What happens when your first startup fails? In Happy Valley, it’s just the beginning

10/25/2022

By Caryn Anderson

Photo: Xora co-founder Royce D’Souza hard at work.

In 2021, HappyValley Industry covered budding startup Xora. Specializing in 3D design communication, Xora had help from Ben Franklin’s Fall 2020 TechCelerator program and Penn State’s 2020 Summer Founders Program. The future was bright — until it wasn’t.

The highs and lows of entrepreneurship

After getting their initial start at Penn State's HackPSU, Xora co-founders Royce Leon D'Souza and Greg Costeas anticipated an exciting future with the new tech tools they’d created. What happened next was a rollercoaster of ups and downs that ultimately led to the shuttering of the company and a career shift for D’Souza.

At one point, the company was ramping up quickly, earning revenues of $10,000 to $15,000 per day in State College, but only after navigating a wild ride of challenges and multiple pivots.

“There are only enough times you can get hit before you lose the will to keep going. At that point, I put my hands in the air and said, ‘I’m done. This is really it.’”

D’Souza recalls, at first, spending six months working with beta customers in the construction industry, none of whom ended up paying them. The team felt defeated, but reskinned the product and moved on to a different market.

“This time, we were much faster at customer discovery, building relationships and finding product market fit,” said D’Souza. “We gained our first customer within two weeks in the video game and mobile development space. Our initial traction outpaced our ability to execute, and we ended up losing contracts and only retaining a small subset of clients.”

Reflecting on this, D’Souza realized that he and Costeas may have felt an element of fear in asking for help with the funding needed to scale the product, which ultimately slowed growth.

“My experience running startups is almost my day-to-day life right now. Startups often acquire a lot of data and IP, but don’t know how to monetize it. I work with bankers, tech professionals and startup founders to help them build their data infrastructure and protect it. My startup background offers a unique perspective.”

“We weren't ambitious enough. I don't think we fully believed in the product we were selling. But after many pivots, we ended up dropping AR altogether and found our space in food delivery, where we would bundle orders from GrubHub, DoorDash, Uber Eats and the restaurant's point of sales to create optimized delivery routes,” D’Souza said.

Finally, the company had found its footing. It began scaling with 30% month-over-month revenue growth and planned expansions to Boston and Washington, D.C.

However, in early 2022, just as Xora was poised to make its next move, the VC market slowed to a halt. D’Souza found himself co-founder of a startup deemed no longer "backable." Shortly after, investors did not honor their commitments, pulled capital and left the company with financial obligations it could not cover. Ultimately, the only choice left was to shut down, let go of staff and halt operations.

Nothing prepares you for the experience

“The shutdown pretty much destroyed me as a person,” noted D’Souza. “It was something that a lot of people tried to prepare us for and tell us that we should expect. But there’s nothing that can truly prepare you for the highs and lows that come with entrepreneurship.”

“There’s this intensity of having people’s livelihoods depend on the daily work of the organization. You’ve got customers and clients, payroll, insurance, and technologies that you rely upon and other organizations that rely on your technologies,” he said.

“Things were ramping up. We were doing $10,000 to $15,000 per day in State College in terms of revenue, which is a good amount for just a five or six-person operation. Like almost everything that comes to the venture capital industry, it is an accelerant. It’s fuel. But you have to make sure that the fire is just right. Otherwise, it will burn you down rather than ignite like a flame or a rocketship,” D’Souza added. “There are only enough times you can get hit before you lose the will to keep going. At that point, I put my hands in the air and said, ‘I’m done. This is really it.’”

“The shutdown pretty much destroyed me as a person,” noted D’Souza. “It was something that a lot of people tried to prepare us for and tell us that we should expect. But there’s nothing that can truly prepare you for the highs and lows that come with entrepreneurship.”

D’Souza continued, “No one ever tells you how complex it is to wind down a company and to do it accurately. When you’re taking outside capital or inside capital or friends and family, that can lead to lawsuits. No one tells you how to clean that up and negotiate all those issues to ensure you’re making the best out of a bad situation.”

But it still all paid off

Xora halted operations in early March 2022 and officially shut down by July 2022. Today, D’Souza works in Washington, D.C., as a databroker in a boutique firm — and his career was only made possible by his experience as a startup founder.

“My experience running startups is almost my day-to-day life right now,” he said. “Startups often acquire a lot of data and IP, but don’t know how to monetize it. I work with bankers, tech professionals and startup founders to help them build their data infrastructure and protect it. My startup background offers a unique perspective.”

D’Souza now works with a team around him, staff and support. He’s enjoying working with established businesses that have problems that were there yesterday, will probably be there tomorrow and are going to be there a year from now. This is a stark contrast to startups, where the problems of yesterday are not the same as today, and they’re definitely not going to be the problems of tomorrow.

“One day in the future, when I’m naive again about the difficulties of running a startup, I will come back to it,” he said. “With building my last company, we were really naive about how difficult it is to run a company and build something. That naiveness makes it hard to execute, but significantly easier to think outside of the box because you have a built in conviction that it will work. When you lose that conviction, you also lose a little bit of genius and a little bit of your spark.”

Although Xora ultimately shut down, D’Souza remains hopeful for his own path in entrepreneurship and he certainly doesn’t advise others to avoid the entrepreneurial lifestyle.

To budding startup founders and entrepreneurs, he had this advice: “Don’t worry about technology or problem areas. Find a tribe. Find people you can trust, whether that’s customers, fellow college students or people equally energized as you. You don’t really need to know a problem area to contribute something of value. You need a team around you that’s energized and ready to work toward something together.”

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