The CEO of $1.3 billion cybersecurity startup Arctic Wolf moved the company's headquarters from Silicon Valley to Minnesota to capitalize on its affordability, talent pool, and work culture

  • Arctic Wolf decided to relocate its HQ from Silicon Valley to Minneapolis in the middle of the pandemic.
  • The company has 800 employees, though many of these already weren’t based in California.
  • CEO Brian NeSmith said there were three main reasons behind the HQ move.
  • See more stories on Insider’s business page.

The same day that cybersecurity startup Arctic Wolf announced that it had been valued at $1.3 billion, it also said that it was moving its headquarters from Silicon Valley to Minnesota.

When it made the announcement in October 2020, it joined dozens of other companies that have moved out of California over the past year as the pandemic forced companies to address their real-estate commitments and stance on remote working.

Brian NeSmith, CEO of the 800-person company, told Insider that he chose to relocate its headquarters from Sunnyvale, California, to Eden Prairie, Minnesota, because of the Midwestern state’s affordability for both businesses and living costs, its talent pool, and its work culture.

Read more: Google’s push to bring employees back to offices in September is frustrating some employees who say they’ll quit if they can’t be remote forever

Arctic Wolf, which has raised more than $350 million across five funding rounds and became a unicorn in October, is one of the fastest-growing cybersecurity startups in the US. It told Insider that it had doubled its revenue every year for six years in a row.

“Right from the very beginning, actually, we started a significant portion of our operations outside of Silicon Valley,” NeSmith, who founded the company in 2012, told Insider.

Even though its headquarters were in Silicon Valley, it carried out its research and development work in Ontario, Canada, while more than 200 employees were already based in Eden Prairie, where its sales and marketing team was located. The company is currently working on its expansion into Europe, with plans to open physical offices in the UK and Germany.

“We were already fairly distributed when the pandemic hit,” NeSmith said.

But when COVID-19 hit last spring, many companies began evaluating their real estate as some employees eyed working from home permanently.

Silicon Valley giants Facebook, Twitter, and Salesforce have said their employees can work remotely post-pandemic, and trading platform Coinbase is even scrapping its former San Francisco headquarters in favor of a decentralized and remote model.

Minneapolis has a “thriving” tech community – and much lower staff turnover

NeSmith told Insider that there were three main reasons why he relocated Arctic Wolf to Eden Prairie, a city of less than 75,000 people around 12 miles southwest of downtown Minneapolis.

“First and foremost, the Minneapolis area is a very attractive area for talent,” NeSmith said.

He said that it had a “thriving” tech community that had been building up over time.

The area is home to multiple colleges, including the University of Minnesota Twin Cities, and half of people aged 25 and over have a bachelor’s degree or higher.

NeSmith also said that being in Minneapolis is “a lot more cost effective” than Silicon Valley, both for Arctic Wolf itself and its employees.

Real estate is much cheaper in Minneapolis both for commercial and residential properties. In San Francisco County, the median house price is $1.11 million, compared to $322,300 for Hennepin County, where Minneapolis is located, according to data from the National Association of Realtors.

Minnesota, which is also home to Best Buy, Target, General Mills, Radisson Blu, and MyPillow, has a “business-friendly” culture and people have a different attitude to work, NeSmith said. He said that since relocating the headquarters to Minneapolis, Arctic Wolf’s staff turnover halved.

“One of the things that’s a negative about Silicon Valley is people change jobs too willingly,” he said. “So you see the turnover rate is a lot higher, so, there’s a little bit less loyalty to a company.”

He added that the company got a lot of support from the region as a major employer, including good publicity from local news outlets.

NeSmith said that some employees were unhappy with the decision, but that they still had the option to stay living in California if they didn’t want to relocate to Minnesota.

“If they wanted to move, we would facilitate helping them do that,” he said. “But it wasn’t a requirement that everybody had to be based in Minneapolis.”

NeSmith said that Minneapolis is now Arctic Wolf’s main employee hub, followed by Ontario. NeSmith himself currently lives in Austin, Texas.

NeSmith: the option to work in-person is still important

“I think that the pandemic has illustrated for a lot of people that everything doesn’t have to be physically in Northern California,” NeSmith said.

He said that Silicon Valley had “tremendous infrastructure” for supporting a startup company, but that tech companies were increasingly realizing the benefits of working remotely.

NeSmith did, however, note that for some people it’s really important to be able to work together in person.

“I personally believe there’s a lot of value in being in the same facility, at least for part of the time,” he said. This includes learning about other parts of the company beyond your immediate team and having water-cooler chats with colleagues.

There is growing momentum for companies to let employees work from home permanently, though debate over this has become heated after WeWork CEO Sandeep Mathrani said that people who are most comfortable working from home are the “least engaged” with their job.

Some companies are hesitant to let staff work from home permanently. Google is opening new offices in Houston and Portland and has resisted going fully remote.

NeSmith said it had been “a little more of a challenge” creating an office culture while working remotely. He said that Arctic Wolf held regular happy hours known as “the Wolf Club,” and held all-company meetings to “celebrate and be a little bit social,” as well as discussing business.

“I was actually in Minnesota last week,” NeSmith said. “I felt almost a little like a new kid in a candy store, like: ‘Oh, I get to meet people and I get to go outside.'”

A picture of a switch and lightbulb
Source: Read Full Article