Choosing the right kind of business partner…

This is a follow-up post to a prior discussion on partnerships in The Beauty of Partnership

Choosing a business partner can be the most important decision you can make for your start-up, since it truly is a long-term relationship that is hard to get out of if things turn South. Many people say it’s like a marriage of sorts, and I would have to agree. You share the ups and downs and all the financial responsibilities and ownership with your business partner, and if you pick the wrong partner, it will be a rocky ride.

Seth and I have been working together since leaving Citigroup in June, and it’s been fun and tumultuous. In the midst, we attempted to bring on two additional partners (one at a time) and saw the negotiations deteriorate in final stages. We were incredibly disappointed with these developments, since we put a tremendous amount of time, energy, and money into making these deals happen. However, in retrospect, this was the best thing that could have happened for our business.

So why take the risk of bringing on another partner to help run the business? We took the risk because we thought that with another (and older) partner, we would be in a better position to raise money from outside investors, establish credibility with potential business partners, and have the guidance from somebody who had been through the start-up mill before, all leading to a higher valuation for our company. We thought that these benefits would outweigh the risks if we chose carefully.

So if you decide the risk is worth it, how do you choose such an individual? This answer is not simple. It’s hard to know if a good friend would make a good business partner. However, I believe you have the best chances of picking a good business partner if it’s somebody you already know and trust. But a business partner cannot be just any friend. This is not a friend who you used to get drunk or play sports with in college. It is a friend who has the same work ethic as you do. More importantly, this is a friend who has no qualms about telling you when you’ve messed up. This honesty and openness, critical in any business relationship, is often found in very close friendships; all the groundwork for a successful partnership already exists. This is why I believe that a close friend who meets these criteria has the potential to be a better business partner than anybody you might find elsewhere.

Bottom Line: Choose any partner carefully. You’re giving up a lot (equity/control), so make sure you’re getting a lot in return. If there is a pre-existing relationship, all the better. Make sure there is a sufficient level of trust, openness and honesty. It is also critical that all partners share the same vision for the company and a similar work ethic to help the company achieve its long-term goals. Without these critical aspects, the partnership will deteriorate more quickly than a Las Vegas Marriage. I do not claim to have the answer on this topic ans would to love to hear your feedback on this subject, so please feel free to share you comments and experiences.
JT

Follow-up meeting with magazine publisher

Seth and I went uptown today to meet with one of the large magazine publishers I had been speaking with about our rewards program and the opportunity to offer it to them and their subscribers to bolster loyalty and revenues. I had met with them a couple months ago after some phone calls when I presented the initial concept and business proposition to them. They seemed intrigued with what we were doing and wanted to set up another meeting in April. So we went back in to give them additional information on how the program would work for one of their larger magazine titles.

The weather was terrible and I made the mistake of taking a cab up 8th avenue. I thought I left plenty of time with 20 minutes to go 30 blocks in a cab. However, I arrived at my destination 45 minutes and $20 later. Like I said, a huge mistake. Seth was in another can and got to their offices only 10 minutes late. I told him to go up and start without me. Not the best way to kick things off. I was frustrated and upset that I was late to this meeting and apologized profusely to all parties involved upon my arrival. Anyway, we made a presentation to three senior executives in their marketing department and discussed the functionality we would provide for their program by showing them our own rewards program at iBakeSale.com. They seemed to be pleased with the hundreds of big name merchants we already had in the program. At the end of the meeting, we answered some specific questions they had about costs, payments etc. and left the meeting feeling pretty good about how it went, minus the fact we were 20 minutes late.

Seth and I found a cafe near their offices to recap on the meeting and felt ok with how the presentation went. We were obviously pissed at ourselves for being late to the meeting and only hope that it won’t hurt us in the grand scheme of things. So far, our persistence and our unique value proposition seem to be working out pretty well for us. We just hope that it we come out on top at the end of this process when the publisher makes a decision between us and 4-5 other providers over the next month. We’ll keep you posted…

Bottom Line: Persistence and flexibility have stood us in good stead so far. Follow-up is crucial. Always find a way to engage in a conversation with your prospective customers. Built that relationship and follow-up frequently (no more than once a week). My goal is to be persistent but not annoying. A fine line to tread I know, but we’ll just have to see how it pans out…

JT

Now presenting iBakeSale.com…

Seth and I have been debating for awhile now about the pros and cons of using the OnCard Marketing name for our consumer program. We’ve debated everything from OnCard Marketing, OnCard Rewards to OnCard Community. We settled initially for OnCard Community and even created a logo based off of the OnCard Marketing logo (see www.oncardmarketing.com). We were using that logo on the initial site design for about two weeks and were even able to sell merchants into joining our program under the OnCard Community name. However, we got to thinking about our consumer brand and decided that it was not a good idea to use OnCard anything. The main reason is that we don’t own the URL for OnCard. An Australian credit card company owns the website address for www.oncard.com, which is a huge bummer for us. Luckily, we already have the trademark for OnCard in the U.S. and they don’t have any presence outside of China and Australia.

Nonetheless, we are stuck in a dilemma where if we call the rewards program OnCard Community, consumers (with their very short attention spans) will shorten the name to OnCard, and then if we get lucky and people actually tell all their friends about OnCard, people will end up on the wrong website confused as to how they were told to sign up with a company based out of China. So, we decided that it would be best to keep the OnCard Marketing name for merchants and create a uniquely branded name (and logo) for our first rewards program, one that reflects the focus on grass-roots fundraising and community giving. I spent hours on GoDaddy.com pouring over hundreds of domain names, emailing lists upon lists of possible names to Seth. Most of them I have to admit, were garbage. But out of all that rubbish, iBakeSale was born.

We like it because it is fun and conveys a sense of community, fundraising, grass-roots organizations, and alludes specifically to a common community fundraising activity (i.e. the bakesale) that we are looking to replace with a more tech-friendly way to shop and save for organizations near and dear to our consumers’ hearts. This could include school PTAs, religious organizations, little league and other sports teams, extracurricular school activities, as well as small to medium size charities looking to increase their fundraising efforts, for free. We are currently knee-deep in tech development and should hopefully be done by end of April for the general public. We will begin testing it on a small scale this weekend. Will keep you updated as we near launch of the program…

JT

Building our network with LinkedIn…

When we started OnCard Marketing a few months ago, Seth and I were fresh out of Citigroup with a list of contacts that consisted mostly of friends and fellow financial services professionals. We absolutely had scarce few people we knew in media, advertising, non-profits, publishing, PR, law, accounting, etc. However, we realized very quickly how important networking was to reach the right people we would need to help grow our business. One of my friends suggested LinkedIn to me back in July. I had never heard of it but quickly found out that it was a rapidly growing professional social network or people in business spanning lots of different industries. It was free to sign up, so Seth and I joined the network. We started building our network with friends who were already using LinkedIn and gradually expanded it to business contacts and then even to prospective business partners, new recruits, vendors, etc. It has absolutely been an invaluable tool for us as we constantly look to expand our network and bring the best talent to our company that can help us grow. I have to believe most entrepreneurs would have to agree.

Bottom Line: If you’re just starting out as an entrepreneur, joining LinkedIn is a must. It’s free and will help you get in touch with many people who can help your business. You can sign-up at http://www.linkedin.com

JT

The beauty of partnership…

Seth and I have been working together for some time now on OnCard. The one thing I realize is how much I appreciate having a partner with whom to share the experience (and all the work). I realize how much work there is to do to launch a new business, ranging from sales, marketing, technology, operations, finance, book-keeping, legal, PR, vendor relationships, etc. The list goes on. This is a lot of stuff for one person to do. Starting a business from scratch is hard enough for two people. I can only imagine the pain that would be required to start a business like ours from scratch with only one person. There are companies out there that are started by one person, but I have to imagine that doesn’t last for long. As in our situation, Seth and I have different skill sets, and I am hard-pressed to believe that one entrepreneur has both the time and abilities to handle all these critical responsibilities.

I think that partnerships can be a double-edged sword. Having partners means that you need to share decision making responsibilities, which is not normally desirable for some entrepreneurs. Many business owners like to be the one in control, but that is neither optimal or feasible for most start-ups.

If our situation, Seth and I always talked about going into business together. We are close friends from college and have always gotten along well. However, people warned that going into business with a friend would mean the end of that friendship. Luckily for us, that does not seem to be the case. It has actually worked out very well for us, because we have that long-standing friendship. We both feel that if only one of us had started this business, it would have been incredibly isolating and lonely, and we wouldn’t have had the support structure to get through the hard-times. Also, having a good friend to share the experience with has made it all the more fun and rewarding.

Some people say that they’d rather struggle alone than risk bringing on the wrong kind of partner. I agree with that rationale to a point. However, if you bring on the right partner, I believe you increase the chances of success for your start-up exponentially, or at least that is what Seth and I hope is the case with our start-up.

In fact, things have worked out so well so far that we are considering bringing on an additional (third) partner to help run the company. This will be a trickier decision because we will not have the pre-existing level of trust that goes with knowing this guy from college. This will be a challenge and will require some good advice by others who we know have been through this process before. We’ll just have to let you know how it plays out…

JT

More bites from magazine publishers…

I’ve been following up with the hundreds of ad sales folks at these various magazine publishers. I’m sure by this point I am beginning to annoy a few people. But I guess that’s the fine line I need to walk when trying to sell a new service nobody’s ever heard of to busy people who need to forward my emails to the correct people in different division. Well, I am continuing to get a few more bites from these big magazine publishers. Just a couple days ago, I received an email from a senior consumer marketing executive at Hearst Magazines who is interested in hearing more about what we’re offering and wants to set up a call for after Thanksgiving. I also received an email from some new business development folks at Conde Nast, who also want to set something up for after vacation. I think they’re from Golf Digest, which would be pretty cool.

On another front, a friend of mine from Cornell who works in marketing has a close friend who works at Meredith Corp, one of the large magazine publishers I’m trying to get in touch with. She is going to put me in touch with this gentleman to talk more about our business and how we are hoping to work with Meredith. Hopefully, something will pan out from that conversation. Again, all this (everything it seems) will pick up after Thanksgiving so I’ll let you know how it goes in a couple of weeks…

Bottom Line: For entrepreneurs trying to network into large corporations, be patient. I’m not a patient person, and this process is very humbling and is teaching me to take one day at a time. As I’m finding, the sales process is neither easy nor quick. The two things that have helped me get any traction are resourcefulness and persistence. And that’s what I would recommend. I have no idea if it will pan out, but initial signs are showing that resourcefulness and persistence will give you the best chances of success.

JT

Following-up with the magazine publishers…

So it’s been a few months since I’ve updated you on how things have been going with the magazine publishers. I ended up meeting with Stuff Magazine the first week in August. They thought it was a great idea (to provide pay-per-sale advertising technology to their advertisers) but didn’t really see any interest from the higher-ups in the organization. They encouraged us to spend some ($90k) money on advertising with them and then they would consider a partnership. We decided to pass on this one for now but I’ll make sure to follow-up with a few of the higher-ups in the coming months to see if there is further interest once we’ve built some technology to show them.

I’ve also followed up on the 200+ emails I’ve sent out to the advertising execs at dozens of magazines. Needless to say, most still haven’t bothered to respond, although I have received about a dozen bites from publishers ranging from Hearst, Conde Nast, and Time Inc. The problem now is that my email needs to travel from Ad Sales to the right person in marketing. Many times, these two groups don’t talk, and as I’m finding out, don’t really have any reason to help one another. The sales people who responded to my emails so far understood my predicament and were willing to put themselves out and help me network to the right people in the organization. I realized through this process that I needed to contact people in marketing or circulation, not ad sales. The salespeople were busy selling ads, which I wasn’t buying. The problem was that I didn’t have any way of contacting the marketing people directly. I’m just going to have to rely on this internal referral process and cross my fingers. I’ll let you know if I get any interest…

JT

Picking a board of advisors… continued

Read up on how the process began in Picking a board of advisors…

Out of about 12 phone calls made to prospective board members, only about half accepted, with the others claiming that they had other obligations inside and outside of work that would preclude them from providing informal advice to a start-up every few months. Obviously, I didn’t buy into it. But I’ve been told not to take anything personally in business.

Out of the 6 respondents who accepted, we have close relationships with 4; the other two we’ve never met in-person but were referred to us by close contacts. We decided to ask two Cornell professors to advise us. Seth maintains close relationships with his professors from when he was in school and keeps in touch with them on a regular basis. This is a logical choice, since one of them teaches entrepreneurship and the other is a leading technology professor in the computer science department. One (our favorite Texan) comes from marketing/advertising, and the other three come from financial services, one payments consultant, and two commercial banking and credit card experts. So now we have a board. I don’t think we’ll have any fancy meetings. But I feel much better that we have a network of older executives who can provide useful insights and advice to us in times of need (of which I imagine there will be many). I should also mention that we have received interest from 3 individuals who unfortunately could not have a formal relationship with our company (i.e. be listed on our website) due to conflicts with their corporate employers. Instead, they have pledged to help us in any way they can on an informal basis. I’m sure that will be plenty of advice.

Bottom Line: Every start-up should have a board of advisers. A board of advisers is not the same as a board of directors. Most start-ups don’t need to go through the legal hassle and paperwork to create and elect members to a board of directors. A board of advisers is much more informal (usually does not require compensation or paperwork) and gives you two of the big benefits of a board of directors. The first is credibility. Having older, successful and experienced people associated with your company will only help as you try to build your own credibility as an entrepreneur. Second, surrounding yourself with this crowd will give you a support group of qualified (hopefully) individuals to whom you can turn for advice when you need it.

JT

Picking a board of advisors…

We’ve been told that every start-up needs advisers. Especially since we’re young, a lot of people are saying that we need to form an advisory board with a few key people who would be able to provide sound business advice to us on a semi-regular basis. However, I don’t know exactly where to start. Seth and I have a decent network in financial services, but we were explicitly told to avoid putting friends or family members on the board because it detracts from our credibility. We’ll have to put our heads together and reach out to a bunch of people we’ve met so far through the process who have relevant experience to our business in technology, media, financial services and the like. I’m going to send out a bunch of emails and make a few phone calls to gauge interest. We’ll let you know how it goes…

JT

Reaching out to media partners…

Seth and I decided that magazine publishers would be a great partner for us. The magazines had tons of female subscribers and no real rewards or loyalty programs to offer them. Some have credit cards and the like, but we think we’ve got something unique. I started doing my research about a month ago on the top publishers and came up with a pretty short list. Conde Nast, Meredith Corp, Rodale, Time Inc., Hearst and Dennis Publishing were at the top. I decided to focus on these guys and start networking into the organizations to speak with somebody in sales or marketing for some of the well-known magazines. While doing my research on each of the publisher’s websites, I realized that they provided lots of contacts for their advertising personnel, since that’s the primary way they make money by selling ads in the magazines. I thought that this was a pretty good place to start since I could narrow my search to ad sales personnel by magazine. I made a list of names from the websites (most of which gave names, emails and phone numbers) and started smiling and dialing.

Most of the emails I sent were never answered. There were, however, a few bites. I managed to set up a call with a couple people from ad sales at Stuff Magazine for last week in July. I’m not sure that they are the right crowd to discuss a subscriber rewards program. But we’ll just have to see. I’ll probably follow-up with the 150-odd people I contacted this week over the next month or two to see if there are any new bites. I’ll keep you posted…

JT

Developing partnerships…

About a month ago, Seth and I were put in touch with an older Cornellian who had started a major enterprise out of Ithaca NY. The company dealt with student ID cards, among other things, and had just purchased a smaller company that dealt with student discounts at a variety of well-known stores, hotels, etc. This gentleman suggested we speak to one of his colleagues at this recently acquired company to discuss a potential partnership for our fledgling business, OnCard Marketing. I reached out to this individual and had a couple conversations to explain what Seth and I were trying to build. He seemed very intrigued, considering we were focused more on the technology side than they were. We arranged to get together two weeks ago in-person when he was in NYC on business. Seth and I met with him and one of his associates over dinner and had a really invigorating conversation about the future of their business and how we might be able to add value through a partnership. Seth and I were excited when we parted ways that evening because they seemed to buy into what we were doing. They even suggested that they might be able to provide facilities in their own offices to incubate us until we got off the ground as part of the partnership. Well, all very exciting stuff…

We followed up on that meeting by putting together a PowerPoint presentation that outlined exactly what we envisioned in a partnership and what we would bring to the table. We were scheduled to go to their offices in Boston and present to them last Friday. We signed NDAs on Wednesday to protect both parties from divulging confidential information, and I emailed them the presentation a day ahead so they could print it and review it to make for a more meaningful meeting. Well, I received an email Thursday morning after I had sent them our presentation that they could not go ahead with the meeting unless we voided the NDA we signed the day before. They said it was because they were working on some semi-related things and did not want to put themselves in a legal bind. I didn’t know exactly what this meant, but took it to mean a big FU. We canceled the meeting so we didn’t run the risk of presenting to them without legal protection and had our lawyers draft a letter regarding the confidential materials we already sent them and asked them to destroy the materials. Seth was even more livid than I was about this whole ordeal. Regardless, that was our first attempt at securing a partnership…

Bottom Line: This was a blessing in disguise because this partnership did not make complete sense. It was the proverbial square peg in a round hole. We were trying to make it fit. It’s very easy to get overly excited about potential partnerships. Try to stay focused on your own business and come up with 5 good reasons why this partnership would help you attain your own business goals. We should have done this, because we only could come up with 2 in retrospect and would have avoided a huge headache. Our advice is to be careful with disclosing too much to potential partners without and NDA (non-disclosure agreement), although many people, including us, will tell you that it’s more a gesture of good faith than an enforceable legal document. The last piece of advice is that if something looks suspicious or doesn’t feel right, follow your gut instinct and walk away. This last piece of advice is the most important and will serve you in good stead as you make future business decisions.

JT