Finding affordable health insurance has long been a difficulty for small business owners and employees.
Premiums may be affordable one year and could double the next. In 2020, Virginia’s average health insurance cost per person was $8,815, according to data from the Kaiser Family Foundation, and 36.1% of people polled reported that they did not seek mental health treatment because of cost. The average monthly cost of health insurance for small business owners is $547 per employee, which rises to $1,175 for family coverage, Kaiser reported in 2021.
The federal Affordable Care Act, passed in 2010, helped self-employed Americans negotiate affordable health policies, and in 2022, Virginia’s lawmakers passed legislation that aims to make similar strides for small businesses.
Small businesses with two to 50 employees will soon be able to join a self-funded health insurance consortium, or Multiple Employer Welfare Association (MEWA), through their local chamber of commerce or other business organization, such as the Virginia Farm Bureau. The ultimate aim is to lower the cost of insurance per person by creating a larger risk pool.
“I think this could be a game changer for small business,” says state Sen. Monty Mason, D-Williamsburg, one of the legislation’s sponsors. He predicts MEWAs will help small businesses attract more employees, noting that “80% of new jobs are offered by small businesses” in Virginia. “Other states that have these types of consortiums have seen premiums [go] down by 15% to 20%.”
According to state law, no one can be excluded from a MEWA based on preexisting health conditions, and insurance policies must cover emergency care, hospital stays, prescription drugs and other expenses typically covered by insurance. Any surplus revenue will be sunk back into the insurance plan at the end of the year, and associations must maintain a net worth of at least $4 million and deposit at least $50,000 of high-quality securities with the Virginia Department of the Treasury.
The first organization in the state expected to offer such a plan is the Virginia Chamber of Commerce, which is set to roll out its WiseChoice Healthcare Alliance this summer. Barry DuVal, the chamber’s president and CEO, says he anticipates about 3,000 people will join join in the first year — “similar to health coverage for a big company.” The only requirement for membership is that a business join a local chamber affiliated with the Virginia Chamber. Premiums will differ per business, DuVal notes.
The State Corporation Commission’s Bureau of Insurance will oversee the consortiums — as of May, the bureau had not yet received any applications for approval, but a spokesperson says it expects one soon from the Virginia Chamber. Any organization planning to create a MEWA must submit a three-year financial feasibility plan with enrollment projections, a methodology to determine premium rates, as well as a projection of balance sheets, cash flow statements showing capital expenditures, and purchase and sale of investments, the SCC says.
“We worked so closely with the Bureau of Insurance,” Mason says, “I think the structure is as sound as it can be.”
Mason’s first try at passing the legislation in 2019 was vetoed by Gov. Ralph Northam, who was concerned the bill would lower membership in the state insurance exchange.
“We argue that it would not hurt the state exchange,” DuVal says. Northam’s successor, Gov. Glenn Youngkin, a Republican, said before taking office in January 2022 that he would sign a bill if it were passed again by the Virginia General Assembly. He did so at a ceremony last year.
Aside from stabilizing the cost of health insurance, DuVal says MEWAs will likely help boost membership in local chambers. Similar policies in other states have helped chambers grow, with health insurance consortiums including up to 40,000 members after a year or two in existence. Mason anticipates Virginia’s consortiums will include 10,000 to 20,000 people once they’ve existed for a couple of years.
“Ninety percent of Virginians work for small businesses,” DuVal notes. “The real benefit of this is to produce and promote a healthy Virginia. It also helps smaller businesses recruit. Now they can offer competitive health coverage for employees.”
Rural communities need extra love when it comes to additional business resources, says Kathy Deacon, vice president of business and resource development for the Vinton-based Advancement Foundation.
The foundation has been running “The Gauntlet,” a business program and pitch competition, since 2015, expanding it into Southwest Virginia this year.
Since the program is run online, it has had participants from all over the country, as well as overseas, Deacon says. While the class portion is online, it also hosts in-person stakeholder meetings and networking events.
The competition’s expanded region adds all counties from Buchanan down to Lee, across to Henry and up to Rockbridge.
“We want to uncover entrepreneurs in areas that are typically underserved. Our focus really is on rural community developments that aren’t typically in line to get lots of additional resources either at the state or the federal circles,” Deacon says.
The program provides entrepreneurs who are looking to start new businesses or expand existing ones with 10 weeks of business planning and development classes, including marketing, e-commerce and financial planning — beginning in February, with an awards ceremony in May. At the end, they turn in a business plan that is judged by a panel, and the highest ranked entrepreneurs compete in a pitch competition.
Each year, the Gauntlet program provides more than $300,000 in cash and in-kind services, including consultations with attorneys, accountants and marketing professionals, as well as website development. A general prize pool is applied to the participants based on business plan and pitch competition judging.
This year, over 100 entrepreneurs participated.
The program helped 2023 participant Dirk Moore, owner of Blue Hills Natural Food Market in Abingdon, find support in expanding into a new location. “I think whenever you have business owners who are working together, especially when they’re in proximity with one another, you learn how important it is for everybody to succeed and for your business ecosystem to do well, and that is really reinforced by the Gauntlet program,” Moore says.
Some program participants go on to make moves nationally — like Richard Mansell, a 2019 participant from Covington whose company, IVO Ltd., is valued at $10 million — but most have small Main Street businesses that are succeeding locally, Deacon says: “Once you’ve got a thriving downtown, the growth continues, and it’s creating jobs and opportunities for families to thrive.”
On May 15, the first bets were taken at the 40,000-square-foot temporary Caesars Virginiacasino in Danville, while a $650 million permanent resort casino is being built next door.
The temporary casino looks like a simple white tent on the outside, but the inside feels “very much like you’re in any casino in the country,” says Chris Albrecht, senior vice president and general manager of Caesars Virginia.
Albrecht has worked at Caesars Entertainment Inc. casinos across the nation for the past 18 years but says it’s the first time he’s opened a temporary casino. It’s a challenge not having the full set of amenities and tools of a permanent casino, he says, but he’s dedicated to making the experience great for customers.
Located at the former Dan River Inc. Schoolfield mill site, the temporary facility features eight sportsbook betting kiosks; 740 slot machines; 25 live table games, including blackjack, roulette and baccarat; 28 electronic table games of blackjack, roulette and craps; and a quick-service restaurant, Three Stacks.
Hiring began in January, and the temporary casino has about 400 workers, about a quarter of whom are table games dealers.
A partnership between Caesars Entertainment and the Eastern Band of Cherokee Indians (EBCI), Caesars Virginia started construction in August 2022 on the permanent casino, which is expected to open in late 2024. Plans call for 500 hotel rooms, a spa, a pool, bars, a 2,500-person entertainment venue and 40,000 square feet of meeting and convention space. It will have at least 1,300 slots, 85 live game tables, 24 electronic table games, a poker room and sportsbook.
Caesars Virginia received the green light to operate on April 26, when the Virginia Lottery Board approved its license, making it the third casino to receive state approval.
Virginia’s first casino, the Hard Rock Hotel & Casino Bristol, opened in July 2022 in a temporary space at the former Bristol Mall after receiving licensing approval less than 90 days earlier. In December 2022, developers began construction nearby on the $400 million permanent Hard Rock casino, which is slated to open in July 2024. The $340 million Rivers Casino Portsmouth, which received its license in November 2022, opened its permanent space in January. The Pamunkey Indian Tribe’s license for the proposed $500 million HeadWaters Resort & Casino on the Elizabeth River in Norfolk is still pending state approval.
The top five most-read daily news stories on VirginiaBusiness.com from April 15 to May 14 included the news that Richmond was likely to keep its Minor League Baseball team, even though its new stadium wouldn’t be ready until spring 2026, a year later than originally planned.
Council members voted unanimously for the $2.44 billion mixed-use development, including a replacement for the Richmond
Flying Squirrels’ 38-year-old baseball stadium. (May 8)
George Mason University‘s School of Business will be renamed for the late Donald G. Costello, the Loudoun County business owner whose gift was GMU‘s largest-ever individual donation. (May 3)
Way back when, Roanoke was a train city — the headquarters for Norfolk and Western Railway and a late-1800s hub for the Shenandoah Valley Railroad.
The scenic mountain community, however, has grown into a bustling region with a variety of successful industries, including one standout: health care. With the formation of Virginia Tech Carilion School of Medicine (VTCSOM), the product of a public-private partnership between the university and the nonprofit Carilion Clinic health system, Roanoke has become a hotspot for medical talent, research and development.
What was once just a brownfield a little south of the city center is now home to VTCSOM, a medical research institute and clinical facilities. In fact, VTCSOM is considered one of the major “success stories” from a brownfield grants program run by the Environmental Protection Agency. In 2008, the city of Roanoke received a $200,000 grant to clean up the scrapyards around South Jefferson where the medical school and Carilion Clinic hub stands today.
“When the people who formed the [Virginia Tech Carilion] partnership envisioned building assets that would be shared between Virginia Tech and Carilion here in Roanoke, including a research institute at a medical school, they really were thinking about transforming Roanoke from a … ‘train city’ to a ‘brain city,’” explains Dr. Lee A. Learman, the medical school’s dean since 2019.
The small medical school, which graduated its 10th class of doctors in May, has become one of the country’s most competitive medical schools. It has the third lowest acceptance rate in the nation, according to College Evaluator. For the class of 2025, 6,405 prospective students applied to VTCSOM, and just 49 students were accepted — a 0.77% acceptance rate. By comparison, 6,914 people applied to Harvard Medical School for entrance in 2022, and 226 were admitted — a 3.3% acceptance rate.
VTC is also the most selective medical school in Virginia, compared with acceptance rates ranging from 0.85% at Eastern Virginia Medical School to 4.5% at the Virginia Commonwealth University School of Medicine. VTC is also the state’s smallest medical school; it began enrolling 49 students per year in 2020, after starting with classes of only 42 students.
Dr. Aubrey Knight, senior dean of student affairs at VTC, says that this small expansion doesn’t mean the school is any less competitive.
The growth in class size is “incremental, it’s relatively small,” he says. “We’re still a very small school. Going from 42 to 49 [students], I don’t think makes that much difference in the culture of the school or in the process for admitting students. The process for admissions is more about our reputation and the growing number of people that are applying and interested in the medical school.”
VTCSOM is “very much a clear and compelling partnership,” Carilion Clinic President and CEO Nancy Agee says. “Medical students, residents, fellows and faculty, all those are intricately linked.” Photo by Don Petersen
Symbiotic partnership
As its name makes clear, the Virginia Tech Carilion School of Medicine is a true partnership between the university and the regional health care system. In summer 2014, the medical school received full accreditation from the Liaison Committee on Medical Education and the Southern Association of Colleges and Schools Commission on Colleges, and on July 1, 2018, it officially became the ninth school
at Virginia Tech.
Roanoke-based Carilion Clinic operates a network of seven hospitals, as well as primary and specialty care practices serving nearly 1 million Virginians across the Roanoke and New River valleys as well as the Shenandoah Valley and Southwest Virginia. This robust network of physicians is what allowed Virginia Tech to establish its own medical school, says Nancy Agee, president and CEO of Carilion Clinic, which has grown into an almost $2 billion medical system over its nearly 125-year history.
“The school doesn’t exist without us. It’s very much a clear and compelling partnership,” she says. “Medical students, residents, fellows and faculty, all those are intricately linked.” Carilion Clinic physicians train medical school students; Virginia Tech does not employ the professors, she explains. This has been a symbiotic relationship — in that Carilion Clinic employs more than 1,000 physicians, up from the 600 the organization had when Agee became CEO in 2011.
Currently, there are 600 Carilion Clinic physicians who are also VTCSOM teaching faculty. These 600 physicians are paid exclusively by Carilion; however, the medical school has a total of 871 faculty, with the others having different employers and affiliations. Virginia Tech employs 78 faculty members.
“It’s been a sea change, frankly, and the School of Medicine has been a catalyst for it,” she says. “It was part of our plan at the beginning, so we’re achieving that vision.”
While Virginia Tech Carilion medical students don’t have guaranteed residency programs with Carilion Clinic, some end up “matching” with one of Carilion’s programs. Upon graduation from medical school, students across the country participate in a matching process in which prospects rank their top residency programs, and the medical programs do the same with the students. Medical grads typically match with a residency program, which can vary in specialty, length and location. For the VTC class of 2023, seven students matched with Carilion, and since 2014, 57 students have matched with the regional medical network.
Others, though, have matched with increasingly competitive programs, including Massachusetts General Hospital, Mayo Clinic School of Graduate Medical Education, and Ronald Reagan UCLA Medical Center. So far, VTC has had a 100% match rate for students pursuing residencies, which is somewhat rare, even at other highly regarded medical schools.
“The factor is more about our graduates performing well and opening the door for subsequent students,” Knight says. “We’ve always had very strong students. Other people are recognizing that to a greater degree.”
Sahana Nazeer, who graduated from VTC in June, will return to her hometown, Boston, for a child psychiatry residency program at Brigham and Women’s Hospital, consistently ranked as one of the nation’s best hospitals. Coming from Brown University, Nazeer wasn’t necessarily eager to move to Roanoke — a city mostly unknown to her — but it quickly felt like a place where she could build a community. With small class sizes, Nazeer says she felt comfortable approaching and working with her classmates.
“I feel like I walk away from medical school feeling like I’ve had an individual relationship with each person in my class,” she says. “I don’t know many med students that could really say that, too. I can 100% say, now, four years later, I’m going to miss Roanoke.”
That sense of community largely hinges on the school’s problem-based learning, in which small groups of students work through medical scenarios together, teaching each other how to be successful in practice.
Dr. Adam Tate, a 2018 VTC graduate, also found that having significant direct contact with faculty, medical residents and attending physicians made his medical school experience an “involved and immersive classroom and clinical learning environment,” he says. “I developed both amazing friendships and professional relationships from my time in the program.”
Research chops
Because VTC is so competitive, incoming students often have serious research chops.
“We really do want a student who has some experience in and can hit the ground running with research,” Knight says. “While we have a curriculum and we do teach them the basics of clinical research and biomedical research, we expect that they’ve had some experiences prior to coming, so that it’s not a shock.”
Virginia Tech Carilion students, staff and faculty note that the school’s focus on research is another factor that makes it unique when compared with other medical schools. That’s largely due to the Fralin Biomedical Research Institute at VTC, which was founded in 2010 and focuses on the study of diseases such as brain disorders, heart disease and cancer.
“Fralin does some very significant biomedical research, and students are very involved with Fralin and our faculty,” Agee says. “Something that we’ll continue to focus on is commercialization of research,” including redesigning medical products by using artificial intelligence and machine learning.
All medical students are expected to conduct weekslong “original, hypothesis-driven research” during their three-and-a-half-year medical school journeys. Plus, each student receives $1,000 per year for research supplies during years two through four.
The outcomes have been impressive over the past decade: More than 100 students have published their research, and nearly 400 have presented their findings at regional, national or international conferences. In March, VTCSOM hosted its Medical Student Research Symposium, highlighting student research.
VTCSOM’s focus on research is very different from old-school medical training, Learman explains. Many medical schools have academic departments focused on different disciplines, including physiology, biochemistry and anatomy, and were built out with large faculties lecturing students.
“It’s hard when you’re a student learning abstract knowledge and principles to not understand how those get applied in actual patient care,” Learman says. “Our students finish with a research certificate. When they get to residency, they’re far more facile with how to implement knowledge to impact clinical decision-making as a result of these research requirements they’ve been able to fulfill over the four-year curriculum.”
“We both loved being here during school and made many important connections,” says Dr. Adam Tate, who practices at Carilion with his wife and fellow VTSCOM graduate Dr. Megan Witham. Photos by Don Petersen
Return to Roanoke
Roanoke may not always be the first place VTC graduates practice medicine, but it’s often a final destination. Both Tate and his wife, VTC alum Dr. Megan Whitham, pursued residencies elsewhere before returning to Roanoke to work at Carilion Clinic.
Whitham works in maternal fetal medicine, while Tate practices family medicine. Originally from Carroll County, Tate was “psyched” to get to study medicine near home and Southwest Virginia’s Appalachian Mountains, a region negatively affected by a shortage of doctors.
“We both loved being here during school and made many important connections, which contributed to our desire to move back once we were finished with residency and fellowship training,” Tate says. Plus, Whitham notes, Roanoke was “an exciting place for us to come back to because it has been developing quickly, and there is a growing young professional community that is so welcoming in this area.”
About 25% of VTC students stay in Virginia for their residencies, Learman says, and of the 408 students who have graduated from the medical school so far, he anticipates about 100 of them will come back to the state to practice.
“We’re also happy that we can create a net increase in the Virginia workforce by attracting people from outside of Virginia who fall in love with this region and may go away temporarily to do residency but come back ultimately to live and to work,” Learman says.
Incremental growth is what’s next for the school, officials say. This will include the construction of more medical training space and the small increase in the number of new students at VTC to 49 in 2024.
Architectural planning for the future building hasn’t begun yet, and timelines aren’t mapped out, but officials envision the new construction to more than double the size of the current 51,000-square-foot facility, a VTCSOM spokesperson says. While a target class size hasn’t yet been determined, the expansion could allow the school to double in enrollment. However, the school would not enroll more than 100 students per class, “which would still be a small medical school by national standards,” the spokesperson adds. (The median medical school class size nationally is 140 students, with a range of 40 to 250, according to the Journal of the Association of American Medical Colleges.)
“The transformation of an industrial brownfield into a rapidly growing health science and technology campus over the past decade is a remarkable success story for the Roanoke-Blacksburg region and the commonwealth as a whole,” says Virginia Tech President Tim Sands. “We are excited about the next phase of growth for VTCSOM.”
Virginia Tech At a glance
Founded
Virginia’s original land-grant university, Virginia Tech was known as Virginia Agricultural and Mechanical College when it was founded in 1872. Virginia Polytechnic Institute and State University is the state’s second largest public university by enrollment.
Campus
Virginia Tech’s Blacksburg main campus stretches over 2,600 acres. Tech also has regional presences statewide and a study-abroad campus in Switzerland. The university’s Innovation Campus for computer science and computer engineering graduate students will open in Alexandria in 2024.
Enrollment (2022-23)
Undergraduate: 30,434
Graduate and professional: 7,736
In-state: 23,885
International: 3,884
Students of color: 8,741
Male: 57%
Female: 43%
Employees
Full-time employees: 8,538
Research and teaching
faculty: 2,766
Tuition and fees, housing and financial aid*
In-state: $15,476
Out-of-state: $36,393
Room and board: $11,746
Average financial aid awarded to full-time, in-state undergraduates seeking assistance in 2021-22: $8,588
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.
Brendan Richardson co-founded Charlottesville-based Astraea, a satellite imaging and data analytics company. Photo by Matthew R.O. Brown
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.
Randal Wimmer became a multi-millionaire based off a contract proposal he wrote at his kitchen table and at a Northern Virginia Starbucks.
A Navy veteran, Wimmer started his own government contracting firm, McLean-based Analytic Strategies, in 2003. It took three-and-a-half years and a lucky business connection for the company to win its first subcontract — providing maritime data analysis for Unisys Corp. at $200,000 a year — until it struck its first home run: a $15 million prime contract for logistics work from the Defense Logistics Agency in 2010.
“That was the one that took us over the edge,” Wimmer says.
Virginia is home to four of the world’s five largest defense contractors — Raytheon Technologies Corp., Boeing Co., Northrop Grumman Corp. and General Dynamics Corp. — not to mention a slew of other government contractors offering services ranging from janitorial and security work to integrating artificial intelligence into health care management software to building the nation’s nuclear aircraft carriers. According to the Government Accountability Office, the federal government spent $637 billion on contracts in fiscal 2021, $386 billion of which was spent on defense services and products.
That’s a lot of money to compete for in a crowded field, and for a startup trying to earn a piece of the pie, there are ways in, though it takes work, say those who have been there before.
“It’s not as simple as you build something, and they will come,” says Jerry McGinn, executive director of the Greg and Camille Baroni Center for Government Contracting at George Mason University. “You have to understand the marketplace, understand potential customers, understand what kind of offerings you need that are attractive [and] where you fit in the marketplace.”
If that sounds like the same sort of checklist any startup should have, federal regulations, security clearances and contracting rules dictating prior performance — proving you’ve done work through obtaining previous contracts — add additional challenges for entrepreneurs seeking a foot in the government contracting door. Wimmer and McGinn refer to this as the “chicken-and-egg” approach.
“It’s like, ‘Well, how do I get … experience when I have no experience? If you’re not giving me a job, I don’t have any experience,’” Wimmer says.
That’s where connections can be crucial. Joining industry associations and developing relationships with business developmentemployees at larger contractors can lead to critical subcontracts that can build a business and help earn those necessary past performance requirements, Wimmer and McGinn say.
Federal programs, including the Small Business Innovation Research and Small Business Technology Transfer programs, can also help put a company on the government’s radar.
As a startup in the early 2010s, McLean-based ID.me won more than $5 million in grants from a National Institute of Standards and Technology program focusing on developing online identity management that helped it launch its product and provided access to state and local government customers, says CEO Blake Hall. The company also received investments from Virginia Venture Partners and Blu Venture Investors, both of which helped the company navigate the federal contracting world.
“With limited resources, you have to focus,” Hall says. “As you build trust and deliver value, your footprint will naturally expand as customers ask you to take on more work.”
Standing out
Another key to success is to find a niche by developing an innovative product or service. Sean Matson, co-founder and CEO of Virginia Beach-based Matbock LLC, says his military experience — he is a former Navy SEAL — helped his company figure out the process of getting a product to market and developing a supply chain. It also gave Matbock initial credibility and relatability to design and build the tactical gear it now sells. Matson says he watched platoon members modify newly issued gear that the government spent money on and thought “that seems weird,” so Matbock looked to fill the gap.
In August 2022, the company won its largest contract to date: $6.9 million from the Army to develop a prototype hybrid electric joint light tactical vehicle. “We relied on new materials, new ways to eliminate ‘one-trick ponies,’ and our own experiences,” Matson says.
Wimmer also points out that only 5% of companies in the United States pursue federal contracts. That eliminates much of the playing field. Earning a designation as a small, veteran, minority or woman-owned business or as one located in a historically underutilized business zone can also help a company stand out because the federal government requires that a certain amount of its money be awarded to those businesses annually. Further, Wimmer points out, the government tells its customers exactly what it is looking to buy via its acquisition and contracting process.
After winning more than $1 billion in contracts, Wimmer sold Analytic Strategies in 2016 and now runs the McLean-based Government Contracting Academy, which offers instructional courses for entrepreneurs trying to break into the industry.
As a government contractor, Wimmer’s initial successes took time and perseverance. He gained contracting experience while working corporate jobs and trying to launch Analytic Strategies. To grow the business after his first big win, Wimmer earned quality management certifications set by the International Organization for Standardization that documented and legitimized his corporate maturity. That’s a step he recommends to every business he now works with.
“This is the easiest and best industry you can ever pursue as a first-time entrepreneur,” Wimmer says.
Snacks and energy drinks are often the fuel for young entrepreneurs burning the midnight oil while perfecting their pitches and products. But for some University of Richmond students, snacks and energy drinks are their products.
Grace Mittl, a 2022 UR graduate, is co-founder and CEO of Absurd Snacks, a food allergy-friendly trail mix devised during Bench Top Innovations, a yearlong course that lets UR students guide a food or beverage concept from idea to commercialization. It “allows people to test their entrepreneurial itch,” Mittl says. “If you fail, it’s OK.”
Mittl’s nut-free snack, created during UR’s inaugural 2021-22 Bench Top Innovations course, is now sold at several Richmond grocery stores and convenience stores. Next up is TwinTail Brews, a sugar-free energy drink produced by the 2022-23 Bench Top class.
These are just two examples of the numerous ways that Virginia’s universities are providing students real-world experience with startups.
For instance, the University of Mary Washington‘s Center for Economic Development offers a student entrepreneur education program, StartUpUMW, and the University of Virginia has several entrepreneurship centers across multiple colleges with focuses on technology, nonprofit startups, licensing inventions and more.
In past decades, higher education’s efforts to cultivate entrepreneurship were largely the purview of business schools or of university technology transfer offices. But these days, colleges and universities are casting a wider net in encouraging startup ventures.
For example, at the Old Dominion University‘s Institute for Innovation & Entrepreneurship, faculty, staff and students of any major can collaborate and start businesses.
Virginia Tech‘s Apex Center for Entrepreneurs is also interdisciplinary and “provides any Hokie, from any major and any year the opportunity to engage in all phases of the entrepreneurship.”
In Mittl’s class, students worked in teams and presented their product pitches to a panel of judges who decided which project the whole class would work on.
“I was elected CEO of the class and had rights to the [intellectual property] as the original creator of the recipe,” Mittl says. She and class COO Eli Bank decided to continue running and growing Absurd Snacks after graduation in May 2022.
“That was super far off from my plan,” she says. “I had a job lined up in digital marketing. I had an interest in the food and beverage industry, but I wouldn’t say it was in the cards to start a business.”
Her company now has 25 accounts, primarily natural grocery stores in the Richmond area, she says, adding that Absurd Snacks plans to take on three student interns this summer.
Joel Mier, a lecturer of marketing in UR’s Robins School of Business, is creator of the Bench Top program. A number of factors led to the decision to focus the program on the food and beverage industry, he says. First, UR executive-in-residence Shane Emmett is the former CEO of the Health Warrior health food brand, which he and his co-founders sold for an undisclosed amount to PepsiCo Inc. in 2019. Also, the university has an industrial kitchen where students can test products and then scale up commercially. And, Mier notes, food is “one thing that everyone participates in every day.”
A former vice president of marketing at Genworth Financial Inc., Mier started his career in various leadership roles at three Silicon Valley tech startups. That’s the kind of environment that comes to mind when people think of startups, but Mier wants to demonstrate that “innovation happens everywhere,” not just in tech, and he enjoys hearing “students from all walks of life say, ‘I didn’t know what I was capable of.’”
At George Mason University, students and faculty are “a subset” of the people served by the Mason Enterprise Center, according to Paula Sorrell, associate vice president of innovation and economic development. The center offers programs, services and resources for entrepreneurs of all experience levels.
Students and faculty take part in the center’s Mason Innovation Exchange — the MIX for short — which is home to a makerspace and fabrication lab, a digital media lab and a startup incubator, offering everything from metal fabrication to business mentoring.
Another key part of Mason’s program is to connect students with entrepreneurship-related internships, Sorrell says. And through the National Science Foundation, it is part of a regional consortium aimed at providing experiential entrepreneurial training to academic researchers in science and engineering.
GMU is also a hotbed of biotech research; the Institute for Biohealth Innovation includes about 300 faculty and thousands of students focused on researching infectious diseases, cancer, reproductive health and other medical conditions.
One success story is Shrishti Singh, a postdoctoral fellow at GMU who plans to form a company to produce a photoacoustic imaging technology for doctors to visualize early-stage, precancerous tumors without resorting to invasive surgery — a development that Singh hopes will lead to the survival of more patients.
“This technology gives patients better diagnostics for colon cancer, pancreatic cancer, breast cancer and more, and can improve their prognosis,” Singh said in a statement, adding that her goal was to develop technologies that “make it from the research bench to the bedside of the patient.”
Partnering with the city of Roanoke, developer Ed Walker started redevelopment of 100 acres encompassing the sprawling, former campus of American Viscose, a rayon plant that closed in 1958.
“This is a chance we have as a community to really do something transformative,” Roanoke Economic Development Director Marc Nelson says.
Located in the city’s southeast quadrant and dubbed Riverdale after the historic name of the neighborhood, the project will include both historic rehab and new construction.
As part of his agreement with the city, Walker will invest at least $50 million over the next 17 years. Walker says it will be the last project of his career.
“These projects take a decade — and this one will take longer — so this is it,” he says. “If I’m lucky, I’ll live long enough to see it somewhat complete. It’s the kind of place that’s never finished. It’s so large and complex.”
Before Walker’s company purchased the property, a group of investors operated it for decades as the Roanoke Industrial Center. Walker hopes to retain many of the businesses currently located there.
By 2043, he hopes the Riverdale neighborhood will offer “everything a great place has — lots of different kinds of people creating a diverse experience that’s enjoyable, safe, affordable, creative, economically powerful, experiential and healthy.” Specifically, he expects it will offer residences, offices, retailers and eateries as well as art studios and outdoors-focused programming.
Riverdale’s first phase, which could be completed by 2029, will include 375 apartments and at least one 3,000-square-foot commercial building.
In January, Roanoke City Council approved a $10 million loan to Walker’s company, Riverdale Southeast LLC, to cover property acquisition and site remediation. If developers invest at least $50 million over 17 years, the loan will be forgiven, according to a performance agreement. Additionally, the developer will receive a real estate tax rebate for 17 years. Currently, the property generates about $100,000 annually, according to Roanoke City Manager Bob Cowell.
A master plan for the project will be put together this year, factoring in input from area residents, city planners, leaders in outdoor sports and national consultants.
Richmond-based Chmura Economics & Analytics looked at the projected impact of Riverdale on construction, commercial operations and household spending in the city of Roanoke from 2023 to 2040 and estimated the initial development plan will have a cumulative economic impact of more than $326 million.
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