A dot com classic

1
A dot com classic

• Govworks.com

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• The dot com period is now seen as an historical
  aberration, the subject of a market phenomenon
  where the technologies behind eCommerce applied
  in innovative ways sparked enormous enthusiasm
  amongst investors who were afraid to miss the
  next big thing.

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• It was a classic case of market economics a huge
  demand for stocks of dot com companies, but
  very few that were actually listed with the stock
  exchanges and available to investors. The result
  was a spectacular run-up of prices of those
  companies whose stock was available, and a
  blizzard of concept pitches, with dubious
  business plans, designed to gather money from
  venture capitalists.

4

• Dot com companies emerged by the hundreds,
  thousands even, and were characterized by
  dizzyingly rapid growth. One in particular can be
  seen as the poster child example of a dot com
  company, where a great idea took off, but
  ultimately fizzled as it ran out of time and
  money to deliver on the concept.

5

• That company was govWorks.com, and the reason it
  became so famous is that a documentary film team
  chronicled it from the moment of its inception to
  its final failure. The story of govWorks.com is
  told in the film Startup.com, which received an
  unusually successful (for a documentary) release
  and widespread distribution.

6

• govWorks as a concept presented a classic
  Internet win-win scenario vastly improved
  services at substantially lower cost, with less
  hassle for everyone involved. The premise for
  govWorks was simple provide citizens with easy
  access to their local and state government
  institutions for services ranging from filing for
  building permits to paying parking fines. The
  market was huge and the potential to provide high
  quality of service to a notoriously inefficient
  sector was breathtaking.

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• Unlike many dot com operations, this one had real
  economic viability. So what went wrong? From
  the film, one could find the following

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• the company grew too fast, from 2 to over 250
  employees in about sixteen months
• they underestimated the time needed to build
  the core of the system
• the need to raise capital took tremendous time
  and energy
• success in raising money also brought a loss of
  control as outsiders gained control of the
  companys board of directors

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• the govWorks founders were overly optimistic in
  their expectations of income from clients
• they ran out of time and money
• fundamental mistakes in execution were made by
  the young, inexperienced founders.
•  

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• Tom Herman was a co-founder of govWorks, and
  served as its Chief Technology Officer.
• Q If you were to do it over, as CTO, what would
  you do differently?

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• The areas where I was the weakest were in
  managing the outside vendor and managing the
  expectations of the govWorks non-technical
  resources (the CEO and other executives). If I
  were doing it again, I would have been more
  assertive with the vendor and from earlier on in
  the process demanded people on our team w/ more
  experience. In fact, I wouldnt have chosen the
  vendor we did because they didnt show me people
  who would be on my team that I felt brought the
  specific skills/experience that we needed.

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• The other major thing I would have done
  differently is to have been more rigid about
  requiring specifications for projects before the
  engineering team took them on and less flexible
  about allowing changes. We tried to do too much
  at the same time and more importantly we often
  changed the goals at the last second.

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• Change control is critical and I managed it
  poorly. This is really part and parcel with poor
  expectation management with my co-executives. It
  was hard for me to say no to last-minute change
  proposals and feature-creep when I knew the
  right answer was no. It was a go-go time when
  all things seemed possible, and it was difficult
  to stand in the way of such unrestrained
  optimism. I wanted to please people too much.
•  

14
what happened to the company?

• We ran out of money and under distress sold the
  company to a subsidiary of First Data
  Corporation. The purchaser required that
  govWorks file Chapter 11 protection before the
  acquisition was completed to eliminate all of the
  contingent liabilities. An indication that we
  were right about the prospects can be seen by the
  fact that what we created is still running, and
  growing profitably under the new brand name,
  govOne Solutions. The founders are no longer a
  part of it and made no financial gain from the
  sale of the company.

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• Q Based upon your experiences with the new
  company, what are the most common mistakes made
  by crash-and-burn dot com operations?

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• "Too rapid of growth, business plans that dont
  address mass problems, and poor execution. For
  a startup to make sense its got to apply a
  scalable technological solution to a mass
  problem (i.e., one that a lot of people KNOW
  they have). The product has to have a high
  margin and the company has to have the
  expectation of being profitable in a short amount
  of time so it can either stand alone or be bought
  for a premium.