Ventures-backed startup is doing something few venture-backed startups are doing: making money. According to Priebatsch, the company made its first million dollars in revenue over a six-month period in 2010, and matched that within the first six weeks of 2011.

In a nutshell, SCVNGR tries to deepen experiences at locations by creating simple game-like challenges for its members when they check in.  It now has more than 3,000 enterprise clients — from Coca-Cola (s ko) to the U.S. Navy — that are building challenges for users on the mobile platform. And while large corporations pay to use the SCNVGR platform, consumers and small businesses can build on it for free, although that might change as the company looks to add new features.
Meanwhile, Priebatsch has also been forging ahead with a second venture to build a “deal-layer on top of the world.” With LevelUp, SCVNGR is competing with local deal programs like Groupon and Living Social by offering a series of three deals to consumers, who unlock each one as they try out a business. Encouraging customer loyalty is radically different new twist to the daily-deal market.
Two months into a pilot program in Philadelphia and Boston, LevelUp says it has about 200 SMBs offering deals to 100,000 registered users, divided equally between the two eastern cities. The company said its high-watermark for a daily deal has been 1,400 takers. “By volume, we are already in the top three players in Boston and Philadelphia,” Priebatsch said. “[On] any given day, it’s Groupon, LivingSocial, LevelUp … which is pretty sweet.”
Although he wouldn’t say how many people have purchased from the site, the company did share some initial data on customer loyalty and its new daily-deal offers: 50 percent of LevelUp users who have purchased Level 1 have ‘leveled up’ to Level 2, it said, and 20 percent of users who have purchased Levels 1 and 2 have already ‘leveled up’ to Level 3.
Priebatsch says he knows LevelUp is having some success, because it’s irritating his competitors. “I always know I’m doing my job right when I get hate mail from people whose businesses I’m affecting,” he said. “When we launched LevelUp and three weeks in I got hate mail from some of the folks at Groupon and Living Social … I was like, ‘check. Doing my job.” The emails weren’t mean, he added, but were evidence that “we are causing disruption in Boston and Philly.”
And what about his unbalanced approach to this competition? “If you are a 20-something and you’re just dropping out of college, be balanced later,” he said. “Now is the time to be completely lopsided and run with it.”
Post and thumbnail photos courtesy of Flickr users Steve Evans and Tech Cocktail