Hospitals have long used ultraviolet light to zap viruses, but the devices were too expensive for businesses and schools. Spurred by the pandemic, an unlikely trio started R-Zero to develop a lower-cost alternative—and was just featured on our latest list of Next Billion-Dollar Startups.
Grant Morgan was baffled. It was March 2020, Covid was raging across the nation and one of the simplest ways to kill a virus—blasting it with ultraviolet light—was not being used in schools and nursing homes because hospital grade disinfection devices cost over $100,000. But the cofounder and CEO of R-Zero couldn’t understand why: “That’s a lightbulb on wheels with a timer. There’s no way it costs $100,000 to make,” says Morgan, who’d previously worked at Abbott and mobile phone repair startup iCracked. “It’s an artifact of our screwed-up healthcare system.”
By April he and his cofounders—venture capitalist Ben Boyer and Eli Harris, who’d worked at drone company DJI and cofounded battery startup EcoFlow—were struggling to build their own lower-cost disinfecting ultraviolet lights. Within months, R-Zero had lined up its first customers, leasing them a mobile device for $17/month that could zap a room clean within minutes. Today, the Salt Lake City-based startup sells ultraviolet-based hardware that disinfects, software and sensors that gauge how crowded a room is and a dashboard that provides analytics on how the devices are used.
“You look at people starting companies and you think there’s a formula. The dirty secret is no one knows what they are doing.”
Last year, revenue reached $13 million; it’s expected to triple this year. With $170 million in equity funding from investors that include Silicon Valley’s DBL Partners and the Mayo Clinic, R-Zero is now valued at $505 million. That fast growth helped it gain a spot on this year’s Forbes Next Billion-Dollar Startups list, one of 25 companies we think most likely to reach a $1 billion valuation.
With concern over the pandemic fading, Morgan now sees a far bigger opportunity beyond Covid. The same ultraviolet light disinfection technology that inactivates the coronavirus can also help lower the risk of transmission of other diseases, including influenza and norovirus—even monkeypox. Ultraviolet devices, which rely on a short wavelength of light known as UVC, work without toxic chemicals or massive energy use. Since they disinfect indoor environments and not the human body, they are not considered medical devices—meaning the company doesn’t need to spend time and money dealing with the FDA.
“I think we can come out of Covid and build a safer, healthier, new normal,” says Morgan. “I think this is going to be baked into every physical space. It will be as ubiquitous as general lighting.”
Morgan, 33, grew up in Folsom, California, the city made famous by Johnny Cash’s “Folsom Prison Blues.” His father was an accountant; his mother ran a small business that sold printing forms and then became a school administrator. In high school, Morgan played drums in a jazz band (“We went to Europe and opened for Carlos Santana”), but opted to study mechanical engineering at California Polytechnic State University.
After a stint at Abbott and at a small medical device maker, he landed at iCracked in 2015 when his buddy AJ Forsythe, who’d started the company in his Cal Poly dorm, called. “You look at people starting companies and you think there’s a formula. The dirty secret is no one knows what they are doing,” he says. “That was a really empowering thing for me early on in my career.”
It also reinforced his preference for startups over big companies. When Allstate acquired iCracked in February 2019, he stayed just six months before going to another startup. “I don’t have an off switch,” Morgan says. “It’s a blessing and a curse. I am, maybe, maladjusted. The status quo makes me uncomfortable.”
“The traditional chemical disinfection industry is highly inefficient. It’s ineffective, it’s unsustainable, it’s dangerous and it’s labor intensive.”
It was venture capitalist, Boyer, 46, cofounder of Tenaya Capital, who had the original germ of an idea to use ultraviolet light to fight Covid. Boyer would bring the connections and strategy, Morgan the leadership. Their third-cofounder, Harris, had experience making hardware and knew how to sell.
Harris, who is 29 and a Forbes Under 30 alum, had an unconventional upbringing on a shared property in Santa Barbara. His parents had spent many years overseas—his mother on ashrams in India, his father in Kenya—and he studied Mandarin in college at Amherst. For a decade, he lived in China, working at drone company DJI in Shenzhen and then cofounding battery startup EcoFlow in 2016. He and Morgan had connected over a potential partnership for iCracked technicians to repair DJI drones that never panned out.
For scientific credibility, they connected with Richard Wade, a toxicology expert (and father of an iCracked employee) who came on as the company’s chief scientist. At 76, Wade, who has a PhD in environmental health sciences from the University of Michigan, had worked in public health for decades, and, among other roles, had been the VP of environmental health at cruise lines Princess and Norwegian. He had, notably, written the protocol for decontamination of the Diamond Princess ship after its Covid-19 outbreak. “My bias was UV because of it demonstrated efficacy,” Wade says.
After briefly considering on-demand disinfection, they quickly shifted their idea to building—and selling—the ultraviolet devices themselves at a price that would work for restaurants, hotels and schools. “I called Ben back and said, ‘You’re going to think I’m crazy, but we’re building lights.’ He’s like, ‘You are crazy, but I’m in,’” Morgan says.
It wasn’t easy. The supply chain crunch meant that ultraviolet lightbulbs were tough to get. Morgan, who knew that manufacturers typically produce a few extra for every big order they get, went to LightSources, one of the biggest ultraviolet bulb makers, and asked to buy anything they could spare. “We got the overrun bulbs, just five bulbs,” he says. Then they scoured the Internet for more, eventually getting enough bulbs to work out a design.
By July, they’d built a prototype named Hope (as in “hope this works”) that was six and a-half feet tall, held together with duct tape and wire. They dragged it to Atelier Crenn, a Michelin-starred French restaurant in San Francisco and gained a first beta customer. Then they loaded it into a minivan, driving around California—to a luxury dude ranch, to schools, to anyone who might be a customer—to show it off. Helped by its relatively low price and the panic of many business owners over how to reopen safely, they started lining up customers.
“The traditional chemical disinfection industry is highly inefficient,” says Ira Ehrenpreis, managing partner at DBL Partners, an early investor in Tesla who led R-Zero’s $15 million funding round in August of 2020. “It’s ineffective, it’s unsustainable, it’s dangerous and it’s labor intensive.”
With the new funds, R-Zero placed a large order for ultraviolet lightbulbs, and focused on improving their design. They wanted a product that would not only disinfect safely, but also wouldn’t look out of place in a restaurant or school. They hired Bould Design, a San Mateo, California-based shop that had designed Nest’s thermostats and Roku’s streaming players, to come up with a streamlined look. “It had to look safe,” says William Dougherty, chief information security officer at digital healthcare firm Omada Health, which signed a deal with R-Zero when he reconfigured the company’s space last year.
Today, in addition to Omada Health, customers include large school districts, like those in Clark County, Nevada, Fort Bend, Texas, and South San Francisco; sports teams like the San Francisco 49ers and Detroit Red Wings; senior care facilities including Trilogy Health Services, which operates 132 locations across the Midwest; and companies like electric vehicle startup Rivian and household products manufacturer Simple Green.
R-Zero switched from a pricing model of leasing its devices at ultra-low cost to a more sustainable model of selling them and charging a subscription of between $50 and $250 a month to cover things like software and replacement bulbs. The company now offers three devices. Its original, mobile Arc device is the most expensive at $28,000 and can only be used to disinfect an empty room due to the harmful impact of the wavelength of its UVC light (254 nanometers) on people. R-Zero’s two newer devices are cheaper and designed to operate continuously in the background. Both came to market in November of 2021.
Beam ($5,000) is an LED-based, upper room disinfection device that uses 265-nanometer ultraviolet light to create a disinfection zone located above people in a room. Vive ($3,000), meanwhile, uses a wavelength known as far-UVC at 222-nanometers to inactivate harmful microorganisms in the air and on surfaces, even while people are present. While the Beam works in large open spaces, like classrooms and office lobbies, the Vive can be installed in smaller spaces, such as conference rooms and bathrooms.
“What we have come to realize is that there is not one-size, fits-all for infection protection,” Boyer says. “What Arc competes with is some form of chemical intervention. For Beam and Vive, it’s HVAC upgrades.”
In July 2021, R-Zero acquired a tiny outfit called CoWorkR that uses sensors to gauge how many people are in a room. That information, in turn, allows it to determine a room’s risk—a packed room is less safe—and to automatically turn the disinfection devices on or off. The data also allows R-Zero to give its customers advice on whether meeting rooms are over capacity and how to space meetings out to lower infection risk.
Before the pandemic, people accepted as normal that illnesses like influenza and the common cold spread through offices and schools, Morgan says. Yet the technology that could reduce the risk of Covid-19 could also cut the transmission of these longstanding illnesses, a boon to both health and productivity. “The vision long term is to sell a reduction in sick days,” Morgan says. “We’re capitalists, but I want my gravestone to say, ‘Grant helped eradicate the flu.’”
Header image of R-Zero founders Grant Morgan, Ben Boyer and Eli Harris with their UV-based disinfection devices.
Source by www.forbes.com