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Matthew Karras
ENTR 200
1 March, 2007
Failure Case Analysis: GovWorks.com
It started simply enough. There were two childhood friends, Kaleil Tuzman and Tom Herman, that had a bright idea and went with it in 1999. There idea was simple yet would help many of people with their daily, hectic lives. It was a plan to create an online business that would allow the payment of government bills, such as tickets and taxes, through their company’s website. Also there would be the possibility to apply for permits and many other features of local governments that were sometimes hard to negotiate through with current bureaucracies. With a sound business plan and some beginning investors, and a great idea, they went ahead with their plan. This is when everything went wrong.
It all started in 1999 when the two childhood friends invested $200,000 of their own money into the startup of this company. There were however 2 others that helped out in the beginning, also their friends. By July of 1999, the projections forecasted that the market was to be worth $450 Billion. This led the company to hire about fifty employees most of whom were computer engineers and would be developing the software and website to be used by the company.
Things were going smoothly enough until early in 2000, when Tuzman needed to perform a Series B round of investment searching in which he raised about $19 million. This search was primarily led by Kohlberg Kravis Roberts and the Mayfield Fund. Soon after there were new offices built in Alley. This allowed GovWorks.com to begin to team up with other companies such as Cotesa Holding Ltd. This was one such joint venture that was intended to develop the company to be able to tap into the Latin American portion of the market.
These sorts of joint efforts eventually led to the rapid expansion of the company allowing it to buy and absorb others such as Jobs-in-Government. This was a government online auction...