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A dot com classic

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					A dot com classic

   Govworks.com
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”.
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.
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.
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.
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.
Unlike many dot com operations, this one had
 real economic viability. So what went
 wrong? From the film, one could find the
 following:
• 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
  company’s board of directors;
• 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.
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?
“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
  wouldn’t have chosen the vendor we did because
  they didn’t show me people who would be on my
  team that I felt brought the specific
  skills/experience that we needed.”
“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.”
“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.”
       … 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.”
Q: Based upon your experiences with the
 new company, what are the most common
 mistakes made by crash-and-burn dot com
 operations?
"Too rapid of growth, business plans that don’t
  address “mass problems”, and poor execution. For
  a startup to make sense it’s 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.”

				
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posted:5/21/2010
language:English
pages:16