Enterprise -- Companies: Alliances
HOOKING UP WITH A HOUSEHOLD NAME
A big ally can be the fastest route to capital and contacts
Two years ago, entrepreneurs Steven Shamrock and Susan Ray were getting ready for a trip to Santa Clara, Calif., all set to talk chipmaker Intel Corp. into supplying crucial technology to Cyberplay--a concept store where families, teachers, and school groups would explore the Internet, test-drive software, and buy it, too. But just before leaving, the two friends from Eustis, Fla., realized something was missing: business cards. The partners scrambled to the nearest mall, printed up some cards, and then finished packing their bags. Recalls 35-year-old Shamrock: "We didn't want to come off as amateurs."
But in some ways, they were. Despite a decade each of business experience, neither Shamrock, a real estate developer, nor Ray, a retailing executive, possessed the technological savvy to realize their vision. The two neighbors had gained most of their computer knowledge while playing games with their kids. And even with the $880,000 they had raised from family and friends, they knew they did not have the wherewithall to roll out a nationwide retail chain. The partners reasoned that deep-pocketed, research-intensive Intel was just the kind of friend Cyberplay needed to shortcut the painful startup process. But would the $20 billion corporation find Cyberplay attractive? To the partners' surprise, Intel was charmed. Says Rob Siegel, an Intel new-business development executive: "We saw nothing like Cyberplay in the marketplace." Unlike cyber cafes and other computer centers, Cyberplay would do it all: sell computer time with games for $8 an hour, teach business applications, demonstrate software, explain the Internet, run classes for kids and teachers--and use only Intel's newest technology.
SIX WEEKS. Shamrock and Ray are among the many smart entrepreneurs who have managed to ally themselves with big corporate players. "For small businesses, it's a great way to get capital, contacts, and marketplace credibility," says Courtney Price, president of the Denver-based Entrepreneurial Education Foundation.
And for the big guys, it's a way to get a toehold in new markets. Intel's Siegel figured Cyperplay could help Intel introduce its latest technology to both home-PC users and computer novices. So in September, 1995, Intel provided more than $40,000 worth of equipment and technology consultations to open Cyberplay's first store, in Winter Park, Fla. And last year, Intel sunk several times double that sum into a second store, in Atlanta, to get it built in just six weeks, in time for the 1996 Summer Olympics. While Intel declines to discuss the details of its investment, it's clearly doing its part to build Cyberplay's credibility. Last year, Intel featured a Cyberplay station within its booth at Comdex, the world's largest computer trade show.
Ray, still an equity partner, has stopped working for Cyberplay and moved to Illinois, while President Shamrock is finally seeing the months of 18-hour workdays and constant travel pay off. Capitalizing on the Intel connection, Cyberplay has since clinched alliances with other well-known companies, such as IBM-clonemaker Gateway 2000, which is leasing state-of-the art computers to Cyberplay and even financing the deal. Gateway's Bill Shea, vice-president for major accounts, says Cyberplay, with its school field trips and computer classes for teachers, was the perfect marketing vehicle: "We think that schools might build networks based on what their teachers use in Cyberplay."
There's more. Sony Corp. has set up a mini-Cyberplay at Sony Wonder, its high-tech Manhattan tourist attraction. And Fox Interactive is using Cyberplay's extensive consumer database, which tracks who uses what software and for how long, to help predict the flops and blockbusters in the competitive computer-games market. Each store has about 60 Pentium-processor-based networked machines linked via Intel technology to a catalog of over 80 software titles and the Internet.
TREACHEROUS. In July, Cyberplay will open its first store inside a Houston Sam's Club, a division of Wal-Mart Stores. It will offer the warehouse club's members, who include many small-business owners, free business software classes and help setting up their newly purchased computers. By yearend, Cyberplay expects to open five or more Sam's Club branches--a potential big break that could boost the little company's name recognition and fatten its customer database.
Of course, getting too closely involved with any one corporate ally can be treacherous. Babson College entrepreneurship expert Srinivasa Rangan urges that alliances be forged with great caution: "You want to manage the relationships so that you'll continue to be needed--and won't be destroyed if the link breaks up."
Shamrock is hedging his bets by continuing to seek new strategic partnerships, especially with other software developers. "Who'd have thought we'd come this far?" he muses. To be sure, he doesn't need to fret about business cards any more. While Cyberplay may still be awaiting fame, its allies are already household names.By Lisa Sanders in New York