News Column

The Kings of Comebacks

May 2004, HISPANIC BUSINESS Magazine

Joel Russell

Kaleil Isaza Tuzman
Kaleil Isaza Tuzman

Remember when portal, browser, and e-mail were new concepts? When Internet traffic was doubling every few months? Three Hispanic pioneers of the Internet share what they learned from the boom-bust cycle with lessons that can help every entrepreneur today.

Kaleil Isaza Tuzman Then: CEO, Now: President, Recognition Group

Few people crashed more publicly in the white-hot meltdown of the dot-com bust than Kaleil Isaza Tuzman. While hundreds of once-booming Internet service providers, Web portals, and e-commerce sites ended up simply vanishing in relative anonymity, the ultimate fate of Mr. Tuzman's company was meticulously documented by a film crew.

While the original intent of filming Mr. Tuzman's govWorks was to make a case-study video of a dot-com startup for Harvard Business School students, the filmmakers also later sold their unused footage to an entertainment firm. The result:, a documentary film chronicling Mr. Tuzman's struggles to save his company.

"Had we known the out-takes would be shown to a broad audience, we would have thought about it twice or three times," jokes Mr. Tuzman, now president of Recognition Group in New York. "But hindsight is 20/20. I don't regret the movie is out there. Entrepreneurs comment on the experience all the time, and they know someone else has gone through their experience."

Started in 1998, govWorks began as a producer of software to help government clients track contracts and purchasing functions. When the dot-com fever hit epidemic proportions, the company moved to become an Internet portal, and Mr. Tuzman, who took over as CEO after the first three months, tried to manage the restructuring. But in January 2001, he and his partners sold the company to First Data Corp.; and according to public statements by govWorks co-founder Thomas Herman, the sale incurred a loss for the founders and investors. The company had burned through approximately $60 million in venture capital during its three years of existence. In addition, the founders had made no deals with the film crew, so they have no financial interest in the documentary.

The experience is not dissimilar from hundreds of other dot-com tales except for one detail: Thanks to govWorks, Mr. Tuzman understands how a crisis affects a CEO, and he has parlayed that knowledge into a comeback with a new company, Recognition Group, that offers financial advisory services, specialty financing, and help in turning around companies on the brink of disaster. Since 2001, he has worked with more than 40 client companies whose revenues range from $3 million to $150 million.

"I founded Recognition because before govWorks I worked at Goldman Sachs. I saw how big corporations get great advice. The [financial] markets or consultants tell them when to refinance or change strategic direction," he says. "Small companies need advice even more. With govWorks, I needed help, but where could I go to get it?"

From his own experience, Mr. Tuzman says that when taking on a new client he asks the CEO one question: What is it you fear - Is there some aspect of the company you refuse to deal with, that you push off your desk rather than confront? The answer, he says, often points directly to the major problem at any company.

"It's disturbing, and often a predictor of failure, when CEOs think they must always have a smile on their face and present an upbeat image to the market," Mr. Tuzman says. "Your employees, vendors, and customers know there is a problem. The idea you can keep it in the CEO's office is a fallacy."

When CEOs identify too completely with their business, they often refuse to take necessary actions whether it's eliminating a failed product or firing a manager because it feels like it would be tantamount to cutting off a part of themselves. To overcome this paralysis, Mr. Tuzman says, the CEO must divorce himself from those issues. And while experts have written extensively about the so-called "entrepreneurial personality" that can launch a company, Mr. Tuzman says they spend little time writing about the very different personality that is required to save a company. "You are not the business," he says he counsels clients. "You must do the right thing, ethically and financially. If the business doesn't make it, you will make it. Even if you have to file bankruptcy, we live in the United States, and you will make it."

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