One mile north of Zynga’s (ZNGA) shopping mall-size headquarters in San Francisco, a dozen employees at JuiceBox Games crowd into a single-room office with one window and Ikea desks. They’re building a smartphone card-collecting game called HonorBound, which will compete with Zynga’s War of the Fallen and similar mobile offerings when JuiceBox launches it this summer. While the company has a fraction of the team and budget typically required for such a project, its three founders worked together at Zynga before striking out on their own last year. “We’re able to take risks that other companies may not be interested in taking,” says JuiceBox Chief Executive Officer Michael Martinez.
While Zynga struggles to reinvent itself as a mobile game maker, it’s encountering growing competition from former employees. Frustrated by the publicly traded company’s 3,000-employee bureaucracy—not to mention shrinking sales and a falling stock price—many of its top product managers have left for startups. “To be reminded what it’s like to create something as fast as you can and work with a small team of people you adore and trust—there’s nothing like that,” says Mike Verdu, Zynga’s former chief creative officer. A veteran PC game developer who joined Zynga in 2009, Verdu last month unveiled his company, TapZen, which combines Zynga’s free online model with games tailored for tablets.
Besides JuiceBox and TapZen, at least four other game startups have been created by Zynga defectors since the company’s initial public offering in December 2011. Last year former Zynga engineering director Amitt Mahajan, one of the architects of megahit FarmVille, founded Red Hot Labs, which has attracted $1.5 million from venture capital firms including Andreessen Horowitz. (Bloomberg LP, parent company of Bloomberg Businessweek, is an investor in Andreessen Horowitz.) Bee Cave Games, headed by former Zynga general manager Erik Bethke, is pushing Blackjack Casino. Bret Terrill, a former Zynga M&A manager, founded 12 Gigs, which makes Slots Heaven. Paul Bettner, who sold startup Newtoy to Zynga in 2010, plans to develop games for Ouya, a $99 console that runs on the Android operating system.
Zynga CEO Mark Pincus’s emphasis on empowering young executives to act as if they’re running a venture or game studio may have contributed to the diaspora. “One of the greatest measures of the success of our company is the progression of our people as leaders,” says Colleen McCreary, Zynga’s human resources head. “We encourage people to pursue their passions, regardless of where it takes them.” Zynga’s financial difficulties have hurt its focus on developing innovative games by tightening the reins on designers, says former chief game designer Brian Reynolds, who left earlier this year. “It’s hard to go experiment and not have somebody always ask you when will you be done,” he says.
Red Hot’s Mahajan helped start the Red Dog Group, a collection of former Zynga executives who hold Skype (MSFT) chats and meet about once a month to talk shop. The group, whose name is a nod to Zynga’s logo, shares tips on how to raise money from investors and how to improve mobile-user experience. “We’ve all come out of this really strong with the ability to run some companies,” says Roger Dickey, the creator of Zynga hit Mafia Wars, who left the company in 2011 to invest in startups. Zynga managers received training on how to use data analysis to build viral hits and take in more money from virtual goods, he says.
As TapZen’s Verdu builds his own games from scratch, he wishes he had the large computer systems Zynga provided him to run games through analytical tests. “I crave their access to analytics,” he says. “I do miss having all that infrastructure that makes life easy.” His former employer has given him another leg up, though: $10 million in seed money. In return, TapZen will let Zynga “take advantage of any breakthrough we make,” Verdu says.
The bottom line: Zynga managers are taking the company’s strategies, and sometimes its money, as they leave to launch their own game startups.
