The pandemic has shifted perspectives on remote work and the office footprint and has led to a re-evaluation of headquarter locations. In this episode of All Things Work, host Tony Lee is joined by Grant Morgan, co-founder and CEO of biosafety company R-Zero Systems, to discuss this exodus and share the story behind his own company’s decision to relocate.
The pandemic has shifted perspectives on remote work and the office footprint and has led to a re-evaluation of headquarter locations. In this episode of All Things Work, host Tony Lee is joined by Grant Morgan, co-founder and CEO of biosafety company R-Zero Systems, to discuss this exodus and share the story behind his own company’s decision to relocate.
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This episode of All Things Work is sponsored by UKG.
Speaker 1:
This episode of All Things Work is sponsored by UKG. UKG offers HR and workforce management solutions that support your employees and transform your workplace into a work of art.
Tony:
Welcome to All Things Work, a podcast from the Society for Human Resource Management. I'm your host, Tony Lee, head of content here at SHRM. Thank you so much for joining us. All Things Work is an audio adventure where we talk with thought leaders and taste makers to bring you an insider's perspective on all things work. A big question raised by the pandemic is after this is all over, where will people work? Well by all accounts, the answer for those who live in San Francisco, New York, LA, Boston, and other large cities is somewhere else. The dramatic rise of remote work and decrease in the office footprint has called into question the value of big city's high rents and property values along with the long commutes by employees who live in less expensive distance suburbs. Consider that by the end of last year, some 110,000 people moved away from New York alone, taking with them more than 34 billion of income that would've been paid in New York rents and supported New York businesses.
The same Exodus occurred in other major cities ,while less expensive communities from Austin and Nashville to Boise and Salt Lake grew rapidly. Joining me to discuss this topic as well as his decision to relocate his own company from an expensive locale is Grant Morgan. Grant is a serial entrepreneur with a track record developing multiple successful startups. He's the founder and CEO of biosafety company R-Zero, where he leads the evolution of the company's intelligent disinfection platform, providing the first closed looped health security system for all commercial and public environments. Under his leadership over the past year, R-Zero has grown to more than 50 employees and has opened the company's first headquarters in Utah. Early in his career, Grant led the development of multiple breakthrough medical devices at Abbott. And most recently, he was a founding member at iCracked, an on-demand technical services company acquired by Allstate in 2019. Grant, welcome to All Things Work.
Grant:
Thanks for having me, Tony. Really excited to be here.
Tony:
Well, excited to have you. So let's start with talk a little bit about R-Zero, it's growth, your employee mix, how the company came about and how you hired.
Grant:
Yeah. Absolutely. So R-Zero was born out of the pandemic as a response to the loss of human lives and the economic devastation that we were seeing globally. And my co-founders and I really challenged ourselves with, how do we create physically safer spaces for people to go back to? And ultimately, how do we accelerate the economic recovery for a lot of these businesses that have been devastated by the pandemic through no fault of their own? So we founded the company fully remote, and we've been fully remote up until our move to Salt Lake. But largely, as we got started, we started with just three co-founders and hired largely from our networks. That was a huge, huge benefit early on. And so just by virtue of doing that, we ended up hiring most people in or around the Bay Area where we all lived.
And our only MO that we've ever known is remote. So it's worked really well for us, and we've accomplished quite a bit. We incorporated the company in April of 2020, and by the end of July, we had raised a $15 million Series A. And then we were off to the races. And so we designed, developed, and manufactured a truly hospital-grade UVC disinfection device that we brought to market in five months. And since September, when we shipped our first product, we booked almost 17 million in sales, grown the team to now we're about 55 and still growing, hopefully doubling by the end of the year. And today, we are closing our Series B fundraising as well. So it's been a wild ride, absolutely an incredible experience, and a ton of fun.
Tony:
Wow. Congratulations. I mean, you're truly a visionary here and taking advantage of a situation where a new product is needed. And I'm sure finding those 55 employees was a challenge, but now that you have, as you say, most of them are in the Bay Area, and you yourself have spent what, the past eight years working in the Bay Area. How has the Bay Area changed as a place for employment, as a place for office locations in the technology belt?
Grant:
Yeah. Absolutely. So the Bay Area and specifically Silicon Valley more broadly is still the tech Mecca of the world and the startup Mecca of the world. And there's no debate there. I think it's losing a little bit of its lead, but I think it's going to be that way for a really long time. And you just can't recreate that ecosystem that embraces and even celebrates failure and taking risks and trying new things. But what I think has changed over the years is people are starting to realize that some of the things that help Silicon Valley become that tech Mecca, so the access to capital and investors and the access to top talent, those things have started to become available in a lot of different places. And what I would argue now is unless you're doing something truly bleeding-edge, like advanced machine learning or AI, or some sort of decentralized network or something that's highly, highly specialized, I think you could start a company from just about anywhere and get the same results.
And for the access to capital, I think venture capital over the last year has fully adapted to being remote. We raised two rounds of funding without meeting in person with anybody. And so now you're also seeing an exodus from Silicon Valley from some of those very same investors that are moving to places in the Midwest, East Coast, down south. So things are starting to spread out, and the things that made Silicon Valley the tech Mecca of the world are starting to appear elsewhere as well. So I think it's encouraging, but I think Silicon Valley still has a really long time as the king and the dominant force.
Tony:
Sure. So you made two decisions, obviously. One is not to remain completely remote, that you needed a headquarters. And two, that the headquarters shouldn't be or wasn't going to be in the Bay Area. So walk us through those two decisions.
Grant:
Yeah. Absolutely. So the first question goes back to early 2010s. I'm a cryptocurrency nerd, specifically blockchain and decentralized networks. I fell down the proverbial rabbit hole a while ago. And one of the things that taught me was to solve the hardest problems in the world, you need the best talent in the world, and you'd be remiss to think that all of the best talent in the world exists in one place. And so philosophically, when we started the company, we didn't even intentionally hire all in the same place. And we really didn't hire in this all in the same place. We have employees in Helsinki, Finland, of all places, Ukraine. We've got people all over the United States, a couple in Canada. So we haven't ever had a problem with the remote culture. And we've been fortunate enough to have some really, really talented people that can function at high productivity in a remote environment.
Now, we also realize that there is no substitute for in-person interaction. I don't know how many people would debate that, but it's our stance that there's really no substitute and there never will be. But that spurred the idea that look, we do need to plant our roots somewhere. We need a home base, if for nothing else, for all of our employees to get together periodically and interact in person. And of all the places that we could start a company, we loved Salt Lake City for a couple of different reasons. One, it's an incredibly beautiful place. If you like the outdoors, there's no place like it. And two, the quality of life. The quality of life is objectively better out here for our employees, and we're hearing our employees that have moved here corroborate that quite a bit.
And so the third thing is for the company, financially, it's more advantageous to live out here, really anywhere other than San Francisco in terms of the cost of real estate, the cost of talent, things like that. It's much more amenable from a financial perspective for the company. And then the other thing that was icing on the cake was our first Series A investor is a firm called Double Bottom Line Partners or DBL Partners. And that first bottom line is financial success, of course. Second bottom line is social and environmental good. And so since bringing them on, we've worked with them quite a bit to do things to be good stewards of our environment and good stewards of the communities that we are located in. And one of the things that they helped us do is find an office in what's called an LMI. So a low to moderate income area.
And the premise of locating in one of these zones is that we as a company are creating jobs in an area that needs them and improving the quality of those jobs as well. And so here in Salt Lake City, I would say... I mean this in no disparaging way to San Francisco whatsoever, but I'd say the LMI that we're in is nicer, safer, more comfortable than really anywhere in San Francisco that I've ever had an office. So it really worked out for us.
Tony:
Yeah. And if I read this correctly, you went from in a prior work situation in the Bay Area paying 72,000 a month for rent to now 72,000 a year for rent. Is that right?
Grant:
Yeah. For about the same amount of space. It's pretty wild, but yeah, we were paying quite a bit. And actually, it was Redwood City, Redwood Shores more specifically. But yeah, it was expensive to headquarter your company there.
Tony:
Yeah. So one of the questions that a lot of companies ask is, "Okay. Well, so you've moved to a less expensive city. Does that mean talent is less expensive? I mean, can you pay employees less because you're not in San Francisco?"
Grant:
Yes. Comparatively, we can pay employees less in Salt Lake City than we would pay in San Francisco, but we can pay marginally more than, call it the median or the average. So we're creating really high quality and relatively speaking high pay jobs here in Salt Lake City, but still at a significantly lower cost to the company than in a San Francisco or New York or one of those major Metro markets.
Tony:
Right. And I'm sorry, go ahead.
Grant:
I was just also going to say, one important thing that... You may have been about to ask this, but the talent's great here. It's a lot of really hardworking people. There's a few topnotch universities. And so for what we're doing as a company, we haven't seen any disadvantage from a talent perspective moving here either.
Tony:
Yeah. No. You read my mind. And my question was not just the talent in Utah, but I'm assuming you're finding people who are willing to relocate from the Bay Area for all the reasons that you did.
Grant:
Absolutely. Yeah. For the listeners, I moved to Salt Lake City from San Francisco about five weeks ago. This week, it'll be five weeks. And I'm quickly becoming an evangelist, but I'm a California kid born and raised. Spent most of my life there. Never thought I'd leave, but I'm loving the change of pace. And for perspective, where we're comparing rents, I actually bought a place out here. It's a four-bedroom, three-bath place in Salt Lake City, beautiful neighborhood, really nice place. My mortgage is less expensive than my rent was for my one-bedroom, one-bath apartment in San Francisco that was about a third the size.
Tony:
There you go. And the skiing's a lot closer.
Grant:
Yeah. Amen.
Tony:
I mean, I think some of the feedback we're getting is, "Yeah, that all makes sense, but there are amenities in big cities that smaller cities just can't match." I mean, you're going to miss stuff. You think your employees are going to miss things, or do you think Salt Lake's growing so fast, those amenities are already there or coming soon?
Grant:
Certainly. I mean, I think just to be objective about it, there's a culture that San Francisco has in particular that really no other place in the world has. It's a melting pot of culture. And I already miss some of my favorite restaurants, for example. There's higher density of events in San Francisco, higher density of people as well. But Salt Lake City has a ton to offer. It's just a little bit different. So I mentioned the outdoors earlier. But in San Francisco, you might have to drive 45 minutes to truly get outside and go on a hike. I have multiple hikes within five- to seven-minute drive in my house here. So it just depends on what you're looking for in life.
And then the other thing that I've found is all my family is still back in California. And so the proximity to the airport in San Salt Lake City, one of my favorite things is you can get to and from the airport in just about 15 minutes anywhere in the city. So it's really convenient. And there's tons of flights out of here to San Francisco. So you can make a day trip to San Francisco, LA, any of these other places. And so if you want to get some of those things that you're missing, not only can you easily go to San Francisco and revisit, but you can also choose other places as well. And it's not very expensive to fly those short distances, and it's not a ton of time either. So I definitely miss those things, but they're still accessible.
Tony:
Right. And did you evaluate other smaller cities, Portland, Boise, any others, Austin, or was Salt Lake yours from the beginning?
Grant:
Yeah. So I think we had a natural gravitational pull to Salt Lake. We had spent some time here. One of my co-founders has done a number of family trips out to Park City. And so he knew a lot about the area. We did look at other places. We looked at Austin, Portland, Seattle. We looked a few places in the Midwest. But ultimately, Salt Lake City was the total package and we thought it'd be the best quality of life for our employees. It'd give the company the best shot at succeeding. And ultimately, this is where we landed.
Tony:
Yeah. All right. So of course I have to ask. Facebook, Amazon, Apple have all doubled down on large cities. They're expanding their footprints in major metropolitan areas. What does that mean to you, that they have the deep pockets and it doesn't matter, that they feel like they need that sized market to get the size workforce they need? Or how do you read that?
Grant:
Yeah. I think that it has to do with inertia. And I think that when companies like that are looking at expanding, it's much easier and more straightforward to expand locally. But what you do see is also those companies opening up a whole bunch of satellite offices all over the place. For example, we have Facebook here and Amazon here in Salt Lake City. And so I'm not sure how many people moved here from headquarters, but those companies do have a significant presence here and in a lot of other middle-tier cities as well. But I do think some of those companies are doing certain things that do require specialization that exists, or the talent is at least more densely populated in certain places as well. And I also think the larger you get, the harder it gets to operate fully remote and/or in a hybrid in-office and remote culture.
I think that, again, going back to the concept of there's no substitute for in-person collaboration in interaction, I think that you can facilitate more of those interactions if you have people in the same place. And just so happens when you're working at a large company, if you need approvals or need to make presentations, but all the action happens... not all the action, but most of the action will happen at HQ. And so I think it's just easy to build around them. And then you look at those companies' margin profiles, they're fundamentally SaaS margins and they can't afford to invest locally as well, especially when they're prioritizing growth over profits for say a new business unit. And one of the common things that you see is they'll grow that business unit, get it steady, capture a big part of the market near HQ, and then they'll start to ship those pieces of the business off elsewhere and optimize for cost. So I think that it's somewhat cyclical and I think we'll start to see that more often.
Tony:
Yeah. No, that makes sense. So one last area to explore, as I'm sure you know, all last year, you saw employees moving out of high cost cities to low cost cities, even if their employer was still in the high cost city because they could work remotely and lower their costs. And much was written, especially up here in the Northeast, about folks bailing out of New York and DC and Philadelphia and moving out to the suburbs and beyond. But we're already starting to see a little bit of the pendulum swinging back. You're starting to see reports of people saying, "Well, boy, costs have really fallen in New York City in Downtown DC. Maybe I'm going to try coming back again." What do you think? Is this all cyclical? Will the pendulum swing back or do you think we've seen a sea change?
Grant:
I think we're in the middle of a dislocation and I think things will reach equilibrium here in the next couple of years, but I think net net, you'll see more people migrate out of these large cities because I think there's an adjustment happening with employers where some employers will dig their heels in and say, "Absolutely no remote work. We want everybody in the office." And I think that will temporarily pull people back locally to where those headquarters are. But I also think that there are a number of companies that have learned that they can be productive as a company and as a team in a fully remote environment that's been sort of forced.
So one of the small silver linings in this terribly tragic COVID event is it's been this interesting, forced social experiment where we didn't have a choice to go into the office for a lot of people. And so companies were forced to work remote and figure out how to be as productive as possible. And now that they've gone through that evolution and ripped the bandaid off, I think they're going to be more amenable to... You're going to see more remote jobs pop up in aggregate, if we haven't already. And I think that the people that value that lifestyle, that remote lifestyle where you have a little bit more flexibility, maybe you're saving time on a commute, things like that, you can potentially have a better quality of life in a lower cost area, I think that those people are going to start to leave the companies that require them to be in the office and opt to migrate to the companies that do work in remote environments.
And I fundamentally believe that that is going to happen. I'm anecdotally seeing that. And that's one of the main reasons that we are planning to operate a hybrid in-office and remote work environment indefinitely probably, forever, because we definitely want to give people the option, but we'll continue to build our critical mass here in Salt Lake as we do that.
Tony:
Yeah. Well, great insights, Grant. Thank you. That's going to do it for today's episode of All Things Work. A big thank you to Grant Morgan for discussing the future location of work after the pandemic and his company's relocation. Before we get out of here, I want to encourage everyone to follow and subscribe to All Things Work wherever you listen to your podcast. And also, listener reviews have a real impact on a podcast visibility. So if you enjoyed today's episode, please take a moment and complete a review and leave it to help others find the show. Finally, you can learn more about All Things Work and find all our episodes on our website at sherm.org/atwpodcast. Thanks for listening and we'll catch you next time on All Things Work.
Speaker 1:
All Things Work is sponsored by UKG. Your business is important to you, and the best way to improve your business is to improve the lives of your people. UKG develops HR and workforce management solutions designed to take care of your employees because when they feel supported, connected, and appreciated, your business will transform from a workplace into a work of art. UKG, our purpose is people.