The story of govWorks, a US dot.com which sought to bring government electronically to the people, is now enthralling cinema audiences across America. A documentary, Startup.com, about the rise and fall of this ambitious New York-based venture, is already being talked of as a possible Oscar winner for best documentary. It has also made somewhat reluctant stars of its two chief protoganists, the founders of the company whose travails are captured on screen.
The film, which the BBC have bought and will be seen at various European film festivals this summer, demonstrates more starkly than any economic report the perils, both personal and financial, of the dot.com world.
The film ends with the company busted and its founders, Kaleil Isaza Tuzman and Tom Herman, out of work. But every good film deserves a sequel and this one is no exception, although the sequel is happening in real life rather than on the screen. Out of the disaster has emerged another idea of relevance to all start-ups everywhere, which will this week be given an airing in Europe.
GovWorks was the idea of two childhood friends, Tuzman and Herman, the former a Harvard-educated high-flyer who had left a job as an investment banker at Goldman Sachs to start the company, the latter a smart technician and web architect. Essentially, govWorks would navigate government, both local and national, for the citizen. It would make time-consuming and tedious dealings with government simple and speedy. You could pay your utility bills or your parking tickets at the touch of a keyboard. You could register to vote and download campaign videos of politicians.
You could apply for government jobs, both locally and nationally. All that and much more, combined with the boyish 20-something enthusiasm of Tuzman and Herman, won over the venture capitalists who proceeded to throw $60m at them. Among their investors were the Hearst Corporation and the Mayfield Fund. It is at this optimistic stage that we meet our heroes in Startup.com, which was made by two film makers, Jehane Noujaim, who had been Tuzman's flatmate, and Chris Hegedus, a veteran documentarist whose work goes back to the 1960s and whose husband and co-producer is the award-winning filmmaker DA Pennebaker. We watch the pitches to investors in 1999, see the company recruit 230 employees and move into ever flasher offices.
To cut a poignant tale short, disaster was lurking round the corner, and they went from a company that everyone presumed would make billions into bankruptcy. The low point came when Tuzman had to give Herman the bullet, even having him escorted off the premises by security. If you tap into govWorks.com now you will be directed to govOne Solutions, part of eOne Global and American Management Systems, itself part of First Data Corporation, which bought govWorks after it went into bankruptcy.
But there is life after dot.com disaster, and, after a few months of purgatory, Tuzman and Herman are reconciled and have launched something that may have a much longer, if less thrilling, life.
Painful viewing
Sitting by the pool of the hip Avalon hotel in Beverly Hills, a rueful Tuzman recounts how "excruciating" it has been to watch some of the worst moments of his 30 years on the big screen. He and Herman are still best friends, says Tuzman, who was born in Boston of Colombian-Israeli parents, but grew up mainly in Colombia, where he was kidnapped as a child before returning to the US.
Less painful to talk about is the new venture. Recognition Group has its office on Fifth Avenue in New York but employs a modest eight people and is, says Tuzman, already working profitably. It is a company that recognises that many of the brave and foolhardy ventures of the dot.com boom years may fall to earth. So they offer advice to people whose businesses have crashed or are faltering.
Three-quarters of their clients are related to the dot.com world, and Tuzman and his colleagues advise them on everything from recapitalisation to liquidation and firesales, with a bit of grief-counselling thrown in. They are looking to expand: Tuzman is in Europe this week seeking potential partners. He predicts a great need for such an operation with a new wave of failures in the dot.com world to come; last year an estimated 130 start-ups crashed in the US.
"It's possible we will have a second much higher peak [of failures] because there are a lot of companies that have been propped up," says Tuzman, whom Internet World included in their list of 25 unsung heroes of the internet. "The venture firms don't want to recognise the losses in their portfolio." With hindsight, Tuzman says, he can see how govWorks could have worked had they not been carried away by the market at the time.
"The software turned out to be exceedingly valuable and the idea was fundamentally viable. What happened - and I'm not casting culpability - we bought into a way of approaching business development that was very much in vogue, believing in the mantras of 'go big or go home', grabbing market share rather than taking a more methodical approach. We tried to grow it under a set of rules that turned out to be bunk." They had set out to raise $9m but in the "frothy market" of the time - December 1999 - they found more than four times that amount being offered to them by willing investors. Tuzman says they told their board in January last year that sales were going slowly and wondered whether they should be expanding so fast.
"We had board members and investors among the elite in American business - they weren't internet kids - and they said 'you don't know what you got, kid, you never turn away cheap money'. All the things that today seem silly and clichéd, at the time everyone said with great religious conviction, and we said 'yeah, of course you're right'. It turns out the more commonsense approach would have been to reject some of the capital."
Where did the $60m go? On salaries, pay-offs, a very expensive marketing and advertising campaign and the rest on the usual start-up expenses of equipment and offices. The painful lessons are being turned into a book by Tuzman and Herman called Inside the Bubble: The Seven Sins of Early Entrepreneurship.
True friends
"You really see people's characters, including your own, in the crucible of crisis. Everyone wanted to be my friend at first but when the market crashed and things went awry, you're persona non grata, and everyone heads for the hills and you're left to take the bullets. I feel like I have a much better bead on who my friends are."
Herman, talking from New York, said that the new business is not as exciting as govWorks but "it is a business that makes sense. GovWorks was amazing, it was the opportunity of a lifetime and I still believe very strongly that electronic government makes sense." But from a business point of view, govWorks has proved a success for someone: the filmmakers, who had no idea that their movie about this new world was going to capture the dot.com story in microcosm as it did.
In fact, they had thought that they would be cataloguing the rise and rise of a billion-dollar success. "It was almost like the gold rush," said Hegedus from her New York office. "At the time we started it, it seemed that everyone would end up as millionaires." Tuzman and Herman have climbed off the rollercoaster, but they hope that their ride that has so delighted cinema audiences will now earn them recognition of a different kind.
www.govOnesolutions.com
The govWorks.com site under new management
www.recognitiongroup.net
Tuzman and Herman's site for business advising troubled dot.coms
www.startupthefilm.com
Official film site
www.pennebakerhegedusfilms.com
Official site of the filmmakers
