Persuading hard-working founders of Silicon Valley start-up
companies to find time to go to the cinema would usually be a
challenge. But half a dozen founders of companies ranging in size
from a three-person fledgling to a public company with 250 employees
jumped at the chance, last week, to see Startup.com.
This fly-on-the-wall documentary chronicles the formation,
funding, achievements and disintegration of GovWorks.com. The dotcom
company, dating back to 1999, aimed to create a service linking
citizens to government services, letting them pay for a parking
ticket or apply for a building permit online.
Kaleil Isaza Tuzman and Tom Herman, the founders of GovWorks.com,
like so many other entrepreneurs who jumped on the internet
bandwagon in the late 1990s, were bright, excited twenty-somethings,
convinced they were destined for fame and great wealth.
Startup.comis their story but it is also the bitter-sweet
tale of hundreds of other failed companies.
At the height of the internet boom these would-be millionaires
would drop by the FT's office in San Mateo - sometimes at the rate
of several a day - to share their "visions" and their PowerPoint
slides. Often they came by after meetings with venture capitalists
who, they typically claimed, were vying to put money behind their
Most of those start-ups have, like GovWorks, long since been sold
or gone out of business. GovWorks lives on only thanks to Chris
Hegedus and Jahane Noujaim, whose cameras captured every human and
business aspect of the saga: the dreams, the exhaustion, the
arguments, the victories and the defeats. The film won the grand
prize at the recent Sundance Festival.
There was plenty to satisfy those looking for further evidence of
the stupidity of internet mania. "It captured well the consensual
hallucination of last year's dotcom frenzy - the arrogance of the
venture capitalists, the narcissism of the entrepreneurs, the
naivety of the employees and the tragicomedy of too much money
chasing too many bogus ideas," said Larry Bohn, chief executive of
NetGenesis, who added some "east coast perspective" and saw the film
in Boston's Kendall Square.
The group who saw the film in Palo Alto - ground zero of Silicon
Valley - were more generous. They saw the film as an "inside the
bubble" perspective of an internet company. The logic of driving for
growth at all costs, with seeming disregard for profits, may sound
crazy today - but that was what bubble-era companies were expected
to do. The rules were different.
The issue that gripped the Silicon Valley group was why GovWorks
had failed. As more than one of them acknowledged, the line between
success and failure is uncomfortably narrow.
Timing, or luck, plays a bit part in the success of all
start-ups, said Alan Huang, chief executive and chief technology
officer at Terabit, which is developing networking equipment.
GovWorks failed in part because of unlucky timing.
"It was relatively easy for GovWorks to get funding a couple of
years ago. Now it would be very difficult. A couple of years ago it
was difficult to get funding for hardware; now it is considerably
easier; but six months ago it was difficult."
The founders of GovWorks did a lot of things right, said Daphne
Carmeli, chief executive and co-founder of Metreo, an e-business
software start-up. "They identified a need, rather than merely
introducing a technology. So many start-ups are founded on a 'build
it and they will come' mantra."
But Kaleil and Tom also made a lot of mistakes, the worst of
which was failing to determine who was in charge, the group said.
The tensions between the GovWorks founders stood out to Ofer Matan,
co-founder and chief technical officer at Blue Pumpkin Software,
which has developed software for workforce scheduling. "Doron
[Aspitz, Blue Pumpkin's chief executive] and I have worked together
for four or five years," said Mr Matan. "We each know our roles.
Perhaps it is a matter of maturity.
"The chief executive should be a visionary and enabler to other
parts of the business but delegate those parts to others to own,"
added Ms Carmeli.
Originally, it appears, the film-makers thought they were
following a success story that would end with an initial public
offering. At one point during the film, Kaleil is pictured sitting
next to Bill Clinton, then US president, at a White House press
But the story of the film ultimately becomes that of the
deteriorating relationship between the two founders and their
struggles over which is in charge. Towards the end of the film,
Kaleil fires Tom - and GovWorks never recovers.
"The founders of a company own the dream. Every time a founder is
fired it is a bad decision," said Herb Stephens, chief executive of
Outcome, a San Francisco start-up that has developed an online
payments aggregation system.
Eli Barkat, who is chief executive of Backweb Technologies,
developing internet "push" technology, and a former founding partner
of BRM Technologies, Israel's leading incubator venture firm, put
the failure of GovWorks down to the lack of a good business model.
"Most successful companies have problems; none of them is
perfect. This pair had enough of everything to be successful but
they did not have a good business model."
Mandeep Khera, who joined the founders of Maaya, a web services
pioneer, in January as chief marketing officer, took a different
tack. "You need all of the ingredients - good technology, good
business model, good venture capital backing - but ultimately it
comes down to people. People make companies and people break
To close the evening, I asked the Silicon Valley group whether
they would have allowed the cameras in on their start-up companies,
had the opportunity presented itself. Most felt that the cameras
might have been too intrusive. Some believed that the GovWorks
founders had been distracted by the filming.
Yet had GovWorks been successful, the film would have been a
marvellous marketing tool. And who would not want to have a record
to look back on that documented the history of an exciting episode
in his or her life? I suspect that all of these company founders
would want to star in Startup II - providing the ending were