Find Your Partner

Everyone's Doing It

Reisman is just one of countless entrepreneurs rushing to embrace large partners in the dot.com world. Another case in point: Last August, Toysmart.com, based in Waltham, Massachusetts, closed a deal where Walt Disney Co.'s Buena Vista Internet Group took a controlling interest in the dot.com start-up. Exactly what Disney paid for its slice of the virtual toy store is undisclosed, but, says Toysmart.com's 34-year-old president and CEO David Lord, as important as Disney's money is, it wasn't the deciding factor. "We had a great venture capital syndicate put together that was ready to fund us," says Lord. "Money wasn't a problem for us. We decided this based on other factors."

Like what? "The Disney brand is powerful, and, with Disney, we're getting premium [advertising] space on its Web sites that we couldn't get if we weren't part of the family. We fit into Disney's strategic vision, and that will help us really grow this business."

Lord also offers insight into the deal Toysmart negotiated, and it includes two crucial elements:

  • "We insisted that the deal had to be approved at the highest levels of Disney," says Lord. Why? Lower-level execs come and go; their clout rises and falls. If a little business is dependent on an executive who falls out of favor, it too can see its luster diminish in the eyes of the larger partner.
  • "Our contract says we only sell good toys. We do not sell all Disney toys, and there is no pressure on us to do so," says Lord. "We are passionate about what we're delivering to our customers, and that attracted Disney. It understands and supports our passion."

Does Lord have regrets about selling a huge chunk of his business? "You always have hesitations about going into a deal like this," he says. "Earlier, we had talked with Toys "R" Us and went down the path [toward a part-nering] fairly far with them. But we decided we couldn't live with the deal, so we walked away. With Disney, there weren't any deal-breakers. There were only signs telling us to go forward because it will really help us grow."

Another take on the benefits of partnering with a big company is offered by Michael Franz, 46, chairman and CEO of HotOffice Technologies, a Boca Raton, Florida, developer of virtual intranets for small businesses. Last August, Franz closed a venture round that included $6 million from Staples, plus an agreement by Staples to market HotOffice to its customers. "By ourselves, we're one thing. With a partner like Staples, we're a very different thing. Customers trust us much more because of our partnerships. It makes us seem more reliable."

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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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