GovWorks
Encyclopedia
govWorks Inc. was a dot-com company
that was founded in 1998 by Kaleil Isaza Tuzman
and Tom Herman. It went bankrupt when the dot-com bubble
burst in 2000. govWorks's rise and fall is documented in the 2001 documentary
Startup.com
.
The firm, originally known as Public Data Systems, produced software to help government clients track contracts and purchasing functions. As the internet boom accelerated, the company transitioned toward becoming an Internet portal. In January 2001, Tuzman and his investors sold the company to First Data Corporation. The URL www.govworks.com now points to a domain placeholder page.
The firm set out to provide a website portal to allow citizens in local communities to access, pay or apply for city services, jobs or receive community information. Unlike many other dot.com companies of the time, the services provided by goWorks.com appeared to have a well-defined business plan, a market in need of a service and offered access to city services with ease through their website portal. However, like so many others, govWorks’ mismanagement, demand for capital, speed to market and a lack of proper service execution eventually contributed to the failure of the company. In January 2001, Tuzman and his investors sold the company to First Data Corporation and the URL www.govworks.com now points to a domain placeholder page.
According to public statements by govWorks.com co-founder Tom Herman, the sale resulted in a loss for the founders and investors. The company had burned through approximately $60 million in venture capital during its three years of existence.
During the company's existence, cities such as Grand Island
, New York
, showed interest in using its services. A survey was also conducted by The Economist
which concluded that people preferred to pay fees owed to the government over the Internet due to its convenience. Still, govWorks’ couldn’t overcome some of the most common challenges faced by start-up companies and is ranked by Cnet.com as one of the top ten dot.com failures of the time.
History
The company was founded in May 1998 with 8 employees and was originally known as Public Data Systems. The service delivery model for govWorks which was inspired by Tuzman after he found a two year old parking ticket in his New York City apartment , was to offer a service that provided the ability for people to pay city fees through their internet portal. The initial launch of govWorks.com online services to select markets occurred in October 1999 in key cities in Massachusetts and Connecticut with a full scale rollout planned in early 2000.
Just a few months after the founding of govWorks.com, interest in the company was strong and govWorks.com employee count grew to 30 employees as of August 1998 and by October 1998, the company had 70 employees. The Startup.com movie showcased a business culture with energy and excitement; people were interested in joining the company with the hope of getting in at the beginning stages of another dot.com success story. As additional capital investment came into the company and as the company neared its full scale rollout in 2000, the company expanded further with headcount from 120 employees in January 2000 to over 250 employees in April 2000. However, as depicted so well in the movie, govWorks.com suffered from a number of organizational power struggles and governance issues that would eventually lead to the company’s demise.
Towards the end of 2000, when it was clear that the company was hemorrhaging money and not able to fully execute its planned services, the company dramatically reduced its headcount to 60 employees in November 2000 in an attempt to stem the $1 million per month in overhead expenditures. The company was sold to First Data Corporation in January 2001.
The documentary film, Startup.com which was released by Artisan in May 2001, won the Grand Prize at the 2001 Sundance Film Festival and accumulated $765,000 in initial box office receipts.
Management Team and Board of Directors
The management and governance team of govWorks.com consisted of the following individuals, including their position or affiliation with other companies or organizations.
Management
Kaleil D. Isaza Tuzman - CEO and Co-Founder, George C. Fatheree, III - Community Development and Co-Founder, Thomas J. Herman - CTO & Co-Founder, Jason Bernstein - Corporate Development, Roy Burstin - Product Management, Jose E. Feliciano - Finance and Administration, Michael Goodman - Consumer Division, Julian Herbstein - govWorks International, Salvatore Salamone - Public Sector
Board of Directors
Dina Dublon - Executive Vice President and CFO of Chase Manhattan Bank, Joel Z. Hyatt - Founder of Hyatt Legal Services, Hyatt Legal Plans and Professor of Entrepreneurship at Stanford University Graduate School of Business, Kaleil D. Isaza Tuzman - Chairman, CEO and Co-Founder of govWorks, Maynard H. Jackson - Chairman, Jackson Securities, and former three-term Mayor of Atlanta, Henry R. Kravis - Founding Partner of Kohlberg Kravis Roberts and Chairman of the New York City Investment Fund, Michael J. Levinthal - General Partner, Mayfield Fund
In addition to the management team and Board of Directors, the govworks team also included 25 business advisors grouped in four distinct boards including: Public Sector, Non Profit Sector, Corporate and International advisory boards.
Affiliated Companies
Collectively, corporate governance of govworks.com was associated with thirty one (31) for-profit and not-for-profit companies and institutions from a variety of market sectors, including:
Chase Manhattan, Hyatt Legal Services, Stanford University, Jackson Securities, Kohlberg Kravis Roberts, New York City Investment Fund, Mayfield FundCorradini & Company, The Duberstein GroupBarnes & Thornburg, Sapient Corporation, Vestar Capital Partners, Urban Health Initiative, Harvard University, JumpStart, The, ASHOKA Foundation, Public Allies, Kirshenbaum Bond Partners, MassHysteria.com, Chrysler Corporation, Into Networks, Endeavor Fund, Sportsline.com, Vignette, Premier Asset Management, Star Media Networks, Patagon.com, COTESA, S.A. de C.V., Chrysalis Capital, First International Resources Inc., ISI Emerging Markets
A Path to Failure
Although govWorks.com was perceived to be well positioned to achieve success as compared to other dot.com companies of the era, the company suffered from many of the same challenges faced by any for-profit company just starting out.
First, as conveyed in the brief historical account of how the employee population grew so quickly at the company, govWorks’ rapid growth and acceleration actually contributed to its failing. While the concept and service delivery model of the company was sound, two of the co-founders, CEO Tuzman and CTO Herman had limited experience in managing people within a defined organization. Tuzman, with a degree from Harvard University, was largely responsible for the business aspect of the operations whereas Herman was responsible for delivering the end product. As the employee count rose in the company and outside vendors were hired to assist with development and rollout of the website, a loss of control in managing the company’s internal and external resources developed as a result of Tuzman’s continual absence while working with Venture Capitalists and Herman’s leaderless qualities in managing a team. A power struggle and a lack of consistency in direction given to staff and vendors ensued.
An example of how power and control needed to be reinforced within the organization after a change to their website rollout plans can be observed from a scene in the movie where Herman was talking to a co-worker about his position and power within the organization indicating that although he wasn’t the CEO, he believed the staff was aware that he was a co-founder of the company and that he and Tuzman consulted and agreed to all major decisions, essentially attempting to frame himself as a Co-CEO of the company.
Second, demands associated with raising capital also contributed to the eventual failure of govWorks.com. Like many dot.com companies, Tuzman and other management team members spent a significant amount of time attempting to raise money through venture capitalists (VCs). Tuzman, as depicted so correctly in the movie, showed tremendous skill in this aspect of the business which allowed him to raise millions for the venture. However, the time required for this process not only reduced Tuzman’s presence at the company’s headquarters where he could have helped manage staff and external vendors, it also took a tremendous amount of energy by Tuzman to keep up the pace of meeting with VCs.
In addition, conversations with VCs often times led to questions being poised to the govWorks team concerning their approach to market, as described by Harvard Business School professor Walter Kuemmerle in his paper “A Litmus Test for Entrepreneurs.” In the paper, Kuemmerle describes how one such VC advised Tuzman to reduce their initial scope and service of the website to a smaller scale in order to achieve success, whereby Tuzman thought that by creating what Kuemmerle calls an “umbrella” organization, essentially an all-encompassing organization, was the way to go. Tuzman’s approach concept ultimately contributed to the demise of the company as many of the planned options never functioned correctly on the web portal.
Third, effective management control associated with power within the organization also contributed significantly to the company’s failure. From the beginning, there appeared to be questions concerning who was in charge within the company. As depicted in a number of scenes in Startup.com, conflicts ranging from how to approach VCs, the functionality of the website or even deciding on the name of the company were all conflicts resulting in an ambiguity of who held the power in the company. Although Tuzman held the role of CEO and was a co-founder of the company, Herman was also a co-founder but whose actual title, CTO, was lower on a traditional hierarchical scale. Although in theory, govWorks system of power within the organization was design with a traditional system of power in mind as described by Researcher Dennis Mumby, the limitations of such a model in a small organization such as govWorks resulted in continual struggles regarding control over scarce resources and miscommunication, eventually resulting in Herman being fired from govWorks by Tuzman in an attempt to save the company.
In addition to internal power struggles within the organizations’ management, the increased role of Venture Capitalist in the company as well as other outside advisors also contributed to a lack of consistent management control. As a result of their investments, Venture Capitalists were in a position to not only provide the govWorks.com management team advice and guidance, but their financial stake in the company also allowed VCs to exert influence and pressure on the company’s management team as well. Consequently, Tuzman was experiencing conflicts to his legitimate source of power from internal sources such as Herman, but also from the power influences by the VCs, some of whom were advisors or held positions on the company’s board.
Finally, issues associated with the timing, rollout and functionality of their website was too much to overcome for the company. The company’s ambitious plan to offer a variety of services under their “umbrella” model as described by Kuemmerle resulted in constant change in priorities and deliverables from the outside vendors. In addition, the lack of management oversight into the productivity of vendors along with internal resources led to delays and an overall lack of functionality in the website, once it was finally commissioned. Some of the features planned for the web portal included
govPay – allowing citizens to pay various bills, etc.;
govPages - offering contact information for local governments;
govJobs – access to job networksgovGive - allowing citizens an easy way to donate to charity;
govAuction – providing access to available auctions;
While some of the features functioned correctly, many never materialized on the final website. Once govWorks finally rolled out their software, a competing company, EzGov.com, already had rolled out their fully functioning website and captured a large portion of the market govWorks.com were hoping to capture.
In addition, Tuzman’s reliance on being awarded contracts from municipalities to pay for the “umbrella” of services offered by the company also proved to be over ambitious. While technologically possible and consumer market-driven, municipalities and cities who were the perspective clients of govWorks.com were not convincingly sold on the prospects of outsourcing their fee-collection services and, as they were the clients, Tuzman and his colleagues failed to persuade clients how their services would benefit them. In fact, as Kuemmerle writes, “Tuzman and his partner underestimated how little the cities actually trusted the endorsements of the umbrella organizations. The big contracts did not come as quickly as the founders had expected…”
Ultimately, the company’s rapid growth, the constant pursuit of additional financing for the company, a lack of effective management control and timing and eventual functionality of their website were too much to overcome and the company went out of business in January 2001. Of course, Jeffrey Pfeffer in his book “Power – Why Some People Have It and Others Don’t” would say that the govWorks.com management team were right in attempting to achieve a very clear and defined goal, which was that Tuzman and Herman wanted to make a great deal of money. However, they also fell into one of the prime pitfalls of power which was greed.
Competitors
One of the strongest competitors to govWorks.com was Atlanta based EzGov.com. As depicted so famously in the movie, co-founder of EzGov Bryan Mundy was invited by Tuzman to come and tour govWorks’ offices prior to either company releasing their software. Similar govWorks, EzGov offered software to local governments and municipalities to allow citizens to pay parking tickets, taxes and obtain other city services on-line 24 hours a day. Sadly, Mundy and an unnamed female died in home fire in January 2001.
In addition to EzGov, govWorks had other competitors; some of whom offered the same or similar service as govWorks but at a much lower cost, even free in some cases free, as the competitor service models relied on alternate forms of financing versus govWorks’ client-funded approach.
Bankruptcy Filing
In March 2001, govWorks.com officially filed for Chapter 11 bankruptcy protection. At the time of the filing, the company listed assets worth an approximate $8 million and liabilities of $40 million from the more than $70 million it raised through venture capital.
Current Ownership
The website for govWorks.com now points to Public Data Systems.
Dot-com company
A dot-com company, or simply a dot-com , is a company that does most of its business on the Internet, usually through a website that uses the popular top-level domain, ".com" .While the term can refer to present-day companies, it is also used specifically to refer to companies with...
that was founded in 1998 by Kaleil Isaza Tuzman
Kaleil Isaza Tuzman
Kaleil Isaza Tuzman is an entrepreneur, the chief executive officer and elected chairman of the board of KIT digital, Inc., and managing partner of KCP Capital...
and Tom Herman. It went bankrupt when the dot-com bubble
Dot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
burst in 2000. govWorks's rise and fall is documented in the 2001 documentary
Documentary film
Documentary films constitute a broad category of nonfictional motion pictures intended to document some aspect of reality, primarily for the purposes of instruction or maintaining a historical record...
Startup.com
Startup.com
Startup.com is a 2001 documentary film that chronicles the dot-com start-up phenomenon and its eventual end. The film follows e-commerce website govWorks and its founders Kaleil Isaza Tuzman and Tom Herman from 1999-2000 as the Internet bubble was bursting.-Production:The film was made by...
.
The firm, originally known as Public Data Systems, produced software to help government clients track contracts and purchasing functions. As the internet boom accelerated, the company transitioned toward becoming an Internet portal. In January 2001, Tuzman and his investors sold the company to First Data Corporation. The URL www.govworks.com now points to a domain placeholder page.
The firm set out to provide a website portal to allow citizens in local communities to access, pay or apply for city services, jobs or receive community information. Unlike many other dot.com companies of the time, the services provided by goWorks.com appeared to have a well-defined business plan, a market in need of a service and offered access to city services with ease through their website portal. However, like so many others, govWorks’ mismanagement, demand for capital, speed to market and a lack of proper service execution eventually contributed to the failure of the company. In January 2001, Tuzman and his investors sold the company to First Data Corporation and the URL www.govworks.com now points to a domain placeholder page.
According to public statements by govWorks.com co-founder Tom Herman, the sale resulted in a loss for the founders and investors. The company had burned through approximately $60 million in venture capital during its three years of existence.
During the company's existence, cities such as Grand Island
Grand Island, New York
Grand Island is a town and an island in Erie County, New York, USA. As of the 2010 census, the town population is 20,374. This represents an increase of 9.41% from the 2000 census figure . The current town name derives from the French name La Grande Île, as Grand Island is the largest island in...
, New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
, showed interest in using its services. A survey was also conducted by The Economist
The Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
which concluded that people preferred to pay fees owed to the government over the Internet due to its convenience. Still, govWorks’ couldn’t overcome some of the most common challenges faced by start-up companies and is ranked by Cnet.com as one of the top ten dot.com failures of the time.
History
The company was founded in May 1998 with 8 employees and was originally known as Public Data Systems. The service delivery model for govWorks which was inspired by Tuzman after he found a two year old parking ticket in his New York City apartment , was to offer a service that provided the ability for people to pay city fees through their internet portal. The initial launch of govWorks.com online services to select markets occurred in October 1999 in key cities in Massachusetts and Connecticut with a full scale rollout planned in early 2000.
Just a few months after the founding of govWorks.com, interest in the company was strong and govWorks.com employee count grew to 30 employees as of August 1998 and by October 1998, the company had 70 employees. The Startup.com movie showcased a business culture with energy and excitement; people were interested in joining the company with the hope of getting in at the beginning stages of another dot.com success story. As additional capital investment came into the company and as the company neared its full scale rollout in 2000, the company expanded further with headcount from 120 employees in January 2000 to over 250 employees in April 2000. However, as depicted so well in the movie, govWorks.com suffered from a number of organizational power struggles and governance issues that would eventually lead to the company’s demise.
Towards the end of 2000, when it was clear that the company was hemorrhaging money and not able to fully execute its planned services, the company dramatically reduced its headcount to 60 employees in November 2000 in an attempt to stem the $1 million per month in overhead expenditures. The company was sold to First Data Corporation in January 2001.
The documentary film, Startup.com which was released by Artisan in May 2001, won the Grand Prize at the 2001 Sundance Film Festival and accumulated $765,000 in initial box office receipts.
Management Team and Board of Directors
The management and governance team of govWorks.com consisted of the following individuals, including their position or affiliation with other companies or organizations.
Management
Kaleil D. Isaza Tuzman - CEO and Co-Founder, George C. Fatheree, III - Community Development and Co-Founder, Thomas J. Herman - CTO & Co-Founder, Jason Bernstein - Corporate Development, Roy Burstin - Product Management, Jose E. Feliciano - Finance and Administration, Michael Goodman - Consumer Division, Julian Herbstein - govWorks International, Salvatore Salamone - Public Sector
Board of Directors
Dina Dublon - Executive Vice President and CFO of Chase Manhattan Bank, Joel Z. Hyatt - Founder of Hyatt Legal Services, Hyatt Legal Plans and Professor of Entrepreneurship at Stanford University Graduate School of Business, Kaleil D. Isaza Tuzman - Chairman, CEO and Co-Founder of govWorks, Maynard H. Jackson - Chairman, Jackson Securities, and former three-term Mayor of Atlanta, Henry R. Kravis - Founding Partner of Kohlberg Kravis Roberts and Chairman of the New York City Investment Fund, Michael J. Levinthal - General Partner, Mayfield Fund
In addition to the management team and Board of Directors, the govworks team also included 25 business advisors grouped in four distinct boards including: Public Sector, Non Profit Sector, Corporate and International advisory boards.
Affiliated Companies
Collectively, corporate governance of govworks.com was associated with thirty one (31) for-profit and not-for-profit companies and institutions from a variety of market sectors, including:
Chase Manhattan, Hyatt Legal Services, Stanford University, Jackson Securities, Kohlberg Kravis Roberts, New York City Investment Fund, Mayfield FundCorradini & Company, The Duberstein GroupBarnes & Thornburg, Sapient Corporation, Vestar Capital Partners, Urban Health Initiative, Harvard University, JumpStart, The, ASHOKA Foundation, Public Allies, Kirshenbaum Bond Partners, MassHysteria.com, Chrysler Corporation, Into Networks, Endeavor Fund, Sportsline.com, Vignette, Premier Asset Management, Star Media Networks, Patagon.com, COTESA, S.A. de C.V., Chrysalis Capital, First International Resources Inc., ISI Emerging Markets
A Path to Failure
Although govWorks.com was perceived to be well positioned to achieve success as compared to other dot.com companies of the era, the company suffered from many of the same challenges faced by any for-profit company just starting out.
First, as conveyed in the brief historical account of how the employee population grew so quickly at the company, govWorks’ rapid growth and acceleration actually contributed to its failing. While the concept and service delivery model of the company was sound, two of the co-founders, CEO Tuzman and CTO Herman had limited experience in managing people within a defined organization. Tuzman, with a degree from Harvard University, was largely responsible for the business aspect of the operations whereas Herman was responsible for delivering the end product. As the employee count rose in the company and outside vendors were hired to assist with development and rollout of the website, a loss of control in managing the company’s internal and external resources developed as a result of Tuzman’s continual absence while working with Venture Capitalists and Herman’s leaderless qualities in managing a team. A power struggle and a lack of consistency in direction given to staff and vendors ensued.
An example of how power and control needed to be reinforced within the organization after a change to their website rollout plans can be observed from a scene in the movie where Herman was talking to a co-worker about his position and power within the organization indicating that although he wasn’t the CEO, he believed the staff was aware that he was a co-founder of the company and that he and Tuzman consulted and agreed to all major decisions, essentially attempting to frame himself as a Co-CEO of the company.
Second, demands associated with raising capital also contributed to the eventual failure of govWorks.com. Like many dot.com companies, Tuzman and other management team members spent a significant amount of time attempting to raise money through venture capitalists (VCs). Tuzman, as depicted so correctly in the movie, showed tremendous skill in this aspect of the business which allowed him to raise millions for the venture. However, the time required for this process not only reduced Tuzman’s presence at the company’s headquarters where he could have helped manage staff and external vendors, it also took a tremendous amount of energy by Tuzman to keep up the pace of meeting with VCs.
In addition, conversations with VCs often times led to questions being poised to the govWorks team concerning their approach to market, as described by Harvard Business School professor Walter Kuemmerle in his paper “A Litmus Test for Entrepreneurs.” In the paper, Kuemmerle describes how one such VC advised Tuzman to reduce their initial scope and service of the website to a smaller scale in order to achieve success, whereby Tuzman thought that by creating what Kuemmerle calls an “umbrella” organization, essentially an all-encompassing organization, was the way to go. Tuzman’s approach concept ultimately contributed to the demise of the company as many of the planned options never functioned correctly on the web portal.
Third, effective management control associated with power within the organization also contributed significantly to the company’s failure. From the beginning, there appeared to be questions concerning who was in charge within the company. As depicted in a number of scenes in Startup.com, conflicts ranging from how to approach VCs, the functionality of the website or even deciding on the name of the company were all conflicts resulting in an ambiguity of who held the power in the company. Although Tuzman held the role of CEO and was a co-founder of the company, Herman was also a co-founder but whose actual title, CTO, was lower on a traditional hierarchical scale. Although in theory, govWorks system of power within the organization was design with a traditional system of power in mind as described by Researcher Dennis Mumby, the limitations of such a model in a small organization such as govWorks resulted in continual struggles regarding control over scarce resources and miscommunication, eventually resulting in Herman being fired from govWorks by Tuzman in an attempt to save the company.
In addition to internal power struggles within the organizations’ management, the increased role of Venture Capitalist in the company as well as other outside advisors also contributed to a lack of consistent management control. As a result of their investments, Venture Capitalists were in a position to not only provide the govWorks.com management team advice and guidance, but their financial stake in the company also allowed VCs to exert influence and pressure on the company’s management team as well. Consequently, Tuzman was experiencing conflicts to his legitimate source of power from internal sources such as Herman, but also from the power influences by the VCs, some of whom were advisors or held positions on the company’s board.
Finally, issues associated with the timing, rollout and functionality of their website was too much to overcome for the company. The company’s ambitious plan to offer a variety of services under their “umbrella” model as described by Kuemmerle resulted in constant change in priorities and deliverables from the outside vendors. In addition, the lack of management oversight into the productivity of vendors along with internal resources led to delays and an overall lack of functionality in the website, once it was finally commissioned. Some of the features planned for the web portal included
govPay – allowing citizens to pay various bills, etc.;
govPages - offering contact information for local governments;
govJobs – access to job networksgovGive - allowing citizens an easy way to donate to charity;
govAuction – providing access to available auctions;
While some of the features functioned correctly, many never materialized on the final website. Once govWorks finally rolled out their software, a competing company, EzGov.com, already had rolled out their fully functioning website and captured a large portion of the market govWorks.com were hoping to capture.
In addition, Tuzman’s reliance on being awarded contracts from municipalities to pay for the “umbrella” of services offered by the company also proved to be over ambitious. While technologically possible and consumer market-driven, municipalities and cities who were the perspective clients of govWorks.com were not convincingly sold on the prospects of outsourcing their fee-collection services and, as they were the clients, Tuzman and his colleagues failed to persuade clients how their services would benefit them. In fact, as Kuemmerle writes, “Tuzman and his partner underestimated how little the cities actually trusted the endorsements of the umbrella organizations. The big contracts did not come as quickly as the founders had expected…”
Ultimately, the company’s rapid growth, the constant pursuit of additional financing for the company, a lack of effective management control and timing and eventual functionality of their website were too much to overcome and the company went out of business in January 2001. Of course, Jeffrey Pfeffer in his book “Power – Why Some People Have It and Others Don’t” would say that the govWorks.com management team were right in attempting to achieve a very clear and defined goal, which was that Tuzman and Herman wanted to make a great deal of money. However, they also fell into one of the prime pitfalls of power which was greed.
Competitors
One of the strongest competitors to govWorks.com was Atlanta based EzGov.com. As depicted so famously in the movie, co-founder of EzGov Bryan Mundy was invited by Tuzman to come and tour govWorks’ offices prior to either company releasing their software. Similar govWorks, EzGov offered software to local governments and municipalities to allow citizens to pay parking tickets, taxes and obtain other city services on-line 24 hours a day. Sadly, Mundy and an unnamed female died in home fire in January 2001.
In addition to EzGov, govWorks had other competitors; some of whom offered the same or similar service as govWorks but at a much lower cost, even free in some cases free, as the competitor service models relied on alternate forms of financing versus govWorks’ client-funded approach.
Bankruptcy Filing
In March 2001, govWorks.com officially filed for Chapter 11 bankruptcy protection. At the time of the filing, the company listed assets worth an approximate $8 million and liabilities of $40 million from the more than $70 million it raised through venture capital.
Current Ownership
The website for govWorks.com now points to Public Data Systems.