When you're running a small or midsize business (SMB), persistence can indeed pay off.
Take Arkadium: The 127-person games developer just announced a major, multi-year partnership with Microsoft that will likely help the smaller firm grow leaps and bounds from its already solid foundation. But it's not like the deal just fell in Arkadium CEO and co-founder Kenny Rosenblatt's lap. Rather, three years of groundwork and smaller agreements led to Arkadium becoming the largest games provider to Bing, MSN Messenger, and Zone.com before the new partnership came to fruition.
Rosenblatt's company makes titles like Mahjongg Dimensions for the Web, Facebook, iPhone, and iPad, and has partnered with much larger firms like Hearst and ESPN in the past. The CEO said the small-large partnership strategy can work well for content creators like Arkadium--and for smaller tech firms in general.
[ For more on what small businesses can expect this year, see 4 Tech Trends For SMBs In 2012. ]
"You can create great content, but unless you have an audience to absorb it, it's kind of all for naught," Rosenblatt said. Arkadium's story to date offers valuable insights for other SMBs across both the tech sector and a wider range of industries. In an interview, Rosenblatt shared his advice for fellow entrepreneurs and executives when considering a partnership with a much larger enterprise.
1. Start small. Rosenblatt didn't just knock on Steve Ballmer's door one morning and walk away with a deal. He started on a smaller, more suitable scale: Three years ago, he was introduced to someone who worked in Microsoft's games division. Over time, Rosenblatt began pitching Arkadium's games to the contact and building a relationship--and continued doing so even though the effort wasn't reaping any immediate rewards.
"All of a sudden, she had a directive from her boss to add a certain style of game to their Web properties that they hadn't had before," Rosenblatt said. "It just so happened that I had been pitching her several of these types of games."
That year's worth of conversations led to Microsoft picking up a few games from Arkadium. Three games became five, and five became 10--and now more than 25 Arkadium titles feed Microsoft properties.
2. Lose the sales schmaltz. Rosenblatt skipped the hard sell back when Microsoft's answer was a polite "no." Fellow SMB owners and execs--especially those in the tech industry--must do the same when looking to partner with large firms.
"You can't be a used-car salesman," Rosenblatt. "You can't force a decision like this on somebody very aggressively. Only when their priorities and your priorities are the same can really valuable deals get done."
3. Wait until you're ready. Back in 2002, when Arkadium was just one year old, Rosenblatt knew he wanted a massive partner to help distribute one of the company's early games. Tapping the company's various contacts, Arkadium began pitching AOL--no small concern. A deal would have done wonders for the fledging firm, but there was a bit of a flaw with Arkadium's strategy.
"We were a brand-new startup with a pretty crappy product, didn't know much about the industry, and here we were pitching one of the largest games properties in the world," Rosenblatt said. "The brass at AOL sniffed it out very quickly. They saw we were very aggressive and passionate entrepreneurs, [but] if they did a deal with us they'd break every machine we have and our servers would crash. We just didn't have the chops to serve the scale that they had."
4. Identify your three most important goals for the deal. When your team and your product are ready--as Arkadium would be several years later--you need to prioritize your reasons for seeking a partnership. Rosenblatt strongly recommends coming up with a list of three mission-critical goals for partnering with a much larger firm. Doing so will help identify potential partners and likewise keep you grounded while building relationships and negotiating deals. Rosenblatt said knowing what you want will also help avoid a major pitfall of small-large partnerships: accidentally becoming a work-for-hire shop, which will drain your finite resources and force you to lose sight of your actual business.
5. Hire a good lawyer. When you hit the dealmaking phase, have a good lawyer on your team. It's not a combative move, just a smart one. Specifically, Rosenblatt said you'll want an attorney with particular expertise in the type of deal you're doing, whether that's licensing, revenue sharing, or another kind. SMBs that don't bring the right people to the negotiating table risk losing out on the potential boon the right deal should provide.
"Bottom line: When you're dealing with major players, they have very sophisticated legal and [business development] teams that will eat you for lunch if you don't know how to negotiate properly," Rosenblatt said.
According to our Outlook 2012 Survey, IT should expect soaring demand but cautious hiring as companies use technology to try to get closer to customers. Also in the new, all-digital issue of InformationWeek: Inside Windows Server 8. (Free registration required.)