Find Your Partner

Bigger and Better

Reisman's not alone. Now the big news in the arena is that branding is crucial--it takes a name and a sizable amount of consumer mindshare to win eyeballs, and getting there is an expensive proposition. The days when a little start-up could pretty much go it alone the way Yahoo! and did are waning, and a new philosophy is taking hold: "If you're a small, you have to build alliances with bigger companies. You have no choice," says Philip Anderson, an associate professor at the Tuck School of Business at Dartmouth College in Hanover, New Hampshire. "You need to build share fast, and that means you have to leverage more resources than you can get your mitts on by yourself."

Jim Datovech, 45, president of ComVersant, an e-commerce consulting firm in Gaithersburg, Maryland, adds, "Speed to market is critical today, and that's why alliances make so much sense. An alliance brings more strengths together."

Back at Petopia, Reisman heartily concurs because, besides providing money, the partnership with Petco transformed Petopia into an online bruiser overnight. "This partnership gives us so many advantages," says Reisman, who ticks off a few:

  • "We get better pricing on products because we're pooling our procurement with theirs.
  • "Every Petco store will feature marketing materials for the Web site, and we'll have access to its database of five million customers.
  • "We're using [Petco's] distribution centers, so we can get products to customers more efficiently.
  • "We're doing our media-buying in conjunction with Petco, so we'll get better deals on advertising."

The ironic punchline to Reisman's good fortune in snaring Petco as a partner is that she didn't even seek out Petco; it came to her. "They'd retained [investment banker] Morgan Stanley to help them select an online partner, and Morgan came to us."

She didn't spurn the overture. And, very quickly, the conversations got down to the nitty-gritty of how much money Petco would put into the business and what it expected in return. The deal took three months to finalize, but when all the papers were signed, Reisman says she got just what she wanted: "We remain an independent company," she says. "Petco's share is less than 20 percent of the equity, so we can sell different products at different prices. They are a partner, not the owner. We retain complete freedom to run this business. Petco is good at bricks and mortar; we're good at the space, and its management knows that."

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This article was originally published in the February 2000 print edition of Entrepreneur with the headline: Find Your Partner.

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