Smart Money Magazine
July 1, 2002SmartMoney magazine
"Movie Mayhem: How Do You Turn A Very Public Flameout To Your Advantage? Just Ask The Star Of Startup.Com"
By Michele Marchetti
July 2002
Kaleil Isaza Tuzman thought everything was on track. The CEO of a manufacturing firm was considering hiring him to restructure his failing company, and Tuzman had been working for weeks to nail down the deal. That's when he got the e-mail: "Two things happened since we last spoke," the message from the CEO said. "We started negotiations with a bank to get an abeyance, and one of my board members saw the movie."
Tuzman's heart sank. The movie. Not again.
The CEO didn't have to say another word for Tuzman to know he was talking about Startup.com -- and to know that the board member probably had concerns after seeing it. After all, Tuzman had been down this road many times since the film's premiere in January 2001. The documentary, which traces the quick rise and fall of GovWorks, the Internet company Tuzman formerly ran, had become a symbol of dot-com frivolity, with Tuzman, 30, cast as the archetypal narcissistic entrepreneur. One scene shows him forcing out his co-founder and boyhood friend Tom Herman and having him escorted from the building. In another, he brashly offers then-president Clinton a job.
It's bad enough to have a bankruptcy on your resume, but for the world to see your every wart -- well, it doesn't make launching a new enterprise any easier. "I figured there'd be two buckets of people: folks worried about doing business with me and ones simply not willing to," explains Tuzman. What he hadn't been prepared for was the intensity of the reactions, even from people who had no connection with GovWorks: "Instead of 'No, thank you,' it was 'Get off my lawn and never come back.' It was as though they were thinking, Oh, this guy must be toxic. There was this perception that I epitomized the dot-com era. At times I felt like the embarrassing cousin who reminds you where you came from."
One of the worst moments: Last year, at the National Association of Small Business Investment Companies, Tuzman was preparing to give the keynote speech when a venture capitalist approached him. "I just want you to know I've been to all of the panel discussions until this point," he sternly told Tuzman. "And I'm going to skip your talk because I can't stomach hearing you pontificate on this topic." Tuzman was stunned. "I thought, Am I going to get tomatoes thrown at me?"
No doubt the attention from Startup.com has opened some doors for Tuzman's new venture, New York-based Recognition Group, which specializes in turning around or winding down -- ironically enough -- distressed companies. But it has also been a huge distraction. "Every time we go into a meeting, the first questions are about the movie," says Herman, who has since patched up his relationship with Tuzman and is a partner in the new company.
The heavy media coverage of the movie didn't help matters any. The articles not only brought increased attention to Tuzman's past failure, but often harped on the fallout between him and Herman -- something the two were trying to put behind them. "I felt like I had to hit the reset button on my marketing efforts," Tuzman says.
He called a friend, a former crisis-management executive at ad agency Ogilvy & Mather, who gave him some advice: "Tell it first, tell it truthfully, tell it completely." Heeding those words, Tuzman tweaked his sales presentation. Instead of sidestepping Startup.com and what happened with GovWorks, he now begins each meeting by acknowledging his past. "I tell them I ran a company that went through Chapter 11, and it was a relatively visible situation," he says. "People expect you to avoid the subject. But if you kill the mystery right away, there's less interest. Their level of trust goes up because they don't think anything will be hidden from them."
Another effective tool for Tuzman: self-deprecating humor. During one meeting, a potential client brought along his banker, an acerbic man who grilled Tuzman about why they should listen to his pitch. "Look at it this way," Tuzman replied. "At the very least you'll have a half hour of entertainment to make fun of me to your compatriots." The banker laughed, and everyone relaxed. "I think he expected to hear an arrogant kid who didn't have any remorse," Tuzman says. "Once that was defused, we were able to move on."
With the venerable VC firm Odeon Capital Partners, however, Tuzman faced a tougher sell. The firm had some serious reservations. "The last thing you think about is bringing in an entrepreneur who made the same mistakes your portfolio companies made to turn them around, particularly when the mistakes were visible," says Jeffrey Finkle, an Odeon managing partner. Finkle eventually gave Recognition Group a trial run, hiring it to close down one of Odeon's companies. After that went well, what Finkle had initially seen as a negative about Tuzman became a positive. "When you've lived through the experience of closing a company, you can recycle that skill set and give it to others," Finkle says.
So when Tuzman got that ominous e-mail from the manufacturing CEO -- the one darkly warning that the board member had seen Startup.com -- he knew how to respond, having been through this so many times before. He met with the board member, whose concerns were all too familiar: "Why should we place our restructuring in your hands when your last company went bankrupt?"
"I'm aware of the decisions that got me there," Tuzman replied, "and although I can't guarantee that I'll do this successfully, I'll have a better shot than the next guy, because I know the pitfalls." Tuzman left with a new client.
Ultimately, the best antidote for a bruised image is success. The 19-employee Recognition Group has landed 22 projects so far, and it turned a profit in its first fiscal year -- something GovWorks never achieved. To Tuzman, that proves notoriety can be overcome. "I don't expect people to overlook that I ran a company that wound up in Chapter 11," he says. "But I don't expect them to ignore the successes I've had since then."