Welcome to the world of billion-dollar startups, ex-missionary CEOs, and a big diversity problem
Eric Rea is wearing a dark-blue shirt buttoned to the neck, stretchy olive pants, black sneakers, and an Apple watch. With a mountain bike propped against his desk and crystal-blue eyes, the 34-year-old CEO of Lehi, Utah–based startup Podium is both physically fit and disarmingly gracious. He is also a Mormon who, between his freshman and sophomore years of college, went on a two-year mission to Madrid, Spain. Raised in Calgary, Alberta, Rea didn’t speak Spanish when he arrived, but that was the least of his problems. “Trying to get the Spaniards to sign up for Mormonism was a tough sell,” he says. “It turns out Catholicism is pretty strong there. You get a lot of rejection.”
Relentless rejection wasn’t exactly bad training for life as an aspiring entrepreneur. Neither was attending Brigham Young University. While many ambitious high schoolers might fantasize about getting into Stanford en route to crushing it in Silicon Valley, young Mormons all over the country have a different dream: to make it into BYU.
Dead last in party-school rankings, BYU expects students to adhere to a strict honor code that prohibits not just drinking and smoking but also things like camping with members of the opposite sex and growing a beard without a doctor’s approval. (It was also a Very Big Deal when, in 2017, the school started serving Coke on campus, citing an official church clarification of the Mormon caffeine “rule”: Okay in soda; not okay in coffee or tea.) But with strong academics, a heavily subsidized tuition, and a 98.7% Mormon population, the school is incredibly competitive.“Getting into BYU as a white Mormon, especially living in Utah, is really difficult,” says Aaron Skonnard, who graduated from there with a BS in computer science in 1996, and built online software training platform Pluralsight, now a public company with a market valuation of $2.5 billion.
BYU has long been a favorite hunting ground for recruiters from Wall Street banks, big tech, and the CIA, where Mormon candidates’ foreign-language skills and squeaky-clean lifestyle give them a leg up. The school is known for producing outsize business figures, from Clayton Christensen (Harvard professor and author of The Innovator’s Dilemma) to Stephen Covey (author of Seven Habits of Highly Effective People) to Bruce Bastian and Alan Ashton (founders of WordPerfect).
It was at BYU that Rea met Dennis Steele, a Mormon from the Bay Area who did his missionary service in Argentina. The two conspired to start a cloud computing company to provide social monitoring and text-based messaging to local businesses. In 2016, they were accepted into Y Combinator and moved to Mountain View, California, but after graduating from the accelerator, they decided to return to Utah, which offered both affordable real estate and has the youngest population in the country. “There were companies starting at about the same time as us, trying to solve pretty similar problems, who were based in San Francisco, and they’ve kind of all dried up, because I think they just couldn’t hire enough talented people competing with Uber and Google,” Rea says.
Now Podium is a Google Ventures–backed, 650-person company housed in a five-story, 175,000-square-foot space in Lehi. An identical building next door is currently under construction to accommodate the company’s growing workforce, which is expected to double in size. Podium is just one of at least a dozen fast-growing, early stage companies clustered in an area called Point of the Mountain, halfway between Salt Lake City and the BYU campus in Provo, that has become the epicenter of the “Silicon Slopes” tech boom. A decade ago, there was nothing but farmland and a state prison here; today, it’s a chaotic scene of road detours, industrial equipment, and cranes throwing up black-glass monoliths along I-15. Out-of-state giants like Adobe, Microsoft, and Amazon have established significant outposts here, and Utah is now producing more jobs than it can fill with in-state talent. In the first three quarters of 2019, companies here attracted $829 million in venture funding. According to data from CB Insights, in 2017 the number of unicorns in Utah put the state behind only California, Massachusetts, and New York.
Unsurprisingly, most of these companies are also headed by a young, white, Mormon guy. Most of these founders have gone through what amounts to perhaps the most strenuous sales “boot camp” in the world: a two-year mission spreading Mormonism abroad.
Many of these Utah startups share not only interchangeable logos and one-word names (Divvy, Pattern, Bamboo, Nuvi, Jolt, Canopy) but also meat-and-potatoes something-as-a-service platforms with a large addressable market of business customers. The hottest startups do cloud-based visual diagramming software, e-commerce solutions, communication software for medical offices, task management software for fast-food businesses, work management software for enterprise, and benefits management software. Unglamorous, rapidly scalable businesses that play into a theme investors affectionately refer to as “the consumerization of enterprise.”
Unsurprisingly, most of these companies are also headed by a young, white, Mormon guy. Utah is 78% white, and members of the Church of Jesus Christ of Latter-day Saints, who self-describe as Mormon or LDS, make up 62% of Utah’s 3.2 million population. And Mormonism isn’t just a religion — it’s a way of life. Mormons are particularly devout: 83% of them say religion is very important in their lives, compared with 56% of the general U.S. population. Like Podium’s Rea and Steele, most of these founders have gone through what amounts to perhaps the most strenuous sales “boot camp” in the world: a two-year mission spreading Mormonism abroad. Each year, after a brief period of training, about 53,000 LDS missionaries, mostly young men, go out and proselytize for two years (18 months for women), often living far from home. (As a result, many Utah students take six years, rather than four, to get their bachelor’s degree.) Provo-based Vivint Smart Home, founded in 1999 and acquired by the Blackstone Group in 2012 for more than $2 billion, became one of the most successful door-to-door sales companies anywhere by hiring these returning missionaries to sell home security systems.
“Every single one of us can sell the crap out of anything,” says Blake Murray, the Mormon CEO and co-founder of Lehi-based Divvy, which launched its expense management software-as-service platform in January 2018. In April 2019, it raised a $200 million round led by NEA. “Before even a line of code was written, I had built a deck and signed massive corporate agreements with some of the largest banks in the U.S.,” says Murray, who served his two-year mission in Santiago, Chile. Instead of attending LDS flagship BYU, he enrolled at the University of Utah. “My way of sticking it to the man,” Murray says. (Not really: The University of Utah has produced just as many famous Mormon business figures as BYU, including J. Willard Marriott, Novell founder Ray Noorda, JetBlue founder David Neeleman, former Pixar president Ed Catmull, and Atari creator Nolan Bushnell, now a self-described lapsed Mormon.)
In the past, talent from Utah’s schools had to leave the state to find fame and fortune. Now, thanks to an influx of out-of-state capital and the trickle-down effect of several billion-dollar exits, more young Mormon entrepreneurs are deciding to stay right here. Skiers now have to compete with VCs for space on flights into Salt Lake City, where they can scout for a very particular retro brand of founder, combining the ambition of 2020 with the values of the 1950s — competitively groomed and vice-free, with tunnel vision on their business, their family, and the church. Matthew Marsh, a partner in Lehi-based Sorenson Venture Partners, says he spends much of his time these days showing around investors who are only too happy to make the 90-minute flight from the Bay Area, discover their next SaaS unicorn, and have dinner in Salt Lake City before heading home. “They see here what they had a while back — good, sound, fundamental business building,” he says. “You get a gritty entrepreneur who’s going to buckle down, with a sound path to profitability.”
But as the region now finds itself competing with cities like Austin and Denver to lure talent, companies, and expats from the coasts, it is still very much battling a perception problem. While business leaders have slickly rebranded the area surrounding Salt Lake City as the Silicon Slopes, to many outsiders, the Utah economy is still best known as a mecca for multilevel marketing (MLM) companies, lucrative bottom-feeding outfits that started taking off in the 1980s and capitalize on Mormon’s sales heritage and large pool of stay-at-home moms. Those businesses still persist; startups like Lehi-based beauty brand Younique are now rebranding MLM as “direct” or “collaborative” sales for millennials, and as of 2017, revenue from the nine top-earning Utah MLM companies reached more than $7.6 billion.
But if you think Silicon Valley has a white-bro problem, Utah will remind you what cultural homogeneity really looks like. Utah wants to keep growing, both inside the state and, as one local millionaire entrepreneur puts it, “at a global scale.” To get there, it’ll need to grapple with things like its culture’s antiquated attitude toward the role of women and the gay community, its absence of people of color, and the overwhelming cultural dominance of the Mormon faith. Otherwise, the very thing that is transforming Utah into the next tech mecca could be the very thing that ends up holding it back.
Everything in Utah leads back to the church. The state’s modern tech history can be traced to 1965, when David Evans, a Mormon, was recruited to start the computer science program at the University of Utah. Evans brought in top talent from around the country. In 1969, the school — along with UCLA, the Stanford Research Institute, and UC Santa Barbara — became one of the original four nodes of internet predecessor ARPANET. A decade later, Mormons Bastian and Ashton invented WordPerfect, the first modern word processing program, and Ray Noorda — who held prestigious positions in the LDS church — started Novell, which made one of the first personal computer networking systems. In 1997, BYU grads Paul B. Allen and Dan Taggart founded Ancestry.com, built on the trove of genealogical records maintained by the Mormon church. (Today, its revenue exceeds $1 billion, and the company is also in the DNA game, competing with 23andMe.)
Qualtrics founder Ryan Smith — a Mormon with five kids — sold his survey and feedback software company to SAP in November 2018 for $8 billion, the largest sale of a private venture-backed tech company in history.
Second-wave companies like Omniture, the web analytics company founded in 1996 by BYU dropout Josh James, were literally built on the foundations of these companies. “Omniture was on the old WordPerfect campus in Orem,” James says. “I had this daily reminder: Don’t get your ass kicked by someone like Microsoft. And it was front and center in my head every day.”
James’ sale of Omniture to Adobe for $1.8 billion in 2009 was the catalyst for Utah’s current tech boom. After the acquisition, the Utah Governor’s Office of Economic Development offered Adobe $40 million in tax breaks over 20 years to encourage the San Jose, California–based company to expand in Utah, rather than take jobs out of state. In 2018, the state offered another $25.8 million in tax incentives to double the size of Adobe’s presence in Lehi, adding another 1,000 employees. James takes credit for setting off the big-ass glass-building boom around Lehi. “Before, you would just see all these boxes and no interesting companies, and we just put that sucker [the current Adobe building] right there on the I-15,” he says. “Now they’re everywhere.”
All this activity helped convince another Mormon BYU grad — Pluralsight’s Aaron Skonnard — and his non-Mormon co-founders to base themselves here in 2011. The move served them well. Pluralsight raised $310.5 million when it went public in May 2019, at a $2 billion valuation, and now has more than 1,000 employees. It joined the ranks of other recently minted unicorns run by Mormon men, including Domo, the data analytics company that James founded in 2010; CRM platform company Inside Sales, founded by Dave Elkington and most recently valued at $1.5 billion; and Qualtrics, a survey and feedback software company founded by Ryan Smith — a Mormon with five kids — and sold to SAP in November 2018 for $8 billion, the largest sale of a private venture-backed tech company in history.
Today, these four Mormon CEOs — who occasionally meet up at Utah Jazz basketball games or for a weekend at James’ cabin in Coeur d’Alene, Idaho — are the reigning godfathers of the Salt Lake Valley, mentoring and funding the area’s next crop of founders. In 2016, they banded together to launch a boosterish nonprofit, which they dubbed Silicon Slopes — a reference to the slopes of the jagged Wasatch Range that dominates the landscape around Salt Lake City — to support in-state entrepreneurs and seduce outsiders. Their fingerprints are all over the fourth-wave companies along I-15: Podium and Divvy both got early funding from Smith, Skonnard, and James. The same three have also invested in Lucidchart, a maker of collaborative visual software based in South Jordan, Utah. James and Elkington were seed investors in Teem, a Salt Lake City–based provider of facilities management software that was acquired by WeWork for $100 million in 2018. In December 2019, all four gave $1 million each to launch the Silicon Slopes Computer Science Fund to advance K–12 computer science education in Utah.
Now there’s a similar ecosystem emerging for consumer startups. Jeremy Andrus, CEO of Salt Lake City–based Traeger Pellet Grills, with his three-day scruff, flat-brim cap, and black jeans, reads as more California surfer than Book of Mormon. He went to BYU for undergrad, got an MBA from Harvard, and worked in consulting and hospitality before being drawn back to Utah in 2005 to join Park City–based Skullcandy. In his eight years as president there, Andrus took the maker of colorful headphones from $1 million in revenue to a nearly $300 million public company. Since joining Traeger and relocating the company from Oregon to Utah in 2014, he has grown sales at the high-end grill maker from $100 million to $400 million.
Now Andrus is investing in and advising consumer startups, most of which are also run by Mormons. He and Skonnard both invested in Provo-based Chatbooks, a subscription photobook service founded in 2014 by Vanessa and Nate Quigley, a Mormon couple with seven kids. Andrus is an investor in Rags, a onesie maker started by Rachel Nilsson, a Mormon former stay-at-home mom; Owlet, a “smart sock” baby monitor company that has raised more than $57 million and was founded by five BYU grads who are now dads; and Cotopaxi, a Salt Lake City–based outdoor brand founded in 2014 by Davis Smith, who grew up in Latin America, where his father supervised construction projects for the Mormon church. “There are a lot of great consumer product companies [here] that are around $100 million in revenue,” Andrus says. “As these companies grow and people leave, they’ll start new businesses, and you’ll start to see the same kind of local growth effect that happened with tech.”
As for Mormons’ enterprising nature, many of the founders here point to Utah’s “pioneer spirit” as a key influence on its business culture. The first Mormons arrived here in 1847 after a 1,300-mile, 18-month journey from Illinois, where they were escaping religious persecution. (Here, Pioneer Day, on July 24, is bigger than the Fourth of July.) That “pioneer” attitude also translates to frugality and cautious business building. Explains Divvy co-founder Murray, “There’s a fiscal conservatism that’s just ingrained in many of us. You’re taught early to save money and to put it away for rainy days.” Mormons are expected to tithe, donating 10% of their income annually, and are encouraged to keep a year’s supply of food and other essentials on hand for emergencies. “Many of us run our businesses the same way,” Murray says. “From a fundraising perspective, we’ll wait until the terms are grossly in our favor. And then we’ll be responsible with the money. We’re not going to go into hyper-burn mode. That’s different from Silicon Valley, where there’s a mentality that there’s another round at every corner.”
The family unit defines work and social life here (especially since Mormons believe that families stay together for eternity). Six kids cost more than two, so the golden rule here is work hard and be home for dinner.
The one thing founders here won’t wait around for — and perhaps what most distinguishes this region from other startup hubs — is starting a large family. Many BYU grads are engaged by the time they leave school, and if they’re not, they are working on it. Utah has the highest percentage of married people in the United States. (In the past couple years, young unmarrieds have embraced the Mormon dating app Mutual as a more palatable alternative to the meat-market scene at the “single wards,” church-sanctioned meetups for unmarried young people.) Because church teachings encourage procreation and forbid abortion, it’s common for people in their thirties to have five or six children.
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