It was an illegal change that cost the Briton's to advance. Pendleton came through the change zone a meter too early as Varnish moved up a fraction too early.
Pendleton told the BBC: 'We've never really had an illegal change before. It's not something we've been too concerned about in the past but it's just one of those things that happens. It's not Jess' fault, it's not my fault - we're both partly to blame, really.
'We were probably just a bit too overwhelmed by the whole thing, a bit excited about our ride and just a bit too eager. We should have just kept a lid on it.'
The 31-year-old from Stotfold plans to retire after the London 2012 games, but Pendleton's young team-mate will recover. This is just the beginning for Varnish.