How Zynga Boston’s Shutdown Birthed Proletariat, a New Mobile Studio

3/12/13Follow @curtwoodward

They don’t look any different from the other people packed into this buzzing shared work loft, just a few blocks from MIT in the heart of the Boston area’s startup scene.

Amid the funky couches, bright-colored walls, two-liters of soda, and Nerf guns awaiting battle, they’re just another five guys sitting at a long table, coding and designing and hammering away at their keyboards.

It’s what got them here that makes things a little more interesting.

This group, working under the name Proletariat Inc., is made up of former employees of Zynga Boston, the studio formerly known as Conduit Labs that was acquired in 2010 and unceremoniously shut down last October.

It means that, although their company is just a few months old, the Proletariat crew has already been on a veritable roller coaster ride with one of the Web’s next big things. It’s almost an entire career’s worth of craziness: An industry leader bought their company, went public, stumbled over a huge shift in consumer behavior, and showed up out of the blue one Tuesday morning to fire them all in a desperate bid to cut costs.

The whole thing took a little more than two years.

“I could go with never having [the layoffs] happen to me again. But I would love more acquisitions and IPOs. That was fun—I was okay with most of that stuff,” Proletariat CEO Seth Sivak says with a rueful laugh.

Now, as they work alongside other tech entrepreneurs at Intrepid Labs in Cambridge’s Kendall Square, the small team at Proletariat is on a new mission: To make what they want, working with their friends, for gamers like them.

Not a bad way to spend the severance check from the big company that dumped you.

When Zynga purchased Conduit Labs back in August 2010, it bolstered a sense of optimism about the Boston technology startup scene.

Zynga was the first company to make serious of money on top of Facebook, and looked for all the world like an enormous company that had unlocked an entirely new way of publishing games. The fact that it reached out to Boston to add to its fast-growing roster of talent showed that this second-tier tech hub might have a place in the next boom.

(Zynga never said how much it paid for Conduit. The Boston Globe reported that the deal was an all-stock transaction, and Conduit was one of six smaller acquisitions Zynga made in 2010. In its IPO paperwork, Zynga said those six deals cost it a total of $22.1 million in cash, along with stock valued at $26.3 million. Some key employees also got retention bonuses for staying, as is normal.)

The buyout would also serve as a big education for the Conduit folks. They were whisked away to Zynga headquarters for intense training on the new bosses’ ways of running games as a live, constantly evolving service on Facebook—something not well understood by other companies at the time.

“I learned more in that six-week period than I had in the previous six months of building games on Facebook,” Sivak says. “They had perfected it at that point, and they were dealing with huge scale, and really understanding what was going on.”

Sivak and three other eventual members of Proletariat, along with Conduit founder Nabeel Hyatt, made the original pitch to the Zynga brass for the game that would become Adventure World, which would later be branded with the “Indiana Jones” characters.

It was a very heady time. Zynga was making money on players who would flock to its games for free but stick around and spend money on little extras, or “virtual goods,” that would enhance their gameplay—extra nails to help build a barn in FarmVille, or bullets to take out the enemy in Mafia Wars.

In mid-2010, Zynga raised $300 million in private financing from Google and Softbank. Outside analysts said it was on pace to make up to $500 million in revenue that year. The company was all of three years old.

“If you wanted to make the biggest games, to be seen by the most people in the world, you had to be at Zynga. In the summer of 2010? There was no question,” Sivak says. “People ask me now, `Why did you choose to go to Zynga?’ It was a totally different mentality back then. Zynga didn’t have nearly the same stigma that it does these days. Back in 2010 it was this massively expanding thing. If you were in the game industry, it was like, `How are these guys doing this?’”

The former Conduit team, he says, bought in to the new company and worked hard to show that they were serious about helping, not just parading into the new headquarters as triumphant winners of the startup lottery.

“We would meet once a week and everyone would kind of go around and say what they did that helped out someone at Zynga this week,” Sivak says. “We were a team that was there to learn and work and make this company better.”

As the Boston team went to work on Adventure World, Zynga continued its march toward the public markets. It raised another $490 million in private financing in early 2011, and filed its IPO paperwork in July, seeking to raise about $1 billion.

Adventure World would launch in early September 2011, as Zynga was ramping up for its public stock-market debut. The Indiana Jones branding deal would come later, and Adventure World would end up being a moderate success for Zynga—not on the level of its biggest games like FarmVille, but a definite money-maker, Sivak says.

In December 2011, Zynga started selling its stock on the Nasdaq, but … Next Page »

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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  • Drew Hession-Kunz

    Boston- 2nd tier- come on, Curt, Austin is 2nd tier, Boston has 25% of the market, and has more startups per capita than silicon valley

    • curtwoodward

      I guess in my formulation Austin would be third or fourth tier ;) Not meant to be a slight against the Boston area of course, but I will say that’s the general consensus nationally – the “first tier” being occupied solely by SF/Silicon Valley.

    • jim

      @drew its not about Boston or Austin …its about the article and this great startup story…I love how people always find a way to make things about themselves

  • fjcmclgm

    Boy did Zynga plow through the game community and leave a wake of carnage and failure. I’ve heard the folks in Baltimore are heart broken after Zynga just swooped in and fired them all. What a wonderful company.