Typically, a pandemic creates significant headwinds which limit a business’s ability to prosper. In the case of R-Zero, COVID-19 was the reason the company was founded.
R-Zero’s mission is to reduce the spread of infectious diseases. The company’s first device leverages ultraviolet C (UV-C) technology, which is an effective disinfectant because the sun’s UV-C rays are largely blocked by the earth’s atmosphere. As such, life on earth has evolved with no natural defenses against this bandwidth of light, including microorganisms.
The company launched its initial product, Arc, during the third quarter of 2020, going from product conception to customer fulfillment in just five months. So far, the market has been receptive, as evidenced by the company booking five million in sales during its first three months in the market.
Greathouse: Starting a company is tough in the best of times, let alone during a pandemic. You founded the company in April (2020), shipped your first products in September (2020) and you booked more than $5 million in sales in your first ninety days – impressive. What can other entrepreneurs take away from your quick path to success?
Eli Harris: Thanks John. While founding and scaling my first venture, Ecoflow, I learned a lot about the relationship between inventory and cash flow. Because Ecoflow had raised equity financing from two of the largest battery manufacturers in China, those manufacturers were incentivized to give us access to their procurement networks.
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Typically, a startup would have to work third tier factories and front a lot of inventory costs themselves, which eats into your cash flow. Being able to rely on experts for dependable products de-risked our supply chain and allowed us to focus on what we were good at so we could go further faster.
These kinds of partner relationships were critical to our work here at R-Zero in the US. I learned how important it is to be on site and available to walk hand in hand with supply chain and manufacturing staff and partners. This was particularly critical in a moment where we wanted to accelerate economic recovery in our own backyard. Part of human health is economic health, so it was important to our founding team that we were supporting American jobs and doing our part to bolster economic recovery from the pandemic.
Greathouse: You’ve been fortunate to enlist the help of Ben Boyer of Tenaya Capital as a Co-Founder. It’s a bit unusual to launch a company with a sophisticated investor – how did you pull this off?
Grant Morgan: Throughout your career, you meet people that you’re always trying to figure out how to work with in the future. Ben sat on the board of one of my previous companies (iCracked), and I always looked up to him. He is an incredible strategic mind and sharp investor with a stellar track record. Eli and I met through a BD (business development) deal seven years ago, and I’ve been trying to figure out how to work with him since.
When the pandemic hit, we saw the loss of lives and global economic destruction happening and felt compelled to help. So, we sought to help businesses create the safest spaces possible and reduce the spread of infectious disease, while helping them reestablish trust with their employees and patrons, ultimately accelerating their economic recovery.
Ben has invested in a number of marketplace businesses, such as Eventbrite and Lyft, and in its infancy, we thought R-Zero was going to be a marketplace for disinfection services. We started studying organizations that are the best at infection prevention, and honed in on hospitals. We discovered that the best-in-breed hospitals have relied on UV-C for decades, to keep viral load down and prevent hospital acquired infections. As we dug in, we learned that UV-C has over a century of scientific evidence proving its germicidal efficacy, and we wondered why it wasn’t already a standard tool in cleaning and disinfection protocols.
We found that the systems sold into hospitals were $60,000 to $125,000 and therefore prohibitively expensive for the mom-and-pop businesses and even large commercial enterprises that we wanted to help. Given that these devices are essentially lightbulbs on wheels with a timer, we couldn’t understand how they justified the price tag. At that point, we thought the idea was dead in the water.
I’m an engineer by training and by nature, so I dug in to figure out what it would take to build them. What I found was that we could build a device with the same efficacy as the hospital grade units for a fraction of the price of the incumbents. So, I called Ben and Eli and said, “You’re going to think I’m crazy, but we’re building lights.” They both said, “You are, but we’re in,” and we set out to democratize access to hospital-grade UV-C technology.
Harris: Ben has lived through every startup outcome imaginable, from good companies winning and bad companies failing, to good companies failing and bad companies winning. He understands and foresees the intangibles. He looks so far down the runway, whereas most entrepreneurs are forced to limit their vision to near term execution out of necessity. Strategically and operationally, he makes the micro adjustments in course correction that pay dividends down the road.
In the beginning, we were going to bootstrap the business and almost formed an LLC, but the deeper we dove in, the more we realized just how antiquated the disinfection industry really is, with little regulation and few companies trending towards true technological innovation. The big titans that dominated this industry were incentivized to keep their prices high because of their stranglehold on the market, so we had a moment in time where we could innovate and iterate faster than all of these well-established companies.
As a society, we can and should do “infection prevention” better. We asked ourselves, “What should this industry look like?” That vision includes more IoT technology, data science, AI and machine learning and software to not only give us visibility into the disinfection process but allow people to make their protocols more effective over time.
Greathouse: I always encourage my students to “make meaning” in their ventures and then the money will follow. What is R-Zero’s social mission?
Morgan: At its core, R-Zero exists to enhance the quality of human life by making the spaces we spend the vast majority of our time, safer. In making the best infection prevention tools and technologies accessible to every organization, we are working to solve key societal issues of trust and safety.
Harris: Simply put, we’re on a mission to protect the most vulnerable, ultimately making human health more equitable. We’ve built a business model to ensure this level of safety and assurance is accessible to all.
Greathouse: I know that you are both students of business and you’ve gone to school on the lasting impacts of the 1918 pandemic. What did you learn from the past that is informing your strategy?
Morgan: The 1918 pandemic is a fascinating parallel to what we’re seeing today. The biggest learning from it is that there are large societal and cultural changes that happen as a result of a public health crisis. Critical change often comes from devastating events.
Washing your hands, and modern hand hygiene wasn’t a standard practice until after the 1918 pandemic when American Red Cross nurses noticed a difference in mortality rate between hospitals where hand washing was a standard versus ones where it was not. Around this time, the military also started to instate hand washing as a practice to keep troops healthy during World War I. And after the war, campaigns that advertised hand washing were prevalent in America. It took a learning that existed in a niche hospital environment, and once awareness was amplified, for the mainstream it took hold.
Our hypothesis is that people will adopt many of the practices from the current pandemic – enhanced air and surface disinfection, masks, social distancing – in service of creating a healthier, safer future. UV-C being relegated to hospitals is a great example. Moving forward, we believe there’s going to be a greater emphasis on infection prevention, people will be more aware of the health and safety of the spaces we frequent, and technologies like UV-C will be a regular part of our new normal.
Greathouse: Agreed – the impact of the current pandemic will be long lasting. The Arc can be applied to a number of vertical markets – you’ve chosen a horizontal go-to-market strategy.
What have you learned from simultaneously servicing multiple markets? Anything you would have done differently, now that you’ve been in market for a few months?
Morgan: The strategy to go-to-market horizontally was intentional. We knew this wasn’t “by the book” and would present challenges, but we made the decision with eyes wide open. Ultimately, we decided to launch horizontally because our goal was to truly democratize access to this technology and help as many people as we could, as quickly as possible – regardless of the type or size of their business.
We thought a lot about how we can make the most of this wide net go-to-market (strategy) and ended up approaching it like an experiment. It’s been an excellent way to rapidly test and learn about a wide variety of verticals, customers and spaces. We’re constantly looking for signals and doubling down on what’s working and honing in on where we can deliver the most value.
We’ve been able to learn an incredible amount about our customers and bake our learnings back into our product roadmap to accelerate development of our next-gen products, and we’ve identified a number of opportunities that we wouldn’t have if we only focused on a single vertical.
Sure, there’s inherent challenges and added complexity in supporting the breadth of customers we serve, but I would choose the same horizontal strategy if we had to do it over. At the end of the day, what all our customers have in common is being human. And we have the ability to help all of them create safer spaces today, during the pandemic, and long after.
Harris: This technology is a perfectly horizontal tool and it’s been a way for us to not only help the most people in the shortest amount of time, but it’s helping us establish strong product-market fit. Today, Arc is enabling safety for hundreds of thousands of people, across millions of square feet of everyday spaces and common places, like school campuses, office spaces, professional sports team facilities, senior care facilities, dozens of county justice departments, neighborhood and Michelin star restaurants, fitness studios, and hotels. All are verticals that we’re becoming intimately familiar with as a function of casting a wider net and keeping our mission of protecting the most vulnerable as our guiding philosophy.
Greathouse: I think your approach makes sense, especially in the early days, as it will help you identify particular verticals that might be worth doubling down on.
One of the reasons UV-C is so effective at killing microbes is because it’s a spectrum of sunlight that evolution hasn’t created strategies to deal with it. What safety provisions have you built into the product – will we eventually see an at-home version?
Morgan: Part of the reason UV technology hadn’t left hospitals was due to the fact there are no regulations, so manufacturers aren’t required to implement the safeguards necessary to operate UV-C devices in commercial spaces, safely.
Ultimately, we aim to be a part of ushering in regulations for the UV-C industry as a whole and support establishing safety requirements for manufacturers. That said, safety is a top priority for us, so we’ve engineered Arc with a number of redundant safety mechanisms to ensure zero exposure for our customers and their teams.
For example, a thirty-second pre-cycle countdown ensures operators plenty of time to leave the room before a cycle begins and a cycle won’t start if anyone is present once the countdown completes. In the event someone enters the room during a cycle, each unit has four long-range 360° PIR (passive infrared) sensors that will automatically shut the device off if any motion is detected, preventing exposure. These fail-proof mechanisms, in addition to hands-on training we provide all our customers, enable organizations to use our products in any space, with the highest level of safety.
Harris: The alternative disinfection method requires manually applying toxic chemicals, like bleach or hydrogen peroxide solutions. The stronger a chemical solution is for disinfecting, the stronger it is for killing human cells. The truth is, we have no idea what the long-term effects of chronic exposure to harmful chemicals, like bleach, will be. Alternatively, UV light is eco-friendly, and successfully displaces chemicals. With the safety protocols we’ve put in place, UV-C is the safer option because people don’t have to be exposed at all.
Greathouse: I realize you’ve only been in market a few months, but I’m sure you’re already thinking three to five years out. What does the future hold for R-Zero?
Morgan: The future of R-Zero is about establishing a new standard for biosafety. The pandemic highlighted just how inadequate our old methods of disinfection really are. Pathogens have evolved, but the tools we use to fight them have not. We are modernizing this industry so we as a society, can come out of this pandemic stronger, healthier, and better than before.
In the near term, we’re focused on combating COVID-19 and helping safely reopen schools, businesses, and the American economy at large. We’re helping organizations drastically improve their biosafety posture by incorporating UV-C into their standard protocols, and then helping them articulate these changes to their employees and patrons to re-establish trust.
Long term, it’s a reduction in sick days and being better prepared for the next pandemic. Forty million Americans get the flu every year, and somehow, we’ve just accepted that as “normal.” We think we can do better. So, we’re reinventing how infection prevention should be done in 2020, with more IoT connected hardware, data science, and software.
Our platform can save our customers money, reduce the use of harmful chemicals, and ultimately enhance the quality of human life by making the spaces we all live, learn, work and play safer. In the coming years, the R-Zero Badge will be widely recognized as a symbol for trust and safety – becoming a key differentiator consumers look for when choosing businesses to spend their time.
Harris: 2020 was just the beginning. We see a future where R-Zero is ensuring that schools, workplaces, hotels, and restaurants are no longer petri dishes. Attendance is up and sick days are down, and we no longer have the anxiety of making our friends and families sick. We’re looking to help chart a path where businesses can be smarter about personal health and disinfection, armed with the data needed to make informed disinfection decisions.
Greathouse: How can folks learn more about Arc and how it can accelerate getting the businesses back to “normal?”
Morgan: There is light at the end of the tunnel. Vaccines are rolling out. Everyone is eager to get back to normal. However, we need to learn from this catastrophic experience and integrate those lessons into our path forward.
COVID-19 has shown virtually every person on the planet just how vulnerable we are. Even after the immediate threat of this pandemic is gone, there’s going to be a lot of psychological scar tissue people will need to overcome in order to return to life again. Any business that’s looking to reopen and get customers back in their space has a responsibility to adopt new practices to keep people safe. And in turn, people want to know that an organization is taking extra steps to prioritize their health and safety.
Harris: If you or anyone in your community is considering how to address trust and safety within your organization, you can learn more about how Arc can help on our website.