Anatomy of a New-Economy Nosedive

Approximately 85% of new businesses go belly-up. The good news is, there's no loss of face for the enterprising American entrepreneur who, acknowledging failure in one venture, takes a second shot with another. Or a third or a fourth, for that matter.

Startup.com, a feature-length documentary playing in selected theaters around the country, chronicles this uniquely American kind of failure. Shot in 1999 and 2000, it captures that crazy moment when Internet entrepreneurs dreamed of getting rich and making history.

Venture capitalists poured tens of billions of dollars into this fantasy, most of which has since disappeared, and the movie lets us watch two of its protagonists, Kaleil Isaza Tuzman and Tom Herman, scarf up some $60 million of this booty.

Filmmakers Chris Hegedus (The War Room) and Jehane Noujaim find the human drama in their story. Kaleil and Tom were high-school buddies whose friendship is severed on camera by their enterprise's collapse, and the experience hurts them personally.

The action begins when recent Harvard grad Kaleil quits his hot-shot job at Goldman, Sachs to hustle up capital for a company started by Tom and another techie. The deal is that Kaleil is to be given control in exchange for access to his fundraising skills, which are considerable.

Smart, focused, energetic, with a disarming, charismatic smile, Kaleil has the right stuff to drive a company. He's also amoral and ruthless. He fires Tom's original partner, engineering a buyout at what appears to be a bargain-basement price.

The product they're selling, govworks.com, enables Internet access to government services; their bestselling tool facilitates online payment of parking tickets. When a top Silicon Valley venture-capital firm accurately identifies the weaknesses in their business plan and refuses to back them, Kaleil keeps moving. Glued to his cell phone 24/7, he convinces other investors to pony up.

The high point of his hustling is an appearance on a C-SPAN panel show with President Bill Clinton, to whom he gives a business card. In a wonderful follow-up scene, the entrepreneur persuades Atlanta's black ex-mayor, Maynard Jackson, to join their board and lead them in a company cheer.

We see that, when forced to choose between personal values and business, both entrepreneurs always go for the bucks. Kaleil burns through his romantic relationship with Dora, a TV producer who, of course, promotes his company on her show, and Tom tries lamely to connect with his pre-school daughter from a failed marriage during her occasional custody visits.

The firm grows from eight employees to 233. But revenues are flat and more money is needed. When NASDAQ crashes in April of 2000, venture capital dries up. Someone has to take the fall.

Kaleil makes sure it's Tom, not him, and appears to feel badly about making his long-time chum the scapegoat.

The culture created by high-tech entrepreneurs is as much a part of America's economic success as the speculative bucks that drive them, and the lifestyle and values of these Internet wonderboys seem very different from what came before. Kaleil and Tom only wear suits and ties when talking up investors. The rest of the time it's baseball caps, warm-up jackets, sweats and sneakers.

Their language is a cross between business-school jargon and rock 'n’ roll, including the extensive profanity. Sprinkled throughout their patter are new-age buzzwords like “heuristic” and “holistic,” which Kaleil uses to manipulate employees and investors. Particularly nauseating is the emphasis on “connecting” and “feeling” each other's pain in his take-no-prisoners management style. Kaleil also uses a Hindu-like style of meditation and prayer when stressed out that also seems more new-agey than a reflection of traditional religious beliefs.

Unintentionally, the filmmakers remind us of what Catholic thinkers like Michael Novak have been long saying. A world dominated by the values of people like Tom and Kaleil would be unbearable. A just and ordered society, these thinkers point out, needs more than a thriving economy.

It also must have a transcendent moral code based on religion and mediating institutions like churches, schools and voluntary associations.

The balance and interplay of these forces can transform what could be materialistic excesses into a culture that is both virtuous and productive. The viewer gets hints of this in the scenes with the protagonists’ mothers, who try to insert traditional values into their sons’ lives.

“How bad can it be?” Tom asks Kaleil when things look darkest. “We'll get other jobs, start other businesses.”

And they do.

After the movie's production ended, the two got back together and set up another operation that specializes in helping failed Internet companies like their own. Their failure with Govworks hasn't broken their spirit. It was just a necessary part of their entrepreneurial learning experience.

The filmmakers offer a firsthand look at both the bright and dark sides of this innovative, market-driven culture at work.

It's a ground-level look at the landscape of 21st-century American capitalism — a place of boundless opportunities and daunting dangers, not all of them financial.

Arts & culture correspondent

John Prizer writes from Los Angeles.