Pivot points

Talk to those on the front lines of startups — entrepreneurs, investors and those running incubators and accelerators — and one word comes up over and over: pivot.

If an entrepreneur isn’t able or willing to be flexible, chances are poor their business will succeed.

“Those unduly connected to what they started with must understand and address the need to pivot,” says Josh Green, director of the Fairfax-based nonprofit Innovation Commercialization Assistance Program (ICAP), funded by the Virginia Small Business Development Center. “Otherwise,” he says, “they become a statistic.” 

According to a 2021 survey by CB Insights, which tracks business analytics, a lack of need in the market kills off 35% of startups. That’s a failure factor exceeded only by the 38% of startups that ran out of cash or failed to raise new capital.  

“You may have a great idea, but you can’t move forward without knowing if anyone will buy it. A startup’s biggest mistake is not responding to what customers want,” says Katie Overfield-Zook, entrepreneurial ecosystem builder for the Shenandoah Community Capital Fund (SCCF), a Staunton-based nonprofit entrepreneurial support organization that offers startup and small business loans and helps entrepreneurs develop business plans and skills.

Celebrating failure

Roanoke entrepreneur Laura Godfrey has founded or co-founded five companies in the past two decades, and she’s had one of those fold.

It was with assistance from the Roanoke-based Regional Accelerator and Mentoring Program (RAMP) in 2019 that Godfrey evaluated Point 93, which sought to connect consumers with goods at a price they picked by using a blockchain-based identity wallet. RAMP helped Godfrey decide that the company’s solution was too broad and that blockchain was too decentralized to handle the volume of transactions the company projected.

Godfrey credits the quick identification of Point 93’s problems with helping her pivot around customer personalization and data acquisition, and that led her to co-found Brandpoint Analytics, a software-as-a-service platform that allows consumers to exchange their data for price adjustments. More recently, she’s found success as chief operating officer of Bookelicious, an online resource she co-founded with Lea Anne Borders — the California-based wife of Louis Borders, co-founder of the now-defunct Borders retail book and music store chain.

Bookelicious has attracted $2.2 million in seed money.

The company focuses on increasing literacy rates by helping educators and parents match children with age-appropriate and topic-specific books. Launched about a year and a half ago, it’s in use at 3,500 schools nationwide. In Virginia, Bookelicious’ clients include Prince William County and Roanoke City public schools.

Godfrey, who calls herself an optimist, learned from the experience of folding Point 93. “I think that probably in the future it will make it hopefully easier if I have to make the choice again, because nothing bad happened,” she says.

Lisa Garcia, director of RAMP, the accelerator that helped Godfrey test Point 93, says, “We often don’t celebrate failure, but to learn early that an idea is not viable is a success.” Since its 2017 founding, the nonprofit RAMP has advised and supported 43 companies, including five in its most recent cohort. Of those, at least 79% remain in business.  

Given that high success rate, RAMP-supported companies are beating the odds, and by far. The U.S. Small Business Administration says only about half of new businesses survive their first five years.

Pivot and persist

“There are lots of ways to fail and just a few to succeed,” says Charlottesville entrepreneur Brendan Richardson, who’s among the fortunate minority to fall into the latter category. 

In 2012, Richardson co-founded Everactive Inc., a company that produces semiconductors that wirelessly and continuously transmit data using minuscule amounts of power. The technology has many applications — including wearable, self-powering medical devices — and Everactive has grown into a business with more than 80 employees and a valuation of more than $18 million. But Richardson, a self-described “business guy,” left the company in 2016 because it was time to bring on a CEO with semiconductor experience. Ready for his next venture, Richardson co-founded Astraea, a Charlottesville-based satellite imaging and data analytics firm.

His original idea for applying machine learning to data obtained from satellites was expensive and too broad, so he “pivoted from trying to find the ‘killer app’ for satellite data to building a cloud-based tool,” he says, one that lets the customer decide what data to gather. For example, a solar energy company asked Astraea if it could provide the addresses of every rooftop in six Virginia counties that had the reflective surface that it preferred for installations. Astraea delivered that information in five hours. The tool has also been used in Ukraine to provide land data to the Ukrainian and allied governments and humanitarian organizations amid the Russia-Ukraine war.

Astraea’s website promises “everything you need to leverage geospatial data in one place,” and that formula has attracted enough customers that last summer Astraea raised $6.5 million to scale up its operations. 

Richardson credits the company’s success to being willing to abandon an idea that wasn’t working and go where demand existed. “When something goes wrong, use it to pivot in the right direction,” he says. “That’s where persistence comes in.” 

Persist and adapt

Carly Buxton’s Richmond-based startup, Nessle, is a smaller-scale business than Astraea, but persistence and adaptability have been central to its survival as well. Buxton’s initial business plan called for a digital help platform for new parents, but it turned out that many parents wouldn’t pay for something they thought they could find for themselves online for free. Meanwhile, Buxton found herself fielding inquiries from doulas, parenting coaches and other family consultants about how they could get their services listed on her platform. 

“It all started to click,” she says, leading in an obvious direction for a pivot: Let parents access Nessle for free while charging vendors a listing fee.

That plan had legs. Last year, Amazon Web Services awarded Buxton and her business partner, Michelle Cunningham, $125,000 cash and $100,000 in AWS credits through its Impact Accelerator for Women Founders. The grant gave the partners breathing room to turn their platform into a curated directory of child-centric experts.

John Failla’s story features a plotline similar to Buxton’s. He was a lousy math student and had several tutors, but he didn’t much like any of them. He envisioned a resource for people like himself to find in-person tutors with whom they could relate, and in 2016 he founded edtech startup Trilogy Mentors, which rebranded in 2021
as Pearl.

Five years ago, Failla took his idea to Richmond-based nonprofit incubator and entrepreneurial hub Startup Virginia, which helped him connect with mentors and people in the industry. That eventually led to a rethink of his original business plan and a shift away from being a company developing tutoring software to becoming a cloud-based solution for organizations to launch their own branded, customizable platforms for online tutoring.

“You can’t be overconfident,” Failla says. “Building something that isn’t needed — it’s an expensive lesson to learn in money and time.” 

Morgan Evans, Startup Virginia’s communications and program manager, helped Failla avoid that costly mistake. “Before you gamble on an idea, you’ve got to do the necessary work,” Evans says, and for Failla, that work involved conducting customer interviews. Data gathered from those interviews convinced him that his company needed a rebrand.

That turned out to be a smart move. Pearl now has 18 employees and counts the Illinois State Board of Education as a customer. Last year, it was boosted by a $250,000 grant from Accelerate, a national nonprofit initiative supporting increasing access to “high-impact” tutoring in public schools. 

Additionally, Pearl has received more than $4 million in backing from organizations including Charlottesville-based CAV Angels and 757 Angels, an investment group based in Hampton Roads. Angel investors usually assist startups and early-stage companies in reaching the next level, and they generally make their money back when companies like Pearl are sold. 

“The startup ecosystem is a super risky space,” says 757 Angels Director Monique Adams, adding that many would-be entrepreneurs “fail early and fail often.” But angel investors “love companies that execute pivots successfully in the face of significant customer discovery.” 

Since 2015, 757 Angels has invested more than $100 million in 52 companies, which cumulatively have generated 1,500 high-paying jobs, says Adams, who’s leaving the organization in June when 757 Angels will join the VentureSouth network, one of the country’s largest angel investment groups. She will be succeeded by Paul Nolde, former executive director of Lighthouse Labs, a Richmond-based early-stage startup accelerator.

In Northern Virginia, serial entrepreneur Tonio DeSorrento warns that launching a startup can be “so hard, so stressful, with no safety net, no instructions,” he says. “A healthy detachment is a must.”

His latest venture is Fairfax-based GovForce, which helps federal contractors and their subcontractors to comply with government regulations. DeSorrento co-founded GovForce in 2022 and serves as CEO for the company, which early this year snagged $2.5 million in seed money and hired its first seven employees. 

But DeSorrento had a harder road with the previous business he headed and co-founded, Arlington County-based Vemo Education, which he left in October 2021 after Vemo’s biggest investor asked him to step down and make way for new leadership.

Established in 2015, Vemo was based on a model of making future income-sharing agreements in exchange for paying tuition for college students. But the National Consumer Law Center and the Student Borrower Protection Center filed a complaint about Vemo with the Federal Trade Commission in June 2020, alleging that the company engaged in deceptive marketing. And in 2021, 47 students filed a lawsuit against Vemo, alleging that Vemo and a coding academy had colluded and engaged in illegal and deceptive business practices. Vemo is no longer in business, according to a 2022 article from education news journal The Hechinger Report.

“It’s honestly not fun to think about how I didn’t hit the home run with that company that maybe people expected me to,” DeSorrento said of the experience in a February interview with Washington Business Journal.

Nevertheless, as a second-time co-founder and CEO of a startup, he is hopeful for a better outcome. Entrepreneurism, after all, requires a certain amount of optimism, as well as a willingness to pivot.

“You have to fall in love with your customers,” DeSorrento says, “not your solution.”  

Virginia Business Associate Editor Courtney Mabeus-Brown contributed to this story.