Khaleil Isaza Tuzman races into his corner office, mid-conversation on his BlackBerry cell phone. An hour and a half late for a Forward interview, he mouths the words “I’m sorry” to a reporter as he takes off his jacket and glances at his computer screen.
At first blush it could be 1999, when Tuzman was flying high as the 28-year-old CEO of GovWorks.com, driving a Land Rover and rubbing elbows with President Clinton. The speedy rise and dramatic fall of GovWorks — a site that, in short, enabled citizens to pay parking tickets online — were captured in the riveting 2001 documentary film “Startup.com.”
“I really was in over my head,” admits Tuzman, who burned through $60 million at GovWorks, which filed for bankruptcy in late 2000. The crash left Tuzman in personal debt, too, but he has since refashioned himself as a managing partner in the Recognition Group, a successful company that advises businesses in crisis.
Despite the traumatic burst, Tuzman describes the bubble as a “wonderful” time. “Wonderful, because, although it was trial by fire, it opened a whole generation’s eyes to entrepreneurship, and in a wide-open context. It really allowed a lot of people to tap into their creative capacities.”
Ah, the Internet era, the heady days of endless possibility, 70-hour workweeks and in-office masseurs. The late 1990s were a time of unprecedented wealth in the United States as the stock market thrived as never before. Between November 1998 and March 2000, the Nasdaq climbed past 5000 from below 2000, initial public offerings occurred daily and millionaires were made overnight. In 2000 alone, venture capitalists pumped $108.8 billion into new technology businesses. Thousands of suits left their corporate cubicles to cash in on the boom; those who didn’t start dot-coms became day traders; everyone, it seemed, had extra money in their pocket.
And when the stock market tumbled on April 14, 2000, a day now known as “Black Friday,” the good life came to a crashing halt.
Add to the list of dot-com victims — which includes thousands of employees from high-profile flops such as Kozmo.com, Pets.com and Urban Box Office — journalist Steve Fishman. In his new book, “Karaoke Nation: Or, How I Spent a Year in Search of Glamour, Fulfillment, and a Million Dollars” (Simon & Schuster), Fishman chronicles the transformation of business culture during the Internet bubble, as well as the rise and fall of his own start-up.
In December 1999, Fishman, intrigued by the excitement of the era, decided to join the rapidly expanding club of entrepreneurs in his social circle. Armed with a motley crew (which included a former Israeli army paratrooper), remarkably little business sense and $3,000 in “seed money” from New York Magazine, where he is a contributing editor, Fishman set out to conquer the business world with his big idea: hip-hop karaoke.
Fishman, a self-described “tone-deaf Jewish guy from New Jersey, planning to teach the world how to hip-hop karaoke,” also hoped to pocket a million bucks.
“To set out to make a million dollars connected a person to what seemed for a time the country’s most popular ambition,” Fishman writes. “According to what I read, most people expected to be millionaires.” In 1997, Fishman notes, a survey of American college students indicates that 77% expected to earn a million dollars someday. Not to be in business, Fishman declares, was unpatriotic.
Sitting in his stocking feet in his loft-like Tribeca apartment — which, with minimal renovation, could easily be transformed into a dot-com office — Fishman looks back at his drive to build KaraokeNation.com during a time he calls “the American business revolution.”
The bubble, he said, was when “business was like a movement. Everyone wanted to be a part of it — and could.”
In 2000, Fishman notes, his 10-unit building housed six Internet entrepreneurs; even his dry cleaner, dabbling with missile assembly software, fancied himself one. “The idea was anyone could launch themselves into business,” he said. “Credentials, qualifications, past experience — all were downplayed. It was a time in our culture when it seemed all you needed was an idea.”
“It was a wonderful time for outsiders,” especially Jews, Fishman said. “Pedigrees and connections weren’t valued in the same way.”
It was also a time of unprecedented hubris and remarkable naivete. “I screwed up,” said Tuzman. “I raised more money than we needed, spent more money than we should have. We grew too fast, and then we didn’t cut quickly enough.”
Meanwhile, Fishman’s KaraokeNation never quite materialized; after shortening its name to KNation, the concept morphed into KaraokeStation, a division of Oddcast. Fishman didn’t earn any money with the project.
Jeff Lawson, 25, left the University of Michigan in 1998 to transform Versity.com — which offered university lecture notes online — from a hobby to a full-fledged business. Securing more than $12 million in funding, Lawson and three childhood friends relocated to California’s Silicon Valley, where they employed 60 full-time workers and nearly 10,000 college students across the country.
In the spring of 2000, the company was acquired by CollegeClub.com. An initial public offering was in the works. Lawson and his colleagues were poised to become rich — until the Nasdaq plummeted in April 2000. Massive layoffs began within weeks, and the IPO was put on hold. By August, CollegeClub had filed for bankruptcy protection.
Lawson nonetheless looks back fondly. “It provided this great opportunity, especially for people our age who could experiment with new technology, new business concepts, and were given the opportunity to do so,” he said. “You don’t see that kind of excitement, or exuberance, frequently. There was so much freedom, so much potential.”
“People minimize that today,” Tuzman said. “They look back at the bubble and say it was kids running amok. Well, it was everyone running amok. It was Wall Street, Main Street, the press, lawyers, bankers — everyone jumped on the gravy train.”
“So many people today say, ‘I told you so.’ Well, I was there, and they weren’t saying it at the time,” Tuzman said.
“Entrepreneurship is not about making a million dollars in a year,” Tuzman said. “If that’s the kind of entrepreneurship you’re interested in, well, good riddance. You don’t build a company in one year, in five years — or in 10 years, for that matter. Companies are like people: They mature.”
“Everybody says it’s a roller coaster ride,” Fishman said. “They didn’t mean it like this, but it’s true: A roller coaster ends up where it started.”
But, he said, “that sense of keen possibility — especially material possibility — has evaporated.”
Yet the spark remains. “We live in such an incredibly rich — as in textured — economy,” Tuzman said. “There are so many opportunities. People joke that entrepreneurship is dead, but that’s such a wrongheaded perspective.”
Times have changed, of course. “Pink-slip” parties continue, excess is out and the June issue of Fast Company — the magazine that once claimed to be the Rolling Stone of business publications — includes only two dot-coms, eBay and Amazon, on its list of the 25 “fastest” companies.
“Now I pay attention to the price per pound of photocopy paper. Before I would have looked at that as background noise,” Tuzman said.
Today, Lawson is back in Ann Arbor, Mich., finishing a final semester of classes before he can graduate. He continues to work with Kevin O’Connor, the founder of the online advertising agency DoubleClick and one of Versity’s early investors, on developing new business ideas. One, a concept for an “action sporting goods superstore,” is in the works.
“Start-up culture is just exciting,” said Lawson, applying the term to electronic as well as physical business endeavors. “It’s almost like a drug. There’s something alluring about starting at zero, creating something out of that and seeing people enjoy it.”
Although Fishman never netted himself a million dollars with KaraokeNation, he came closer to the mark with his book contract — which netted him an estimated $250,000. Fishman admits he still has the bug. “I’d love to be in business — just not in a karaoke empire,” he said.
And yet, he looks back fondly. “It’s easy in hindsight to be a big critic,” Fishman said. “I wanted to celebrate the entrepreneurial spirit, the movement of people toward their dreams — even if their dreams were meshuge.”
This story "From Start-Ups to Letdowns" was written by Lisa Keys.