Summary
Notes
$1.15B Ring founder
Transcript
GSD. ♪ ♪ So the company called Rain. He was a father in 2011, closed his business in 2018, and lived on for $1.5 billion. He's still turning it easy. He's closed it on me now. These days, you've got to grind for everything. Currently still the CEO of the company. Great success story. Again, he'll be a great guest speaker for us. He's gonna tell us about his journey and how he started and where he's at today. He was also invited at HBS to talk to the white people, white viewers.
So he's basically has the, So without further ado, Jane, please, thank you very much for coming. And by the way, as he's done talking about his journey, we'll be open for Q&A, ask questions. He's young, like us. He's a great supporter. Thank you. Young, but on the edge of the YPO.
I feel that. I'm at the end of the YPO. Yeah, when I did Harvard, I mean, I'm obviously happy to do whatever. I can talk forever. My good friend Jason Chang is a local, so he came as well.
He's just listening. But when I did that, I just kind of talked and just made it pretty interactive. So I'm happy to just chat and talk.
Just go on for till five.
I'd rather have questions. It was pretty fun.
I guess I'm just gonna...
You know, start with, you know, bring, you know, my journey as an entrepreneur, I think there's different types of entrepreneurs out there. I'm the inventor entrepreneur, so I'm like not, there are people that I know that just go, maybe even some of you, like just build companies. Like one of my friends in YPO, you know, has built multiple companies where he's like, I'm going to build this company, I made it for three years, I'm selling it for X dollars, I mean like literally has it down to the science.
like he has gone the second it sells. For me, I'm more like an inventor, a tinker, I like to solve problems, I like to get in and do things. So I was kind of like a serial for a while, It was a bunch of little different things, nothing really took hold. And I went into my garage in 2010 and started literally just kind of tinkering with ideas. My wife was an executive at Fox, starting to do well in the film business. Well, in quotes, but enough to keep us in our house.
And so I went in the garage, started tinkering, couldn't hear the doorbell. I just got an iPhone and just seemed obvious that there'd be a door that goes to the iPhone. I googled Like literally Wi-Fi doorbells to get one, could not find one. The little wireless doorbells wouldn't reach the garage, so I was missing people. And so I just hacked up myself. I hacked up a Wi-Fi doorbell to go to the front door. It took me probably about a year to get that really working. It was just like a side project. And when I got it working, my wife said it made her feel safer at home.
She said it felt like we had gates. We lived in a little house that was kind of like right on the street. I kind of missed this feeling of that. And that was the first sort of slight aha moment of Rick, where it was just like, there might be something here that's more than just like a gadget for a guy working in the garage. And I kind of worked on some other stuff. There's probably almost another year of tinkering with it and just having it there, maybe about six months.
And I was at lunch with another entrepreneur talking about his business, thinking about how I'm going at a business. And he said, what are you working on? I'm like, oh, I work on this doorbell thing. And he said, instead of laughing like most people did at the time, he said, you know, the producer just reached out to me and a bunch of people in the area looking for more mature companies. And so, at that time in 2012, Shark Tank, the ratings, it was the number one show on TV. It was incredible. It was a fine-time show. I ended up emailing the producer from lunch, started driving home, and they called me and said, you should be on Shark Tank. And that sort of series of events set in.
Without that, I'm pretty sure I wouldn't be here today. Certainly, I don't think Ring would be here today because it just needed these boosts. So you're on Shark Tank. that the timing of it ended up being perfect. and kind of kept going. As soon as the shark tank aired, I realized that I, basically just showed the whole world the new product category and that I was not going to be the one to win it. That the product I had was a piece of shit and it was definitely working and that for sure someone would leapfrog us and go out there and be like, you know, I had this constant fear that I was like the bartender, like tending bar and talking to you and I'm like, I'm going to have that for the video doorbell.
It's like, no you're not. You're the bartender. So I kind of had that fear that drove me and so That was November is when Shark Tank aired.
And we got together with our small team over Christmas and said, we need to-It was called Corebot. We needed a new name. We needed a new backend. We needed a new product. We needed to do everything. We saw what we wanted to do. The product wasn't getting there, so we set off a project called F5, which is for fucking five star reviews. And the timing of it, we also-It is kind of interesting to go back, there's things I was just so right about, like the clarity I had then of what we had to do and when we had to do it and how it actually played out is kind of incredible. I just don't know, I was almost possessed.
The cycle for Fusil Electronics, it's basically stuff comes out at CES in January, and then that's what you'll find in the stores for the holidays, so we were now... Christmas, so basically that's So I said the next-if we don't front run the next CES, we're screwed. The next CES, CES of 2014, If we're not ingrained, if we have not set ourselves up, there's going to be a million competitors. Launched October 1st of 2013. We said we had to launch it like first week of October and to launch Ring.
And we went on this like crazy F5 mission. One of the engineers never came back. He like literally, he broke people. It was a crazy like march. And we built Ring, we came out with it October 1st, 2013. And like got all of this, we became like sort of this de facto thing, bringing in the product and everything else. I was right, at CES 2014, probably 30 to 40 companies that came out competing products.
But it was like rain, and almost we were lucky that so many people came out of the province. Because it became like there was ring, and then there was just lots of these other things. And so it allowed us to kind of flyEverybody else. Um... And then we went on a crazy journey of growing from Back in 2014, we did $3 million in 2018. 2013. We did $30 million in '14, we did $170 million in '15, $480 million in '16, and then we sold at the end of that, so I'm missing $70 million. This is $330 million, $170 million, $480 million that we sold.
Now, the charting that out is a beautiful chart of sales. If you charted the cash flow, it charts the opposite. When you're going from 170 to 480 million in a hardware business, it's an order of $480 million worth of stuff stuff, you're doing basically 170. In fact, if you look at their monthly growth, When we were probably doing $10 million a month, I was worrying something like $400 million worth of product. And so if the growth slowed, we were completely dead. And the growth staying where it was, our cash flow was always cut. So we basically had the thing redlined.
But when we started with Ring in 2014, it literally just stayed almost in the red, which is part of why we sold, or I sold at the end of 2017. We just needed a balance sheet. Couldn't take it that we kept going out of business, like almost going out of business. So we did at the end of 17, and then I'm having a little bit of, at the end of 17 we did actually almost go out of business. We were racing around, going into the holidays, had a large amount of inventory out, which obviously was a large amount of liability out there.
We got sued by ABT, partly because I sort of told them to fuck themselves. Not my best. Junction against us, it didn't matter, it was not a product that I could, just nothing to do with our sales, scaring off,Investor to investor coming in for $100 million. Their single check was $100 million. It was a $200 million round total. That investor got scared and spooked. I'd say not that it wasn't wrong for them to get standard proof, but they literally dig for the wire.
So we lost that. All of a sudden we got ourselves negative 70 million. could not raise money, had like a cloud over us injunction. Joey, this is a holiday. This is like mid-November. of 2017 and luckily the ADT decided to settle with us the first week of December and that Amazon a few days later gave us a term sheet for $4 billion. So the delta of those dates was like 45 days from being negative 70 to basically signing the LOI with them on December 31st of '17.
And then I did say, I stayed for five years after I sold. I left for two years, kind of got through some other stuff, realized that I just didn't, I haven't found the thing that I find as interesting as Ring. The mission around Ring and making it safer is really just kind of like this, like what my wife started with, this concept that it makes you feel safer. We've been able to just go ahead and have crime and safety and find dogs and do all this stuff. And so I really haven't found the business that that has that satisfaction. So I went back to ring, but it wasn't, it kind of started to kind of tinker a little bit.
Year and a half ago, so we're back a year and a half ago. And we're not done.
That was quick. I'm happy to go into more stuff.
Like we had-so I'd say both doors opened immediately because the business was doing-I mean, it's just like the tale of two worlds. It's like so crazy. A lot of QVC, they call it Black Saturday, which is the-Black Friday weekend, but I did the daily deal of Black Saturday. I did $22.6 million that day, which is the number of the highest grossing sales of any single product company per QVC of that year.
So here I am, I'm up there doing this, and at the same time we're basically technically bankrupt. It's like this crazy world of-so the business was ripping.
Back to sort of normal bankruptcy, not like full bankruptcy. It just was, the company needed to scale. You were right, when the company got to scale, the economics on a user are phenomenal. We're over 80% subscription. The economics on a ring customer, individual customer, are incredible. To get to scale it though, Cross is a bigger surface area. And so we needed to get it to like a billion, two billion, and then it would become a cash machine, which is exactly what happened.
Like it is a, literally it's like an ATM.
So like, because you would have held on to the company longer, or maybe all the way through. So I think that looking back, and you know something, you don't know the capital markets. Like in today's capital market, it's just however the cap-so like, so-Looking back doing that, if I had just got a little bit slower, I probably would still have owned it today. Because we just, I ran it so like to the edge that as soon as we hit like the slightest bump, like just everything came apart.
Like, that money comes back to you. But it's just like I was just so tight the whole time and you couldn't you can't Yeah Looking back, if I just wasn't as aggressive, In a very funny way, I would have been more, I mean, I'm okay, but I probably would have been way more successful had I been a little calmer with it.
So we get on Shark Tank. I ordered, I think, 30,000 or 20,000 door-to-door bus. There's a lot. There's a lot for them.
And the factories are holding them at whatever, there's a customs warehouse in the US, but they're holding them until I pay them for the final payment.
So I started going into the warehouse and taking out boxes and trying to... Christmas Eve-y. And I'm like... Oh my god, like this is none of them are working.
So we figure out that this dipshit freaking engineer He said he thought he was like changing parameters. He actually wasn't. You couldn't write to that chip. He thought he was like right every time he like tried the camera, he thought it was random. What he didn't realize is that because the Wi-Fi antenna on our thing was so bad, that basically it was like a random generator. So like every time you tried it, it would give you kind of a different like picture quality because it's literally just struggling to be on Wi-Fi.
So like sometimes we connect a little bit better, sometimes we connect a little bit worse, a little more interference, a little less. So while he thought he was like doing parameters, basically he came up with like a random set of numbers. Now the random set of numbers he gave to the factory, that actually went on the chip. That chip we could not change. So now we literally are sitting there with this 5,000 or now out there.
that you can't change them on the chip. You can't. I'm going through, like, check this. Can we change them on the chip? No. If we bring them back to here, can we re-burn it down? No. Can we pop that chip off and put a new chip on? No. By the way, we didn't have the money to--You know, like, you can't just refund, I mean, it's like, yeah, just refund. I'm like, with what?
There's nothing. We've been literally at it all day.
He's like, I don't know, it'll take me like 12 hours to figure this out, or 10 hours or whatever, and get things switched over and try it. I was like, great. He's like, OK, great. So it's like 10:00 PM in New York. He calls me at 6:00 AM. Fucking big words. And it was like the greatest-that was our greatest Christmas Eve.
So, I mean, that was, again, that's probably where I overshot the landing, is, like, when Captain at bay was, like, we just went hard, like, it's part of, like, I'm driven by fear. Like, I actually, like, it's like, that's, like, the fuel that keeps me going. And so, instead of allowing sort of a normal... I think it was this, where maybe we were like 30% of the market and you had 50 people that took some levels of stuff, and then 20%, whatever. We're still in high 80s and stuff. We're just crazy.
Our market share even today is, you're talking about hundreds of competitors. So I did everything for, like I over advertised on TV to build the brand. in stores, discounting, just number of SKUs. We have a thing called tic-tac-toe in the company where weThese tic-tac-toe boards of price, basically like, you know, types for each doorbell, like a battery doorbell. different types, different price points, and we've had to do these six-factor boards, and making sure we're filling every single part of the board.
The ring is not necessarily always the best doorbell in its price point. It's the best sold doorbell in its price point. And it's not just pricing. It's also brand. We've always talked about standing for a mission. You met me at the at the LAPD thing. So we've been very much like part of like the community we build. The Neighbors app is the largest crime and safety app in the US. So we're still like social talking about it.
That guy... literally scaled all the way through. There's a lot of people that just, they broke.
And then you have to, yeah, it's constantly going backwards to fix-And how you would let go of people that were there with you on day one, just saying, you know, make them break their hearts.
I mean, I'd say some of the tricks we did is it definitely gave people a ton of the time. And so I always said like it's like it's a company of multiple CEOs not like I was the CEO and people knew what we were doing.
You try to make them a CEO of customer service. And so we did through doing that you did allow people to scale more.
I think, I mean, the first five years I stayed, part of why I left in the end was I realized that I was just, you know, I was in, my calendar was stuffed. By the time, at the end of the five years, I mean, I had recurring meetings, right? from 8:00 AM to 5:00 PM every day, but none of them were productive. It was just like, I would do every single whatever recurring x, y, z. So that did like-When I came back, And then the business started to kind of like left. It didn't go down, it just like stopped innovating. But you could see like the trajectory was looking bad.
So I said, I didn't want to come back. And then when I came back this time, I said, listen, guys. It's like on my terms, like I'm capable to fire people. Like that was another problem. Like big companies, like they just become like the post office. It's like tension. Like you just can't fire people. And that's the stacking of that is really bad because what happens is When you realize you can't fire people, then you're actually hiring another person to kind of just like get the job done. Then that person's there. It's like you just can't serve. Like, can you even cancer in your body?
I don't think we can do that. Don't even do that. No, 'cause I just, I'd like to cancel that meeting. So I really do, I try to like stay away from like that kind of stuff and just build a product and do it and that's been, it's been fun, it's been like fun to go back and turn it around and get it back to where it is and hopefully, Yeah, if I do go again, hopefully we're able to put it in a place where this time we kind of-keep it going. Because I do want to see it succeed.
So now we watch the fire watch, which I designed while it was in the fire, which is, you know, if a fire, when a fire happens, and it isn't going to work, we say, hey, do you want to put your rain camera into this sort of fire watch thing? We're going to watch for smoke, ember, and fire.
fire and we're gonna feed it up into watch studios, where the command center is, and then get a real-time fire map with pictures and video and everything else, then I can actually like, if the ember starts and there starts to be smoke out of this little bush that's a quarter mile away from the fire, which is what happens, instead of letting that now get seven houses on fire and becoming its own giant thing, which is what happened to the Palisades, you can go and put it out before it becomes a big thing.
So I think that there's just so many exciting things that we can do. With Ring, it's a bit of an affliction. My problem is that it's just too exciting and engaging of what we can still do to change the world a little bit.
Yeah, definitely, I mean the cycle time of developing hardware for us has gone from, I would say, Like really pre-AI, when we were not trying to kill ourselves, I would say it was 24 months from when we came up with an idea. Like we said like, we're gonna do a new floodlight catwalk. And we weren't trying to like, I mean, again, we tried to just break everything. But we tried to go by the normal thing and everyone just worked at it. It was about 24 months to get that product into a customer's head.
We are now, I would say we're six months, if it would be the corollary to that. And we try really to go hard. We're basically now at the-now we're hitting the physics of cutting steel, which is the. So I'd say the speed at cutting a tool is now, that's the delay for us to get a product out. We need about three months. So you really want to force something out quickly with three months? And by the way, it would be interesting to see with, again, making millions of products. Obviously you can make three prints of them, make five of something.
All of this exists. It doesn't tell if it's dirty, if it's clean, if it was mistreated. So we opened an app store because we think there's hundreds of billions, trillions of dollars in the sea of data being erased or not being used now with AI, where if you have rings in a coffee shop, Why is that ring not telling you that the line was there? These two baristas work better than these other baristas. All that should be happening, and we already have it. We should not be building the long tail.
People love it. People love it. They're paying for it. We shouldn't be building a bird-watching thing. Not only is it telling you which birds, it's telling you where they went around the neighborhood. It's like two kids built this thing. So it is like that state. So I think that's like the stuff that's going to open up is the value of the cameras will stick to being crime and safety like the sort of around your home and connecting you as a core.
But then if you want to then do these other things, just like the iPhone, the iPhone is a phone. and Apple is giving you like a 1P app, they're giving you the phone app.
And it was like, our mission is to make neighborhood safer. And how can I stop it when we get there? And it doesn't matter. We had a thing we don't celebrate. That was another one.
Because if you celebrate, then that means you've gotten there and you've never gotten there. It's like until there's no crime in the world, we haven't gotten there. I remember Don, the guy that runs Salesforce, who's still with us today, came back and he closed.
We might have existed, but I think we would have been, like, a distant number two to them and they would have stayed on top. Nest bought Dropcam. And again, this is, like, just as we're coming out. So at the time when you're, like, launching, like, I don't care if Dropcam, Nest, like, I'm just trying to sell units. I'm not trying to build the largest company in the world. And they bought it and immediately did what any terrible acquirer does, which is they just gutted the founders, gutted the culture, gutted literally even to the customers.
Immediately. And they just took all the momentum from this thing and all the goodwill and all of it and they just hammered it. And right at that time was like ring, it was like going like this. It just, like they kind of just hit it like right, and we just like took it and ran, and once we did that, And by the time they finally turned it around and had better camera products and figured it out, kind of had the app a little bit better, they just could never sort of get back the momentum again.
So it really is like a case study in If you're going to buy a company, if you're going to invest in a company, buy a company, if you're going to be on a board, you just have to back the management. You have to back the founders. It's just a simple thing. And if you're not going to do that, don't get in there. Unless you're buying a hard rock gold mine, fine, you throw the founders out. The gold's still there. There's definitely, there's a level of reason, but you're buying that company that's small and growing and special and beloved. People love their drop cans.
Like we have like the volumes out there, we have that, like we're decent there. That has led us into SMB and like the coffee shops and like those, and we're kind of keep going there. We just, A whole set of products is coming out like right now that are like multi multi 4k lens cameras. They're like 360 cameras. They're starting to do now a lot of these like more enterprise based systems. We're just like dipping our toe in.
So like we look at it as like this whole line might not be successful. But like it's going to learn and we're going to keep cycling. We're like, we just launched those trailers. like they're called LBT trails, the ones with the blinking blue light in parking lots and stuff. So I'm actually just shipped our first one today of a production one to a customer. So I mean, it's not sold, but like that's like the first one.
Like I got the picture on the way here of like it being packed up and being shipped out to the first customer. So is it working?
We went to do that last round. They all had their own problems. It was just a crazy sort of like, again, it's like every plane crash you look is always like it's a series of errors. It's never usually one thing. It's a catastrophe of multiple errors that come on top of each other. And so literally, like all these other problems, we also had, you know, Clyde Perkins was in us. And they had a relationship. Well, it turned out that Mary Meeker and Rood were leaving and starting their own fund.
So, ZFJ kind of like pulled back. Goldman Sachs, Jips, Goldman Sachs investment partners, was it Goldman Sachs? Should have been a limited way. They were in Uber, they were in Spotify, they had like billion dollar investments from that group that was in us.
So now they're in this-I mean, it wasn't their fault, but they're in an investigation in Golden State, the WC group. It was knocked. So they were that shut down. So all these things, just for this moment in time, kind of shut down on us. And so we didn't have the internal, like that calling for that 10 million, I lost that ability.
Certainly shipping, we do, like we have a great trade on shipping. So some of that kind of stuff we get. But yeah, overall I'd say that we're pretty independent because we're big enough like just in our lines, like you know, basically the little cameras that like we, They're doing it on their own.
We still use the big CMs. We're mostly out of China. still in Asia, still have been heavy in Asia.
I think we'll see some more stuff happen now that this Skirmish settled out. I think we'll see because I think that just that just drew the attention away. But right before that happened, there was still happening, you know, pushing like Wi-Fi routers and saying you couldn't go down to the next stage. So there's a whole bunch of stuff that's happening right before that. So I think we'll go back to our regular scheduled programming now is my guess.
Definitely the future is that your camera... The future of our security Everybody should feel like they have a security guard in their house that knows you and knows your house. Your facial recognition, your preferences, but with AI, you should have basically a virtual security guard at your house watching your cameras talking to you, telling you what's going on, interacting with you, not like there's motion at your house.
I stayed friends with, kind of, all of them. I mean, Kevin, Mr. Wonderful, Kevin O'Leary, July 5th, I do a lunch with him every year in Nantucket. So, we got to go over there and have this lunch with him. And so, it's like, he's great. He's a great friend. Robert Hershbeck is, like, a really close friend. And he's another just great, like, a great person. Like, they're, it's, I do, I...
I went crazy. I was emailing everyone, like, the person, Jamie from Shark Tank wants to come meet with you. I didn't care. I was like, I was going to use the shit out of this thing. I was like, so, but when the show was super popular, it was amazing. But it was Best Buy. And you can't even do some tiny little electronic stuff that no one knows. So people are dropping in being like, I heard you were here, you know, like you watch the show and it's like the CEO freaking best buy. It's like I watched it with my kids and I just wanted to meet you. And it's like, oh yeah.
It's by far from a revenue side, I would say value side today.
I think it's like trying to find something that you like doing, that you feel like is gonna be something you wanna wake up and do. I think it's just like, It's moving so fast and it's changing day to day.
I don't think I was good in that. Right now, I think you have to go-It's not about building the business quality, it's about building the speed of the face of it. And you see that in these companies. I think it's unprecedented, the speed of this product. Thank you. And home to LA. So thank you guys.