These Entrepreneurs Started Businesses During the Pandemic. How Did They Do?

A team whose venture-backed startup was inspired by a map they created for trick-or-treaters. A tech-company product manager who decided to quit his job during an eight-state road trip. A website developer who saw an opportunity to help small businesses reach customers online.

These are among the entrepreneurs who created new businesses during the Covid-19 pandemic, a time when the highest number of Americans since at least the mid-2000s took the first steps to launch a new venture.

Many new businesses won’t quickly provide a full-time income for their founders or boost private payrolls, while others may prove short-lived or never get off the ground. But their experiences offer lessons for the next crop of entrepreneurs as layoffs, originally concentrated in the tech sector, lead others to consider going off on their own.  

The fate of these nascent ventures could also prove crucial to the U.S. economy. Startups have historically accounted for one-fifth of job creation, according to University of Maryland economist John Haltiwanger. New business formation had been on a yearslong decline before the pandemic.

There are already signs that another wave of new business formation is likely to emerge from recent job cuts and corporate restructuring initiatives. “A lot of these folks are getting nice severances and have been sitting on an idea,” says Madhu Singh, a Seattle attorney who helps entrepreneurs start and grow their businesses. Others are looking to become consultants, sometimes with their former employer as a client, says Greg Russell, a Bellevue, Wash., attorney who has been fielding calls from tech-industry veterans considering their next steps.

Day One Ventures, an early-stage venture-capital firm, received roughly 1,200 applications for its “Funded, Not Fired” program, announced last November, which plans to invest $100,000 each into 20 startups that include at least one founder who was laid off from a tech company.  Day One says it has made seven investments and will continue taking new applications.

Pandemic-era founders say that keys to success include being able to draw on savings or to work a second job while building a business. Other winning strategies: focusing on who will buy the product early on and not just product development, and navigating the challenges of fundraising, particularly in today’s investment climate. Competitors can quickly emerge, and connections may not translate into lasting success.

Trick or treat

Chelsey Roney, a former Microsoft business program manager, and Melinda Haughey, a Ph.D. candidate at the University of Washington, came up with the idea for Proxi after building a map for trick-or-treaters in Ms. Haughey’s Seattle neighborhood. Their tool for making interactive maps allows local media, hotel front desks, influencers and others to turn lists of data into visual maps, create local guides and share recommendations.

Ms. Roney says she had previously thought about launching a startup, but Covid-19 made doing so seem urgent.  As the mother of two young children, she also believed that running her own business would give her more control over her time. “It was motherhood, the pandemic and professional desires all combined,” she says.  

The startup was accepted into a Techstars accelerator in October 2021, and raised $1.6 million last year. 

Wooing investors, never easy, has become more challenging due to recession fears, rising interest rates and other headwinds. “Raising venture money in general right now is very hard, especially as female founders,” says Ms. Haughey, Proxi’s chief executive.

The hurdles are greater for women, who need to provide more finished financial plans when they pitch investors, Ms. Haughey says. “The barrier to entry is higher, and the expectation of having everything fully fleshed out is higher for women,” she says. Startups with all-female founding teams accounted for 6.3% of venture-backed deals and 1.9% of venture funding in 2022, according to PitchBook and the National Venture Capital Association.

Proxi’s co-founders met with more than 30 investors for their first fundraising round. They expect to pitch to twice that number as they seek additional investments this year, because investors are more tightfisted and the company is seeking to raise a larger sum.

On the road

Ankit Dhawan, then a senior product manager at Amazon Web Services’ artificial-intelligence unit, was midway through a road trip with his wife and dog, when he decided to start his own company in 2020.  Mr. Dhawan had been managing a distributed team even before the pandemic. The health crisis solidified his belief that remote work was here to stay, but he also spotted a potential business opportunity to help address a lack of the in-person connections that office environments provided. 

“My drive to start something intensified during the pandemic,” says Mr. Dhawan, who had launched a short-lived free metro newspaper in India before moving to the U.S.

Mr. Dhawan used savings to start Virtuelly Inc. and later raised $750,000 from investors. The company now has 11 employees and offers interactive events designed to foster team building. Mr. Dhawan worked for 18 months without pay, and now takes a monthly salary of $4,000, a fraction of his Amazon earnings. The company had nearly $1 million in revenue and was close to breaking even last year, says Mr. Dhawan, who expects to turn a profit this year.

“It was possible because of my wife and some of the Amazon stock I sold,” Mr. Dhawan says. “My wife is working. She is running the house. That is a big support. It’s very difficult to manage without that.”

Mr. Dhawan’s current challenge is to continue to keep growing the company amid return-to-office mandates and belt-tightening at tech companies, which account for most of Virtuelly’s customers. The company is focusing on new offerings, such as a metaverse escape room, he says.

“The tech layoffs are definitely impacting us. Even the optics of doing a team event are not right,” says Mr. Dhawan. “We have to keep innovating in these tough times.”

No patients

Nathan Suter, a dentist and consultant, and Derek Harn, a user-experience researcher, wanted to help dental practices better manage patient care during the pandemic when they started work on Healier, a healthcare coordination tool, in 2020. Their venture began as a pilot project funded by Delta Dental of Washington, a client of Mr. Suter’s consulting business and Mr. Harn’s employer; within months, the pair spun out Healier as a separate entity. Mr. Suter says he had extra time to devote to Healier because didn’t see dental patients during the pandemic lockdown and then for a time operated with a reduced schedule.

Healier was testing its software with 10 dental practices, but the path to growth seemed uncertain. Mr. Suter says that he and Mr. Harn decided they were early to market and weren’t sure how to move outside of dentistry. Last year, the founders sold Healier to Enable Dental, an operator of mobile dental clinics that was their main customer. Being part of Enable, which is better capitalized, should make it easier to expand the business, he says.

“Derrick and I are problem solvers; the sales part was what we kind of lacked,” says Mr. Suter, who joined Enable’s board of directors before the sale and is now its chief innovation officer. “That is why it is a quick exit.”

Too much competition

Early success can quickly evaporate when competitors sniff out the same opportunity. William Bueti, owner of Little Ox Tech, a provider of custom websites in Walla Walla, Wash., says the pandemic spurred demand from small businesses in his community that were looking to better connect with customers online; it also made it easy to meet with them on Zoom.

But as the pandemic reshuffled the economy, other local programmers and web developers found themselves with extra time or needing income and began offering similar services. Companies that had focused on serving larger businesses shifted their focus to working with smaller businesses.

“I was not the only one to have this brilliant idea,” says Mr. Bueti. “I saw one or two requests a week drop to one or two requests a month or less,” he says. “A lot of my competition had more capital and probably more workforce.” 

Last year, with a new baby on the way, Mr. Bueti took a job as a data analyst with an agricultural company, a position with a predictable salary and company-provided health insurance. He no longer runs ads for Little Ox; most new customers come via word-of-mouth. “I’m mainly in a caretaking mode,” Mr. Bueti says.

Some entrepreneurs have made more dramatic shifts. Joel Bruck, the founder of Scale Out Technology Partners, left Pixar Animation Studios in Emeryville, Calif., where he was director of systems infrastructure, in May 2020. His plan was to leave Silicon Valley, spend less time on the road, leverage his connections to build a consulting business and be closer to his family in the Seattle area.

“It proved difficult to get a real footing,” says Mr. Bruck, who found that most potential clients still wanted him to travel, even if they were working remotely. More recently, many tech companies have been chopping consulting expenses, he says. 

Mr. Bruck began working in property development a year ago, and in recent months, he has taken on a handful of real-estate clients. He says he hopes to continue to leverage his technology expertise by working on data centers and other real-estate projects with extensive technology infrastructure. 

“I’m feeling really good about working on things I can get my heart into while being able to leverage my skills,” says Mr. Bruck, who is currently working on a prospective affordable-housing project. “It’s a good opportunity to make this pivot.” 

—Theo Francis contributed to this article.

Ms. Simon is a reporter for The Wall Street Journal in New York. She can be reached at [email protected]. Mr. Francis can be reached at [email protected].

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

A team whose venture-backed startup was inspired by a map they created for trick-or-treaters. A tech-company product manager who decided to quit his job during an eight-state road trip. A website developer who saw an opportunity to help small businesses reach customers online.

These are among the entrepreneurs who created new businesses during the Covid-19 pandemic, a time when the highest number of Americans since at least the mid-2000s took the first steps to launch a new venture.

Many new businesses won’t quickly provide a full-time income for their founders or boost private payrolls, while others may prove short-lived or never get off the ground. But their experiences offer lessons for the next crop of entrepreneurs as layoffs, originally concentrated in the tech sector, lead others to consider going off on their own.  

The fate of these nascent ventures could also prove crucial to the U.S. economy. Startups have historically accounted for one-fifth of job creation, according to University of Maryland economist John Haltiwanger. New business formation had been on a yearslong decline before the pandemic.

There are already signs that another wave of new business formation is likely to emerge from recent job cuts and corporate restructuring initiatives. “A lot of these folks are getting nice severances and have been sitting on an idea,” says Madhu Singh, a Seattle attorney who helps entrepreneurs start and grow their businesses. Others are looking to become consultants, sometimes with their former employer as a client, says Greg Russell, a Bellevue, Wash., attorney who has been fielding calls from tech-industry veterans considering their next steps.

Day One Ventures, an early-stage venture-capital firm, received roughly 1,200 applications for its “Funded, Not Fired” program, announced last November, which plans to invest $100,000 each into 20 startups that include at least one founder who was laid off from a tech company.  Day One says it has made seven investments and will continue taking new applications.

Pandemic-era founders say that keys to success include being able to draw on savings or to work a second job while building a business. Other winning strategies: focusing on who will buy the product early on and not just product development, and navigating the challenges of fundraising, particularly in today’s investment climate. Competitors can quickly emerge, and connections may not translate into lasting success.

Trick or treat

Chelsey Roney, a former Microsoft business program manager, and Melinda Haughey, a Ph.D. candidate at the University of Washington, came up with the idea for Proxi after building a map for trick-or-treaters in Ms. Haughey’s Seattle neighborhood. Their tool for making interactive maps allows local media, hotel front desks, influencers and others to turn lists of data into visual maps, create local guides and share recommendations.

Ms. Roney says she had previously thought about launching a startup, but Covid-19 made doing so seem urgent.  As the mother of two young children, she also believed that running her own business would give her more control over her time. “It was motherhood, the pandemic and professional desires all combined,” she says.  

The startup was accepted into a Techstars accelerator in October 2021, and raised $1.6 million last year. 

Wooing investors, never easy, has become more challenging due to recession fears, rising interest rates and other headwinds. “Raising venture money in general right now is very hard, especially as female founders,” says Ms. Haughey, Proxi’s chief executive.

The hurdles are greater for women, who need to provide more finished financial plans when they pitch investors, Ms. Haughey says. “The barrier to entry is higher, and the expectation of having everything fully fleshed out is higher for women,” she says. Startups with all-female founding teams accounted for 6.3% of venture-backed deals and 1.9% of venture funding in 2022, according to PitchBook and the National Venture Capital Association.

Proxi’s co-founders met with more than 30 investors for their first fundraising round. They expect to pitch to twice that number as they seek additional investments this year, because investors are more tightfisted and the company is seeking to raise a larger sum.

On the road

Ankit Dhawan, then a senior product manager at Amazon Web Services’ artificial-intelligence unit, was midway through a road trip with his wife and dog, when he decided to start his own company in 2020.  Mr. Dhawan had been managing a distributed team even before the pandemic. The health crisis solidified his belief that remote work was here to stay, but he also spotted a potential business opportunity to help address a lack of the in-person connections that office environments provided. 

“My drive to start something intensified during the pandemic,” says Mr. Dhawan, who had launched a short-lived free metro newspaper in India before moving to the U.S.

Mr. Dhawan used savings to start Virtuelly Inc. and later raised $750,000 from investors. The company now has 11 employees and offers interactive events designed to foster team building. Mr. Dhawan worked for 18 months without pay, and now takes a monthly salary of $4,000, a fraction of his Amazon earnings. The company had nearly $1 million in revenue and was close to breaking even last year, says Mr. Dhawan, who expects to turn a profit this year.

“It was possible because of my wife and some of the Amazon stock I sold,” Mr. Dhawan says. “My wife is working. She is running the house. That is a big support. It’s very difficult to manage without that.”

Mr. Dhawan’s current challenge is to continue to keep growing the company amid return-to-office mandates and belt-tightening at tech companies, which account for most of Virtuelly’s customers. The company is focusing on new offerings, such as a metaverse escape room, he says.

“The tech layoffs are definitely impacting us. Even the optics of doing a team event are not right,” says Mr. Dhawan. “We have to keep innovating in these tough times.”

No patients

Nathan Suter, a dentist and consultant, and Derek Harn, a user-experience researcher, wanted to help dental practices better manage patient care during the pandemic when they started work on Healier, a healthcare coordination tool, in 2020. Their venture began as a pilot project funded by Delta Dental of Washington, a client of Mr. Suter’s consulting business and Mr. Harn’s employer; within months, the pair spun out Healier as a separate entity. Mr. Suter says he had extra time to devote to Healier because didn’t see dental patients during the pandemic lockdown and then for a time operated with a reduced schedule.

Healier was testing its software with 10 dental practices, but the path to growth seemed uncertain. Mr. Suter says that he and Mr. Harn decided they were early to market and weren’t sure how to move outside of dentistry. Last year, the founders sold Healier to Enable Dental, an operator of mobile dental clinics that was their main customer. Being part of Enable, which is better capitalized, should make it easier to expand the business, he says.

“Derrick and I are problem solvers; the sales part was what we kind of lacked,” says Mr. Suter, who joined Enable’s board of directors before the sale and is now its chief innovation officer. “That is why it is a quick exit.”

Too much competition

Early success can quickly evaporate when competitors sniff out the same opportunity. William Bueti, owner of Little Ox Tech, a provider of custom websites in Walla Walla, Wash., says the pandemic spurred demand from small businesses in his community that were looking to better connect with customers online; it also made it easy to meet with them on Zoom.

But as the pandemic reshuffled the economy, other local programmers and web developers found themselves with extra time or needing income and began offering similar services. Companies that had focused on serving larger businesses shifted their focus to working with smaller businesses.

“I was not the only one to have this brilliant idea,” says Mr. Bueti. “I saw one or two requests a week drop to one or two requests a month or less,” he says. “A lot of my competition had more capital and probably more workforce.” 

Last year, with a new baby on the way, Mr. Bueti took a job as a data analyst with an agricultural company, a position with a predictable salary and company-provided health insurance. He no longer runs ads for Little Ox; most new customers come via word-of-mouth. “I’m mainly in a caretaking mode,” Mr. Bueti says.

Some entrepreneurs have made more dramatic shifts. Joel Bruck, the founder of Scale Out Technology Partners, left Pixar Animation Studios in Emeryville, Calif., where he was director of systems infrastructure, in May 2020. His plan was to leave Silicon Valley, spend less time on the road, leverage his connections to build a consulting business and be closer to his family in the Seattle area.

“It proved difficult to get a real footing,” says Mr. Bruck, who found that most potential clients still wanted him to travel, even if they were working remotely. More recently, many tech companies have been chopping consulting expenses, he says. 

Mr. Bruck began working in property development a year ago, and in recent months, he has taken on a handful of real-estate clients. He says he hopes to continue to leverage his technology expertise by working on data centers and other real-estate projects with extensive technology infrastructure. 

“I’m feeling really good about working on things I can get my heart into while being able to leverage my skills,” says Mr. Bruck, who is currently working on a prospective affordable-housing project. “It’s a good opportunity to make this pivot.” 

—Theo Francis contributed to this article.

Ms. Simon is a reporter for The Wall Street Journal in New York. She can be reached at [email protected]. Mr. Francis can be reached at [email protected].

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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