Strategic Partners vs. Financial Backers

Strategic Partners vs. Financial Backers
John Kilcullen
CEO
IDG Books Worldwide

Note: The IDG Books titles, including the popular "... For Dummies" series of books, CliffsNotes, Macmillan General Reference business books and Frommer's Travel Guides, are now owned by Wiley Publishing.

John Kilcullen peddled his idea for a series of information technology books to most of the major publishing houses before signing on with IDG as vice president of sales and developing the "For Dummies" series for IDG. Kilcullen was named CEO of a new division of IDG — IDG Books Worldwide — less than a year later. At its heydey, IDG Books employed 650 people and has revenues of $180 million.

Issue: Strategic partners vs. financial backers

Problem: If you get too involved with strategic partners, you won't retain as much equity ownership, or worse, your company and your idea won't be your own anymore.

Reality: The right strategic partner or partners can take your idea a lot further a lot faster, and make your life as CEO a lot easier. "By going with the smart money partner, you can jump-start the start-up process, especially if you are starting an inventory-intensive business such as book publishing," says Kilcullen.

Strategic partners can help your company in many ways — they can open the doors to working with the right distributors and suppliers, provide your new Web site with instant content, use their global sales force to take your company international overnight or supply you with the technological, legal or accounting help that you can't afford on your own. Sometimes, access to the right resources is worth much more than the money any financial backer could provide.

The right way to get the job done: Look for strategic partners operating within your niche that find working with smaller, independent companies refreshing. Larger companies look for strategic partners for many reasons: they want to be in a new space, but don't know how to approach it; they have new product ideas, but want to outsource them for cost reasons; they don't have the internal talent for a new type of company and don't want to do the recruiting; or, because of the way their company is currently structured, it isn't well-suited to directly leverage a new idea.

A well-developed brand, entrepreneurial ideas, passion about the customer and your product, and the ability to bring a product or service to market quickly all attract strong strategic partners.

What to watch out for: Choosing a strategic partner whose culture you don't resonate with. "IDG has a very hands-off approach. They said, 'Come to California and start a company on our nickel,' " says Kilcullen. "They found my ideas very compelling and made it clear that they trusted me. I was attracted to their global business and their corporate value set."

— Susan Smith Hendrickson