Their matches glow in recession

Article by: TODD NELSON , Special to the Star Tribune
Updated: March 15, 2009 - 10:41 PM

PartnerUp, an online networking site for small-business owners, helps even those with businesses in trouble.

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Husband and wife Steve and Beth Nielsen run PartnerUp, the first and largest online community of small-business owners and entrepreneurs. PartnerUp’s website got visits from 300,000 unique users last month. It is housed in the servers behind them.

Photo: Glen Stubbe, Star Tribune

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Struggling small companies are finding help from PartnerUp, a Twin Cities-based online networking site for small-business owners and entrepreneurs.

According to president and CEO Steve Nielsen, companies battered in this down economy have met merger partners, gotten turnaround advice and even found new businesses to sublease their closed commercial space on PartnerUp.

Those aren't exactly the uses Nielsen and wife Beth envisioned when they launched the free site in April 2007 as a place for members to network, seek and offer advice, find lawyers, accountants or other professionals and meet potential mentors, partners or board members to help start, grow and manage small businesses.

But economic turmoil has helped PartnerUp grow despite the toll the slowdown has taken in jobs and companies. The PartnerUp.com site, for example, drew more than 300,000 unique users in February, Nielsen said. That's roughly three times the number that visited PartnerUp in July, when Deluxe Corp. acquired the start-up, which now operates in an office suite in Deluxe's headquarters in Shoreview.

PartnerUp's revenue comes mostly from advertising bought by a growing number of Fortune 1,000 companies, Nielsen said. Those companies are eager to reach small businesses, believing that small-business spending is likely to continue during the downturn, unlike discretionary consumer spending.

One area seeing more activity is PartnerUp's free commercial real estate listings.

"A lot of small-business owners have personal guarantee clauses in their leases," Steve Nielsen said. "So even if their business goes bankrupt or even if they were incorporated properly or had a good LLC [limited liability company] structure, if they signed that personal guarantee, they're still personally on the hook for that space."

As the economy has soured, companies began listing leases they no longer can afford, or can't get out of, as available for sublease, said Beth Nielsen, senior vice president.

"They're actually finding tenants to fill them, helping them out of what could be a bad situation and maybe making it a little bit easier," she said.

"That's been a trend that we've seen a lot lately," Steve Nielsen said of the subleasing activity. "It's heart-wrenching in a lot of respects. It's hard to watch someone have to wind down a business."

In other cases, troubled companies have found new life after pairing up with other challenged enterprises they found on PartnerUp.

Small mergers

"Mergers between small businesses -- nobody really thinks about that. But a lot of the principles are the same: cost reduction, combining customer bases, improving efficiency. In an economic environment like today's, it's very helpful," Steve Nielsen said.

Very helpful in the case of Stephanie Guyer; as the economy soured in December, she was dissolving Body Rhythms Inc., a massage therapy center in Oakdale she had bought in 2007.

Then Guyer found a listing on PartnerUp seeking a director or owner/operator for a Keep In Touch massage location in Woodbury.

She met Woodbury owner Bob Dubé and in less than a week they had combined their businesses, equipment and client lists to form Body Rhythms Massage and Spa at his site in Woodbury.

"A lot of businesses are having trouble meeting rent and fulfilling obligations to vendors," Guyer said. "It was a merger of sorts that saved two businesses, and as a result the cash flow of the combination has improved significantly."

(Guyer, coincidently, is a Deluxe employee but her small business operates separately. She said she had joined the PartnerUp site before Deluxe acquired it.)

PartnerUp also stands to help out a much larger company: its parent, Deluxe. The longtime check-printing firm is remaking itself as a business services company offering products and services to small-business owners and entrepreneurs.

This year, Steve Nielsen said, PartnerUp is scaling up for a rollout to all of Deluxe's 4 million small-business customers.

Deluxe, with close to $1.5 billion in annual sales, doesn't break out PartnerUp's revenue, and Nielsen declined to disclose it. In January 2008, he told the Star Tribune that the site had grossed an estimated $1 million in less than nine months of operations in 2007.

High expectations

At the time of the acquisition, Deluxe indicated PartnerUp could generate $100 million in product sales and advertising revenue.

"That's the revenue we think PartnerUp has the potential to accomplish, and the revenue we think Deluxe has the potential to accomplish, as a result of the partnership," Nielsen said. "Obviously that's not something that we expect to happen tomorrow or even a year from now.''

PartnerUp is the Nielsens' second start-up. They financed it with proceeds from the sale of an Internet services company they had started while they were in their 20s at the University of Minnesota Carlson School of Management.

Late in the second quarter, Nielsen said, PartnerUp 2.0 will begin, with a number of improvements and new features. One new function will allow groups of entrepreneurs to connect with each other more easily, he said.

The new group networking function, in one instance, will help graduates of a new national entrepreneurship training program stay in touch.

The expert says: James Kahl, assistant director of the Carlson School's Gary S. Holmes Center for Entrepreneurship, said PartnerUp is well-positioned for both a good economy and a down market, which tends to spur entrepreneurial activity.

In his opinion, Kahl said, it's also better than sites such as CareerBuilder or Monster at connecting small-businesses and entrepreneurs and helping them solve problems.

"PartnerUp is a great grass-roots approach to finding entrepreneurial individuals and getting them partnered up to move an idea forward," Kahl said. "The way he's approaching it is much smarter because you're getting down to specific needs and wants and specific individuals."

Todd Nelson is a freelance writer in Woodbury. His e-mail address is todd_nelson@mac.com

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