Silicon Alley Daily.com
March 26, 200127 March 2001
Feature Story
GovWorks Founder Looks to Solve Problems for Troubled Tech Companies
by Brian Morrissey
Similar to Winston Wolf, the Harvey Keitel character in Pulp Fiction who "solves problems," the Alley now has its own fixer who's no stranger to dire situations.
Carrying with him a fair amount of scar tissue from his own entrepreneurial travails, former govWorks chairman and CEO Kaleil Isaza Tuzman has set himself up as the Alley's Mr. Wolf. Three years after forming e-government company govWorks and less than four months after filing for Chapter 11 protection, Isaza Tuzman is back as the managing director and co-CEO of Recognition Group [now known as Recognition Group. In his new venture, he hopes to use his experience at govWorks to help struggling companies implement turnaround plans.
"Just going through the experience we went through was pretty sobering," he says. "I decided I wanted to work with entrepreneurs going through the hard times."
Along with fellow managing director and Co-CEO Juan-Carlos Garcia, a venture capitalist, Isaza Tuzman has formed a group specializing in restructuring, reorganizing, and wringing value out of distressed e-businesses. The company draws on the expertise of Isaza Tuzman, Garcia's 15 years of experience in investment banking, and Recognition Group's other two partners: Jonathan Agus, who has a dozen years' experience handling executive-level crises and shepherding liquidations, and Thomas Herman, who was a co-founder of govWorks. Recognition Group is targeting companies that fit neatly into its areas of expertise: e-government, e-finance, payment technologies, as well as companies in the Latin American market.
Up and running for eight weeks, Recognition Group already has four clients. In the first project it completed, Recognition Group was brought in by an online human-resources technology company to implement a salvage operation. With a six-week mandate, Recognition Group had to decide how best to redistribute cash and whether to sell the company, either whole or in parts. After installing an interim CEO who was experienced in turnaround situations, Recognition Group l led the company to a sale that helped bring some return to investors.
"Just going through the experience we went through was pretty sobering." ---Kaleil Isaza Tuzman
"I do find interesting how much what we're doing is taking a path that seems to everyone involved the right path to take, but it's difficult to corral all the parties," Isaza Tuzman says. "As an entrepreneur, it's extremely difficult to admit to yourself that you need to take drastic action."
As a companion to the advisory side of the business, Recognition Group has a venture side: the Second Frontier Capital Fund, which pumps money into down-on-their-luck dot-coms. Second Frontier Capital has been seeded with an initial $15 million, part of what Garcia hopes will be a $30 million fund closed in June or July. With the doors to additional funding essentially closed to many fledgling companies, Garcia feels Second Frontier Capital can step in and find some diamonds in the rough.
"There are some very good companies out there, many with very good management teams, but the timing is against them," Garcia says. To avoid any conflicts, Second Frontier Capital has a policy against investing in companies that have been clients of Recognition Group's turnaround arm. The fund looks to invest between $1 million and $3 million in companies, with the usual VC goals of a clear exit strategy. Garcia said the company might close the fund before the $30 million goal, if the right deal comes along.
After his three years at govWorks, Isaza Tuzman is confident he's seen enough not to get squeamish in his new role. "Our model is very entrepreneur-focused," he says. "We're very gritty and we get in the trenches."