Raymond Lei: Dropping Out, Startup Growth Challenges & Tough Entrepreneurship Lessons - E168

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I also believe that if you're completely all in on something and there's no going back, that increases the chance of success and so I think if someone is serious and that they're mentally committed to starting a company, they should just drop out get this idea of living a normal kind of education to get an idea out of your mind. I tell people to either try to multitask or just fully commit depending on the nature of their idea- Raymond Lei

Raymond is the CEO and cofounder at Lumina, a hardware company building AI-powered devices that make you look and sound good. Raymond is also the founder at Scalable, a 300-person ecommerce infrastructure company that empowers sellers in emerging markets.  

Jeremy Au: (00:30)
Hey, Raymond, so excited to have you on the show! I’m excited to share your story as a second time founder of Luminar. It’ll be interesting to hear your story.

Raymond Lei: (00:48)
Thanks for having me.

Jeremy Au: (00:51)
Raymond, for those who don’t know you yet, how would you introduce yourself?

Raymond Lei: (00:54)
Oh gosh, I am the founder at two companies. First is called Scalable. It’s this company I started back when I was in high school and it’s still going strong today. We have about 300 employees. Second is a company called Lumina, which is a brand new company started this year. It’s a company that builds hardware devices that makes you look and sound great on video, and I’m using it right now now.

Jeremy Au: (01:21)
I always say you look great all the time. I feel like the background is fake.

Raymond Lei: (01:25)
I’ll take that as a compliment.

Jeremy Au: (01:29)
So, Raymond, can you tell us a little bit more about what you were like growing up?

Raymond Lei: (01:32)
I think for the most part, a normal kid. At age 16, I think something happened. For some reason I just got the entrepreneurial bug really early on in my life. The first time I experienced it was when I was in high school, I was ordering t-shirts for a high school Tennis Club. I thought the prices were too high. I’ve always been a kid that likes good value, really enjoying going to Costco and just finding best deals and stuff like that. And I just felt wronged by the T shirt prices. I decided to make it my own project to investigate why prices were so high and eventually came to the conclusion that there is just a really big opportunity here, and I felt like I had to go after it and I felt like I just solve it first and foremost. That led to the founding of my first company, which started out as like a t-shirt company, but became like an e-commerce company.

Jeremy Au: (02:24)
Tell us more about what was it like to be a founder so early.

Raymond Lei: (02:29)
I didn’t really think of it as me being a founder until kind of after the fact. It felt more like solving a problem like my own problem. There was a frustration that I had. It was an injustice that I felt existed in t-shirts being too expensive. That’s why I just wanted to solve that problem. And then of course, one thing led to another and eventually it just became more than solving a problem. It became building a whole company and building an organization and team and building the whole like machine. The origination point of that was just OK well, there’s a problem that I want to solve it.

Jeremy Au: (03:04)
What did you call yourself in the early days when you didn’t call yourself a founder?

Raymond Lei: (03:07)
I think I always disliked titles. When I was young, I liked the term founder. I always strayed away from terms like CEO or President or anything fancy sounding. Yeah, it was a guy who wanted to fix something that was wrong

Jeremy Au: (03:24)
Tell us about those early days because you’re doing that without the title, without the thinking about it. And then it’s interesting, you say, like you later discover and rename yourself. So talk a little bit about what that phase was before you knew what you were doing was being a founder and running a startup.

Raymond Lei: (03:41)
Yeah, on the very early days I started out by just looking for places to find cheaper T shirts and that happened to be in China. So I would go to other kids in my high school, I’d say. Like, hey, like you need merch for your clubs. I can get you them at lower prices. I went through this problem myself. People value that, people saw the shirts I had and they were good quality. And some people started ordering. Eventually got to a point where there was enough kind of interest that I decided to build a website, do some online marketing which is more scalable than me talking to you one-on-one. It didn't feel like being a founder it’s almost like me just being a dealer of shirts. To start and then just kind of growing from there.

Jeremy Au: (04:27)
I like the phrase dealer of shirts. That’s a nice slogan to have as well. So one thing you mentioned was that you also had to change how you were thinking about business because at the start you build out of business and started saying like those things about scaling the team. So what was that transition for you from your perspective?

Raymond Lei: (04:41)
Yeah, I think so much has happened over the years. They’re kind of multiple phases of the company and I would say it’s even hard to come up with the founding date for the company in the beginning. As I've said, it's just like me talking with other kids at the high school. And does that count as founding the company or is it later when I actually dropped out of school, I think the big point is probably the drop out point. This is a couple years later, after I graduated high school. Going to school at Berkeley, 3 semesters in, things start to really pick up. I decided to drop out and I think that was probably the maybe the biggest point in the course of the company. I started working full time. I hired three people just off the bat and discovered the art of management and then having a team and having other people who could actually help in achieving this vision that I had that was kind of a big turning point for me. I will say it’s also something that I think I had some trouble with and kind of transitioning from a total like individual contributor, founder into a delegator like a manager and conventional leader; almost unintuitive for me. Took a couple years for me to really accept that new role.

Jeremy Au: (05:51)
How did you make the decision to drop out? Because it’s a big one.

Raymond Lei: (05:55)
Yeah, the company was growing. I remember in the back of my mind always thinking, OK, maybe I’m one of these people that dropped out of school throughout high school throughout middle school. It felt you’re used to being in school and you’re told this is the path to be in. In the back of my mind, I always - am I one of those people and like, is that gonna be me? Very interesting thing is that I wasn’t the one that brought up the question. It was actually my mom came to me one day and she was like, you know, Raymond, you seem to be really focused on your work so much so that you don't really care about school at this point. And why not just make that official? Like, why not just drop out? I had hesitations, obviously. There’s a lot of unknowns, such an uncertain path, the way she framed it was simple. It’s very persuasive, and I did it.

Jeremy Au: (06:41)
Wow! Your mom recommended?

Raymond Lei: (06:43)
That’s right, yeah.

Jeremy Au: (06:46)
I feel like that’s contrary to my parents and my, you know, mental model of how parents work.

Raymond Lei: (06:52)
Just lucky, I think.

Jeremy Au: (06:55)
I was at UC Berkeley as well. So go bears. But it’s a big decision and I think a lot of people at university also think about dropping out, especially if you are a founder. Looking back on it. I mean, obviously you have the benefit of hindsight. You’ve grown a company and so on. For people who are making that decision about whether to drop out or not, I’m sure you get the question all the time. How would you advise them to think through the process?

Raymond Lei: (07:18)
Gosh. I give different advice depending on the person. I'll just share both of them. The way I did it was actually a safer way to do it. I did it when there was already revenue and even if the company didn't do extremely well, I'd still be able to survive and there was some income coming in. That's a safe way to do it. I feel like students in school don't utilize the opportunity to take that chance while in school. The least risky time trying to start a company is when you're in school and I think many people don't use that opportunity. Anyways, that's how I ended up doing it. At the same time I also believe that if you're completely all in on something and there's no going back, that increases the chance of success and so I think if someone is serious and that they're mentally committed to starting a company, they should just drop out get this idea of living a normal kind of education to get an idea out of your mind. I tell people to either try to multitask or just fully commit depending on the nature of their idea yeah so I kind of give two pieces of arguably contradictory advice on those.

Jeremy Au: (08:29)
It's not really contradictory because basically you're saying if you have a good idea and you have revenue, that proves that there’s traction then you lean more towards saying why not give it a shot versus the opposite. That being said, do you have any regrets about not going to university and finishing it off or school life?

Raymond Lei: (08:47)
Overall, I'm very happy with this decision but I definitely think in colleges you get to meet a lot of people and that the nature of the interactions in school is very different from what you get afterward and it's kind of a one time benefit that you get that. If you miss out on it, just that's it yeah I mean life is about tradeoffs.

Jeremy Au: (09:06)
One day, you are going to have kids and they're gonna be hearing about this story about you dropping out and they're gonna make a decision about going to college or not. How would you help them think about it or prepare for the process?

Raymond Lei: (09:17)
Oh man. With my own kids in the future…in general, I'm skeptical of the cost and the length it takes to get educated so, I think, on a societal level, I think it might be better if education were both less expensive and shorter. From a personal perspective, I wouldn't necessarily recommend dropping out 'cause I think there's some value in a socially, kind of, warm normal life and I'd only recommend dropping out if they want to do something really badly.

Jeremy Au: (09:51)
Well we’ll find out in the future how it all shakes out. Thanks for being very real about the advice your own decision, how you advise people and how you think about your own future for your family, for example. There you are, you building this company and you're scaling it. What are some challenges that you encounter while scaling it? I personally felt that too, coming from a small team to a larger team and a larger team to bigger teams, actually. I think things really changed around the 30-person mark, what you think about it?

Raymond Lei: (10:19)
Yeah I think the 30 person mark is magical. I'm sure you felt this as well, just like when you're at, say, 15, 20, 25 people? Everyone knows each other, you're super aligned on the mission, it's still a small enough room where you could have like 1 dashboard, like one TV on the wall and everyone looks at the metric and it's like super pumped about that metric and the kind of energy in that environment is just insane. Beyond that, it gets harder to maintain that across the entire organization. I think it's usually easier to maintain in parts of the organization but we've had trouble getting the entire organization to feel that way and I think it's a common kind of management challenge in general. If you look at management literature anywhere. In some ways you look back at that time and you kind of think that was really nice but it's also part of the journey you have to figure out how to adapt to the new situation that you're in.

Jeremy Au: (11:09)
How did you learn to adapt?

Raymond Lei: (11:11)
Painfully? It's very challenging for us. It was actually especially challenging because we have multiple offices and different geographies and different time zones and it kind of gets this problem of remote work with remote communication which is kind of what lumina is getting on solving, but the less connection people have between each other, the harder it is to run an organization that has a very strong culture and very aligned team members so there's a lot of just general stuff that you should do. A lot of communication, good management team that does the right types of communication with their team members and find ways for it to cascade down, all of the kinds of normal good best practice things. The one thing that's very unresolved in my opinion is remote and cross time zones. I don't know if any company has really figured it out. I think some companies have good ideas but no one is doing it…I don't think anyone is doing it perfectly yet.

Jeremy Au: (12:09)
Yeah, I totally agree with you about the time zone dynamic, it's really tough. How did you learn how to manage a larger team, were there any books or mentors that made a difference, from your perspective?

Raymond Lei: (12:36)
I think one of the regrets I had was not scalable bootstrapping. We don't have outside investors, we don't have like a traditional board like many I think Silicon Valley founders have that go a lot of investors who have seen a lot of different situations and I don't think I had that but I didn't have a good amount of executive coaching and still do work with some really brilliant people who have a lot of experience that helps. Most of my improvement probably came from some combination of those two - exec coaching and working with just brilliant people.

Jeremy Au: (13:09)
How did you find a good executive coach?

Raymond Lei: (13:12)
I got kind of lucky. There's a service I use called Torch. They basically kind of have a group of people who interview different people and choose the person that resonates most strongly with. I feel like executive coaching is an interesting job because it's almost like a blend between a business kind of a mentor and a therapist. Arguably more of therapist and I think it's extremely useful and valuable. I would recommend it for anyone running a growing company and doesn't use an exec coach yet.

Jeremy Au: (13:46)
I too have an executive coach and sometimes I do think I lucked out a little bit but I definitely took a while for me to warm up. I'm just kind of curious about how you think people should warm up or prepare to have that because sometimes it doesn't work for them or they don't feel comfortable in getting one or it doesn't work out…I don't know if there's any advice you would give to people thinking about or trying to get an executive coach?

Raymond Lei: (14:13)
Yeah, I feel like it's about finding someone that you're comfortable with. I feel like for certain people, it'll never happen or, at least, it'll be much harder to happen…it's kind of like dating…I mean if you could find someone that you click with then it could be pretty magical.

Jeremy Au: (14:29)
How would you say you've evolved as a leader from early days as a founder to where you are today; how would you say you are different as a person or personality or how you manage things?

Raymond Lei: (14:42)
Yeah, I think the primary thing that changed about me is the way in which I had gone from individual contributor type leader to a reverse of that, I guess, like a manager type leader, but both work. I think some people like to go very deep and they like to get their hands on things and I think a lot of people have founders, especially more tactical founders, I think, tend to be this way, they want to go deep into problems and solve things themselves. I think I still have some of that in me, I still find it fun to get involved, but it comes down to how much leverage you're getting like how much you're actually accomplishing by getting into the weeds. I think, overall, I've transitioned into becoming much better at delegating, much better at getting people to kind of optimize for outcomes instead of optimizing for process and doing less stuff myself.

Jeremy Au: (15:36)
That’s like the biggest struggle, doing less stuff yourself. So, why build a second company I mean you know how painful it is, you know how much work it is, why are you off to build a second company.

Raymond Lei: (16:05)
Very painful and especially the type of company. Second company is also a difficult company to build where we're building a hardware product but it's actually the same story format, I would say, which is there's a personal problem. Personal problem that I face at Scalable, so, we were talking about how as the organization expanded, we needed to figure out how to communicate better across offices and across geographies and time zones. One of the limiting factors was just how you could present yourself on a video call, so I would notice that a lot of people would have really bad camera setups or really bad microphone setups and it just makes them hard to communicate with. It was very challenging whereas some people who had excellent camera setups, they not only were easy to communicate with, but they kind of commanded more attention almost, arguably, more respect in meetings I felt like something that would just immediately make cross office collaboration better was if everyone had a great setup and so what we tried to do was we did some research and then we tried to find if there was a good solution like out of the box for everyone. I mean, the answer is there isn't. The best webcam on the market is the Logitech class of items. There's a fun fact here which is Logitech sells, I think, something in the range of a billion dollars of webcams every year and their top selling web cam is about 10 years old. It was released around the same time as the iPhone 4S it's a very old product, no innovation in years, in almost a decade, they're just selling they're just making all this money and the product isn't good it's not right. Personal problem, perceived injustice, Raymond starts the company, that's kind of what happened. I got kind of lucky because around the same time I was having conversations with a good friend of mine, Mike, who's now the co-founder at Lumina. He previously was working on a hardware startup, he's winding it down, we're just talking about different opportunities in the market and I brought this up, it really resonated with him because he felt a similar problem. He was in Taipei and he was working with people in Indonesia and China and some other countries. We decided to look into whether this is possible and very soon after we kind of discovered this is a solvable problem and if we just can execute correctly then we could definitely make the best webcam on the market and really shock people with how good it could be.

Jeremy Au: (18:33)
As you built this company, how are you different as a founder this time around versus the last time?

Raymond Lei: (18:44)
One of the things that's happening is I'm the CEO of two companies right now. With my first company, I did everything you could imagine by myself and I did that for years. This is kind of almost the opposite in a way I'm trying to do the least I can to produce the outcome that we want and so it's thinking a lot more about leverage and thinking a lot more about outcome driven thinking that I think I didn't develop until several years into the first company, that's one dimension. The other dimension’s a lot more thinking about team and people and culture. What happens after X event happens? For example we have our Indiegogo campaign happening right now, I'm kind of the one that's driving the OK well what happens after that and then based on those outcomes, what happens after that, trying to help map that out and prepare for it in a way that also balances out the short term needs we have in digital resource constraints that we have yeah so some combination of thinking much more about leverage, thinking being much more outcome driven, thinking longer term, doing more planning, thinking about different dimensions of how things could fail or succeed and helping guide the team through that as opposed to me doing everything myself.

Jeremy Au: (20:05)
That's amazing and I feel that's how I felt between my first and my second companies as well. How do you think about the future because now as you build these two companies, how do you feel about your energy, how do you feel about your balance, how do you manage all of that?

Raymond Lei: (20:18)
I like working on stuff. This is fun. If I have too much free time, I naturally start thinking about stuff that I could work on, stuff I could build. In terms of how do I manage my time, it actually works out really nicely because the lumina team is all in Asia and I'm kind of working during Asia hours with Lumina and working US hours for Scalable, it works really well. I think if both were US time, that would be tricky 'cause I don't know how Jack Dorsey or Elon Musk does it. I think they split by day or week which I see as sub optimal for other reasons, then there's certain days of the week which people are just waiting on them. Maybe they figured out something, the magic of delegation, that most of us haven't.

Jeremy Au: (21:21)
Could you share with us a time when you were BRAVE?

Raymond Lei: (21:24)
Certainly. The journey is toughest when you're just getting started. For me, I think with the second company saying OK hardware is hard and you shouldn't do hardware, just focus on a software company instead the second time around. I felt like conviction because not just conviction but I felt a lot of confidence going into it and just feel like I could overcome whatever challenges there were, but the first time around, the reason I dropped out of school was essentially it was for a printing company like we were printing t-shirts and there were thousands of other companies doing this exact same thing and most people thought I was a complete fool for doing it. It didn't seem like that interesting a business idea that there is a lot of push and pull going into it. Ultimately, I'm super thankful for my mom for giving a lot of clarity. I think that decision, but it wasn't an easy one because there was a lot of skepticism from not just people around me but just from general pressure in the world that like this class of idea that I was going after wasn't a good class idea and I did it anyway. It ended up working well, we started off pretty sure. It evolved into something greater. I think there was some level of irrationality in that decision and that I think critics were right that just like, on paper, for this this type of idea is challenging to go after. I think I had some type of rationality or hidden conviction that it led to something else much greater and I think I’d very much regretted it if I didn't make that decision.

Jeremy Au: (22:53)
How did you handle the fear and the regret and the thinking?

Raymond Lei: (23:02)
I think I just had to view it from sort of a first principles perspective and just assessing the opportunity and assessing what could come out of the opportunity. So, rather than looking at it just more externally, I tried to look at it more fundamentally to get to the conclusion that I did.

Jeremy Au: (23:18)
Thanks so much Raymond, for coming on the show. I’ll love to paraphrase the three big things that I've learned from this conversation. The first, of course, thank you so much for sharing about the actual decision making behind dropping out. I guess there's one big milestone, but it's not just about dropping out but it's really a story about you making a decision to focus and build a company further. I think there's been quite an experience to hear that and quite a ride from our perspective to hear it.
Second is, thank you so much for sharing your learnings as a serial founder what you’ve learnt from your first time to the second time and the things you would do differently. So, that's really been interesting
And the third thing is thank you so much for adding a lot of good advice on how to be a better founder from executive coaching to letting go to being more outcomes oriented and that's a lot of wisdom that's in there.

Raymond Lei: (24:05)
Thank you so much for the thoughtful questions. I really enjoyed being on the show.