Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview proven entrepreneurs about how they built their businesses. And beyond loving entrepreneurship and the tech startup world, I just love tech. And so when I see a new gadget or something digital, I can’t help it. I just want to look at it, and sometimes want to buy it.
But when I saw today’s guest product, something called Wyze Cam, sell for 20 bucks, I wanted to . . . I thought, “Twenty bucks? What’s that?” And then I said, “I don’t know. How could they actually make it . . . how could they sell it for 20 bucks, have cloud recording on this camera, have it look good, and still have it be safe?” I have to be honest with you, I didn’t trust them. I didn’t really need a camera. I thought it could be nice to have one in the garage in case someone leaves the garage open. I live in the Mission in San Francisco. Someone could come in and steal stuff. I’d like to know who it is. I thought maybe have a video of the kids’ room, that would be nice. But it wasn’t urgent enough, and so I didn’t buy it because I didn’t think it would be safe enough.
And then, in preparation for today’s interview with the founder, Yun Zhang, of the company behind Wyze Cam, the company name is Wyze Labs, I started researching it. I’m feeling like this is really . . . it’s a solid . . . not only solid camera, but they take security seriously. Every criticism that I found, and you know me, guys, I’m a super cynic. I went out and I looked for every negative thing I could find on them. Every cynic that was out there, they responded to it, and I’m going to bring it up in the interview, and you guys will hear their answers. So then, that just leaves me with this, “How are they selling a camera for 20 bucks?” How are they building a business like this? Where’s the profit? Where’s the future in it, and where is the present? How much revenue are they making?
All right, my rant is over. You guys know the premise for this interview. I want to find out how they did it. This interview where we find out about how Wyze Labs came out with this Wyze Cam for 20 bucks, how they built a business from it, what kind of revenue they’re producing, what their future is, how you can you build a business selling something for 20 bucks like this?
Anyway, it’s all sponsored by two great companies. The first will host your website right, it’s called HostGator, and the second will help you hire your next phenomenal developer, it’s called Toptal.
Yun, I was looking at your face as I said it to see, “Does he feel disrespect? Does he feel proud? Does he feel what as I say it?” I can’t read you. What do you feel as you hear me talk about my very legitimate concerns that kept me from buying your camera?
Yun: Hey, Andrew. Nice to meet you, and thanks for having me here. I think it’s a great opportunity to let more people know about who we are, why we do this, and how we do this. The biggest challenge when we create this . . . Actually, tomorrow is one year anniversary of Wyze. So Wyze founded exactly one year ago.
Andrew: So we’re recording this in July 2018, that means July 19th, 2017 was when you guys launched the business?
Andrew: And then, you hit . . . So I’ve got the numbers here. Tell me what the revenue is.
Yun: So for half of year 2018, we achieved more than $10 million revenue.
Andrew: Half a year, more than $10 million revenue? That’s the first half year? No, the first half year, you did what? $5 million, I think?
Yun: So we founded this company July 19th, 2017. We officially launched our product on October 24, 2017. So if we only look at first half of year from January 1st, 2018 to July 30 . . . or June 30, 2018, we achieved more than $10 million revenue.
Andrew: Wow wee, on a $20 product? You guys making any profit on the $20 profit? Excuse me, on the $20 product? No, right?
Yun: We do.
Andrew: You do?
Yun: Yeah, we do. Otherwise, this business is not sustainable.
Andrew: I could’ve sworn that I saw on Farhad Manjoo’s article that included and featured you in The New York Times that . . . I could’ve sworn he said that there’s no profit in this. But did I misread it? Was he talking about someone else?
Yun: Razor thin gross profit. Razor thin gross profit. But we have to make gross profit, otherwise, this is not sustainable. So we do have a razor thin gross profit, and I think we can drive high enough volume. And we all try to be as lean, as efficient as possible. So last month, the month of June, is the first month we break even.
Andrew: Got it. And breakeven as a company, but per product, there’s a little bit of a margin that allows you to continue to run your business?
Andrew: You grew up in China?
Yun: I grew up in China. I came to U.S. 2005.
Andrew: Do you feel like part of the reason why people are so suspicious is that you grew up in China, that the product is manufactured in China, and the price that there is now this big suspicion of China, and that it’s kind of rubbing off on you guys?
Yun: I don’t think so. I don’t think that China [inaudible 00:05:33] that concept is a problem. I think the biggest challenge is . . . actually, this product is created by a team here in Seattle. We do work with our manufacturer in China. The challenge that we have is we have this product at $20 retail price with these features. People often say, “This is too good to be true.” That’s the biggest challenge we have.
Andrew: Right, because how much . . . what’s a Nest Cam sell for? Let me go to Amazon right now. Nest Cam, that’s one of the big ones, sold by Google. They could afford to lose money on products for a little bit. The Nest Cam, in comparison, is $181.79 on Amazon, right? And so, I get what your point is. You’re saying, “Hey, look. It’s not where we’re coming from.” You come from anywhere. You offer something for 20 bucks when the competition is offering it for $180, people are going to be suspicious of what gives, right?
Yun: Yeah. So too good to be true, that’s the biggest challenge we are solving. But after six months, it’s almost seven . . . eight month that’s after we launched the product, the latest feedback we got from a reporter at a Business Insider in article is, “Once you do the research, once you use the product, it is irresponsible not to buy the product.”
Andrew: I get it. I get it. You know what? I’m telling you, I went through this whole . . . I got to be the cynic. I’ve got to make sure that I call you guys out. I grabbed a bunch of screenshots that I’ll talk to you about, but in the end, it makes sense. All right, so let me take down my guard for a little bit here, my arms, and just get to know you a little bit. I hit you with the hardest stuff. Even before we recorded, I went, like, all out with you. So let me just calm down and get to know you a little bit. So you grew up in China, and one of the things that you noticed in China was that a lot of people wanted to go learn in Western countries like the U.S. And so you as the entrepreneur that you are, you did what based on that?
Yun: So when I was in college, I started . . . so that was in the later ’90s, before 2000. There was a trend happening, because of internet and because of the . . . China opened the market, it became a more open market, and because more and more young people like me at that time were very interested to know more about Western culture and have a strong desire to learn and even to go to U.S., learn the culture, learn tech knowledge. So there is strong desire among these young people, including myself.
But right after I graduate from college, I worked for a company called New Oriental Education. What we do, so we are helping all of these young people, college students, to get familiar with the process of going to U.S. to study a degree, including how to get information about the schools, about the cities, how to apply or how to prep for the test. So that is the company I worked for. I was one of the founding members to create a brand new, original training center for them, and that was their number three original training center. And that company, after I came to U.S. I think around 2006, 2007, they went public in U.S.
Andrew: You opened up one . . . as I understand it, you opened up one of their new locations in a new city, right?
Yun: Yes, yes. Right after I finished my college. By that time . . . It’s about 20 years ago, so I don’t have their latest number. But by that time, about 90% of the young people came from China to U.S. to study all graduate from this training company.
Andrew: I see. Wow. I could see it now. Traded publicly, what is their market cap? Market cap $15 billion in the U.S. So that gives me a sense of how big it got. So you were around this whole entrepreneurial thing that was going on, and then you ended up working for Amazon in the Books section, right? You were the in-stock manager?
Yun: Yeah. So I worked for Amazon for two roles. The first role was in-stock manager for Books category, and the second role was in-stock manager for Lawn and Garden category.
Andrew: So one of the things that I found is that people who worked for Amazon, they worked really hard, and often they just love it. It’s like boot camp. And the other thing is there’s always one big lesson that they took away from all of that work. It’s like it gets tattooed into their body. What’s the one big thing that you learned from working for Amazon?
Andrew: Customer-centric, what do you mean?
Yun: So, really, think everything from customer perspective and drive backwards. So that’s one thing. The second thing is making friends with customers, not just looking for shop [inaudible 00:11:29], but looking for building that trust through your customer-centric approach and strive for the long-term relationship and get a long-term weighing from this relationship.
Andrew: Yun, how did you do that? How did you get to know the customer, or build a long-term relationship, or think from their point of view? How did you, when you were at Amazon, express that customer-centric point of view that they have?
Yun: So a few examples is we . . . each of us went to a call center close to . . . So we are in South Lake Union, around the campus. Most of South Lake Union spend I think a few days [over there 00:12:18], listen to the customer once a year. So that’s the one example.
Andrew: So you personally would go to sit and do customer service phone calls or email?
Yun: I didn’t take the phone calls, but I shadowed. I shadowed the customer service agent.
Andrew: To understand what people are going through when they’re dealing with any customer service issues or just specifically the ones related to you?
Yun: All of the customer service issues.
Andrew: Got it. Okay, did you take anything away from that experience that you remember?
Yun: Of course. There are so many. When we were at Lawn and Garden, there were questions about . . . We handle a bigger category a lot of us use, but we don’t have the first-hand experience of how the customer use it in terms of . . . All the boxing experience, installation experience, and those specific . . . [inaudible 00:13:23] phone calls can help us to understand those. Just like now, we would really focus on making great products for Wyze users. A big thing we have to do is watch how user use the product. Instead of sit in a room and picture how user use, we need to watch how user use.
Andrew: So one of the things you brought back to Wyze Cam was, “Look, at Amazon, we sat down and we watched customer service. Here, we’re going to sit down and we’re going to watch the customer to understand and to empathize with them,” right?
Andrew: Do you do any customer service watching at Wyze Cam?
Yun: We do.
Andrew: What’s one thing you learned that helped shape the product based on the customer service email you looked at?
Yun: There are many examples. So on October 24th, we launched our first product. And then . . .
Andrew: By the way, I think that’s your Outlook. Can you turn off the notifications on your Outlook? I can’t believe that to this day, people still get alerts every time an email comes in. To me, that would be just so painful. I hate email. But I guess if you want to know what your customers are thinking all of the time, you want to know it instantly, so I get it. So, yeah. You were saying something about April, you were looking at customer service email. What did you see at that point?
Yun: Yeah, so on October 24th, we launched our first product. And then, February 15th, we launched v2 which is upgrade version. Now, the difference between v1 and v2 are [inaudible 00:15:03] are the information we got from the customer feedbacks. So a example is we had a better audio performance on the v2, which we clearly see the feedback from customer.
Andrew: Because you know what? I did see that the first set of messages that I saw online, the ads, the pages, etc. were all about the camera. And occasionally, I’d see something about the fact that you can talk back. And you’re saying, by looking at customer service, you saw that people wanted to use that two-way communication more than you anticipated. And so version two featured better audio, and also I’m noticing that more in your messaging today. That’s it?
Yun: Yes, yes. Another example is we just launched . . . last Friday, we just launched a work with Amazon Alexa, meaning a customer can have our camera as a video feed, live video feed, on their Alexa device like Echo Show, or Echo Spot, or Echo TV on those screens, live video feed.
Andrew: And you saw that in customer service?
Yun: A few from a few channels. From customer service . . . our customer service have email, phone call, social media forum, Reddit. We take from all of these channels to get a customer feedback, not just the 800 number, not just from email. So we saw the request from customers saying when you will have Alexa or when you will have the Google integration. But that’s one channel, that information . . .
Andrew: You know, I kept seeing that, too A lot of questions in the earlier forums posts about whether Alexa was part of it, and I thought what people were looking to do was just get alerts via Alexa or tell her to turn on or off via Alexa. How did you understand what people were looking for via Alexa? I couldn’t read . . . Based on the messages that I saw online, I didn’t understand that that’s what people were looking for. That they actually wanted to see it on their Alexa devices. How did you know that?
Yun: Exactly. So, initially, we had the same thought, use Alexa, use a voice to turn on and off our camera, not adding a lot of value to the user experience. We had an internal discussion, and also we had a lot of discussion with Amazon Alexa team. So myself and all the team members all came from Amazon. So we have a very close relationship with them, so we talk with them. They have a lot of opinions, and also once we got more and more users . . . by the way, as of now, we have more than 300,000 Wyze users in U.S. And the most important thing, these users are very active. So they are willing to talk to us, you know, willing to work with us to improve the product to improve their life better. So we talk to users, we talk to Amazon, we discuss internally. Then we believe this feature, if we can bring the live video feed through Amazon Alexa device, that feature is actually very, very valuable.
Andrew: So you were following up with them and saying, “What do you want from Alexa? Why do you even want Alexa integration?” Is that right?
Andrew: And they were saying, “I have this device, this Echo Show that allows people to . . . ” Got it, the one with the screen.
Yun: Yeah, then you can think about . . . then you can use . . . You have kids, right?
Yun: Then you can use this Echo Show, Echo Spot as a baby monitor. You don’t need to pull out your phone and get your phone all the time. You can do your stuff and let Alexa tell you what’s going in the baby room.
Andrew: Right. Because baby monitors are pretty expensive too.
Yun: Yeah. And also you can hear. Right now, we cannot talk back to the room, but you can hear the sound from . . .
Andrew: You can’t talk back from the Echo, but you can from the mobile app, right?
Yun: You can. Yes, yes.
Andrew: Yes, okay.
Yun: We have a sound problem from Echo right now.
Andrew: Okay. So I get it. You were working at Amazon. I could see how much you learned from it. You said, “I think I’m going to start my own business,” and the first thing that you started is Autel Robotics. What is Autel . . . Am I pronouncing it right?
Yun: The first thing we started is copter shop.
Andrew: Oh, a coffee shop? You started a coffee shop?
Yun: Not a coffee shop, copter.
Andrew: Oh, a copter shop? What’s that?
Yun: It’s a drone distributor. So the first thought out of Amazon is we saw emerging category which is consumer drones. So we started as a very early distributor of a brand called DJI. That’s a copter shop. So after that, we started Autel Robotics which we are . . . we started to make our own drone brand.
Andrew: Wait, when you say you’re a distributor, distributing DJI to where?
Yun: To Amazon.
Andrew: Oh, really? They weren’t going directly to Amazon and listing themselves?
Yun: Oh, we sell at Amazon marketplace to consumers.
Andrew: And DJI wasn’t doing that directly?
Yun: No. They focused on product development. That was 2013. So they really focused on product development, and they are very young company based in Shenzhen. So they trust us can handle the Amazon marketplace very well and know the customer relation very well, so they let us [through 00:20:51].
Andrew: Got it. Makes sense, right? You’re seeing the drones are taking off, right? It’s a hot market. You have experience selling on Amazon, so you’ll be the person who takes it, you’ll list it there, and I could see also why you guys are so good at responding to Amazon. One of the things that I noticed you guys do at Wyze Cam that a lot of other manufacturers don’t is if somebody has a question, you use the comment feature to respond back to them. If somebody points out an issue, you use the comment feature to respond back to them. It’s really well done. All right, so you did that for DJI, and then at some point, you said, “I’m going to start competing with DJI”?
Yun: The result might be start competing with DJI, but the thought is not. The thought is we’re a group of ex-Amazon . . . I mean, why we do startup? For me, it’s a great learning process to do startup. If we don’t think we are learning new things, we’ll feel like we’re not doing the right thing. So, as a DJI distributor, we very well handle the Amazon e-commerce marketplace, and then we want to do more. Build a new brand, handle customer service, not just the e-commerce but also big box in U.S. We want to learn all of these new things, which we cannot learn at Amazon, and we cannot learn at a copter shop. That’s why we think, “Okay . . . ” But for DJI, our role is Amazon-only e-commerce distributor. So that’s the restriction we want to break.
So that’s actually a kind of . . . a core thing we always have as well and why is we always challenge ourselves. We always want to break the boundary and learn and do new things. That’s why we started Autel Robotics. So we created a new drone brand. We’re not only doing Amazon e-commerce but we also launch and sell this Autel Robotics drone at all U.S. model went out and [inaudible 00:22:57] stores in less than six months.
Andrew: You did what? I didn’t catch that last part.
Yun: Oh, we sell that drone, Autel Robotics, in all U.S. [Best Buys 00:23:05] . . . more than 1,000 Best Buy stores. We did that in . . .
Andrew: In less than six months, you got that kind of distribution. But who manufactured it?
Yun: Our manufacturing partner at Shenzhen.
Andrew: Got it. So I see what you mean. You essentially were starting to compete with them, but your goal wasn’t to become the new DJI. Your goal was what? You said to learn, but it’s more than just learning.
Yun: First, it’s very exciting to learn how to build and then grow a brand comprehensively in U.S. through both online and offline and also providing service to consumers.
Andrew: Okay. And you know what? You told this to our producer, too. You said, “We didn’t really have a problem in mind when we set out to start this business. We didn’t really have an idea of what we wanted to do. We just had the sense that we wanted to make technology more affordable. We wanted to find ways to sell direct to consumers.” In fact, you have a checklist, right, of what you were looking for when you came up with your idea?
Yun: Yeah. It’s more like, again, we always want to challenge ourselves with more things. It’s more like, okay, so we learn how to do the traditional way of sales and marketing service in the U.S. on and offline. What else we can do? So we found, first of all, a drone is a very niche market. The next thing we need to do, we want to do, is have a much bigger impact to consumers. So that’s . . .
Andrew: Okay, you know what? Let’s put a pin in the story for a moment. But I think I get it. You’re saying you left and you said, “Let’s see what we can do. Let’s experiment until we find something.” It’s like going out on a bunch of different dates until you find the one that you love, right?
Yun: We have a direction. We have direction.
Andrew: What was the direction that you had?
Yun: The direction is, first all, we want to do something has a much bigger impact than drone which is a niche market.
Andrew: But that happened afterwards. It seems like when you left Amazon, you were just experimenting, right? And as you experimented, you learned what you liked and what you didn’t. You liked manufacturing more than distributing other people’s products. You liked having an impact on a lot of people more than you liked having a great product that only a few people would know, right? Am I picking up on how you thought things through?
Yun: Yes, yes. We always learn and create our thoughts, and then have a bigger and bigger vision and dream. So before we start Wyze, we know we need to work on something that has a much bigger impact. [inaudible 00:25:36]. Number two, we want to work on something which reduce the ease of use barrier and reduce the price barrier. So has a big access to a lot of people. A drone is very expensive. This [inaudible 00:25:57] drone still $500 to $1,000 price tag consumer drone. So that’s number two, want to work on something which is less expensive. And third, we want to work on something people use very often, hopefully, use every day. Instead of drone, you bought it, excited as a Christmas gift, then you probably use it a few times a year. So that’s the direction we had. And then, we found a camera. The smart home camera . . .
Andrew: You know what? I’ve got a question that I’m going to come back and ask you about. Here’s the question, it’s why do you care that people use you often? Why isn’t it just, “We make the best products possible, and we make a good profit.” Why was, “The best products possible that lots of people use often,” why was that a criteria? Let me take a moment to talk about my sponsor and then come right back into it.
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All right, so, Yun, let’s come back to that. Why? Why did you care that a lot of people used you? Why did you care that they used you often?
Yun: Very good a question. So we want to be a product company, but we want to be a product which connect with people. So our end goal is to create a community of users and create a product for user, the community members, great product at lowest possible price. But how we can do it? We’ll have to remove as much as we can the traditional marketing cost and then traditional channel cost. So that’s kind of a Costco membership. You be the member, and, you know, you have this benefit. So that’s a community we want to create but without membership charge.
But the goal is to offer the community members a great product at lowest possible cost. And also, have the community members to work with us to continue to improve product and help us to make the next product. So that’s the goal. Now, we have a camera, why we want to have the product people use often because we want to have a place to host this community, which we think the mobile app can be a very good place to host it. So we haven’t done this yet. Right now, a lot of transactions, our forum communication are on the web, but to use the camera, people will use the app. So our next step we’ll create this active community in our app.
Andrew: All right. And so you’re saying if they’re only using it once a month or whenever they get a chance to, you’re not going to create this on-going relationship with them that allows you to learn from them what’s working and what’s not, and what they want, and then build the next and the next. You’re trying to create some kind of learning model that can only come when people are using your product often and giving you feedback. All right, and I do see it. I’m actually on your Reddit page. One of the things that I like about your business is, yes, first of all, you have a Reddit page. You guys manage it yourself, right?
Yun: It’s more self-managed, but if we see questions and we need to answer, we will answer. And also, we have, so far, once a quarter, we’ll increase [inaudible 00:31:48] . . . well, so far, once a quarter, we have a Reddit AMA, which we host AMA answering all of the questions from user once a quarter. We are thinking about doing it once a month [inaudible 00:32:02].
Andrew: Okay. So you’re active in it. And so, one of the things that I like is that you guys have it and you’re active in it, and the other thing is that it’s a beautifully designed Reddit page. I think a lot of people just create the page and move on. You guys designed it. Well, all right, so I see that you came up with that. Here’s what I did. It seems like you said, “I don’t want to come up with a product and then figure out how to manufacture it,” and so on. It seems like what you guys said was, “Who already has a camera that’s inexpensive that we can make our own by adjusting the firmware, or adjusting the software, or creating an app, or doing any collection of those things?” Am I right?
Yun: Most of are right. So we have a team here in Seattle, and then we have a small engineering team in China, mainly work on firmware and the app, but most of these are software part. And then, our manufacturing partner, they work on the physical part and the manufacturing, but that part is right. But most important part is the manufacturing partner who work with us need a share that’s in [inaudible 00:33:07] we have . . .
Andrew: But didn’t you . . . So I went to Alibaba, because I heard a lot of people say, “All these guys did is go to Alibaba, and they’re reselling someone else’s camera with a nice name.” I did go to Alibaba, and I saw a camera that I think is the exact one as yours, the Xiaomi . . . I forget how to pronounce it. Xiaofang?
Andrew: Right? So didn’t you guys just buy the same thing that other people can buy on Alibaba and then say, “We’re going to change the software?”
Yun: The physical part is the same. The company that’s working the camera with us also working with Xiaomi . . . well, the Xiaomi version camera. But the app is a new app, we created it for U.S. consumers, and the firmware is too.
Andrew: So that’s what I was saying, that where some people might go to Alibaba and just buy something and say, “Okay, great. I’m going to mark it up and sell it,” you guys said, “Well, we’re going to buy it. We’re going to use it as the basis for what we create, but software is going to be our advantage,” right?
Yun: I don’t think the manufacturer making this camera opened the API for other companies just buying the camera and loaded their own software. So we actually worked . . . before we launched the product, we worked months with this company. We know this company better right before we started Wyze Labs.
Andrew: Okay. So it was someone that you knew, and you just found a really good camera, and then you started working with them. How did you adjust the physical camera, or did you? Was it just the software? Was it just the firmware?
Yun: We wrote it a new firmware. We wrote a new app. And also, for the other part, we tune the software, like the visual quality. We tuned the software to achieve the visual quality we want to offer [inaudible 00:35:05] for U.S. market.
Andrew: Okay. All right, so then you had it and you’re ready to start selling it. How did you get attention first? Where did you start selling it?
Yun: We launched at our own website, wyzecam.com. And then right after that, we launched at Amazon as well. But initially, we had the demand was much higher than we expected, so we had a supply exchange. Now, at this moment, we sell at three channels, wyzecam.com, amazon.com, and Micro Center.
Andrew: And where?
Yun: Micro Center.
Andrew: Oh, Micro Center, the computer hardware reseller?
Andrew: Why them, by the way?
Yun: So two reasons. One, for Wyze, our targeted customers, our audience at this moment are tech enthusiast people who are willing to [embrace 00:36:10] tech knowledge, use that tech knowledge to [inaudible 00:36:13]. So these people at this moment are our users, and Micro Center has the exact same target audience. So that’s the first reason. Second reason is Micro Center agree with our value proposition which is lowest possible cost. So as a brick and mortar stores, so they agree with this value proposition and want to work with us and want to sell our product to customers. So that’s the second reason. And, usually, we cannot go through distributors because we don’t have that margin to support the distributor network.
Andrew: Okay. You know what? You said something about how they have your audience, the people who understand and love technology. You know that webcams could be used by lots of different people. Why didn’t you decide to target those people first?
Yun: Because these people understand that $20 camera is not just a cheap electronics. So what we want to do is use this camera to inspire people’s creativity. Now, we see all of these people, tech people, use this $20 camera for many, many different applications other than security.
Andrew: Like what?
Yun: A few examples. So we have the user use the camera in their crawlspace to detect mouse because our camera has night vision and also has motion detection. And second use case, people use this camera to watch pill boxes for their elder parents. So they actually named Monday through Wednesday and use a camera to make sure their parents not forget . . . elder parents not forget those pills.
Andrew: To take a pill?
Andrew: Okay, right. It’s only 20 bucks so might as well.
Yun: Yeah. So that’s a second example. The third example is some user to use this camera to watch their bird feeders. And the fourth example is some people use this camera to watch their 3D printers.
Andrew: Just to see how long and to see whether it’s done?
Yun: Yeah. There’s so many. Almost every day, we see new applications. That really inspire me and it really inspire other users in this Wyze community.
Andrew: I’m looking at the Twitter account of . . . I guess Gwendolyn Evans who, I guess, does customer service for you guys.
Yun: Yeah, she is our social media manager.
Andrew: She doesn’t post much on her own personal Twitter account, but here’s one that she did post. October 27th, 2017, “I’ve been working at Wyze Labs, and I’m so proud of my company. We sold out our Wyze Cams the day we launched.” How many are we talking about that you guys sold out?
Yun: Ten thousand.
Andrew: Ten thousand? So how’d you get 10,000 new customers to even notice you let alone to buy the day you launched?
Yun: So here’s what we did. So because we have this razor thin margin, so we don’t have money to budget to spend on ads or to spend on traffic acquisition. So we spent a lot of efforts trying to find business medias tech reporters. And then, we send posts to them, try to convince them this is not to put . . . this can be trusted, and this is a good product. So some of them use our product, want to give us a shot and use our product, and then this product exceeded their expectation. Then, they start to write article about the product and about us. So pretty much that’s how we got it started.
Andrew: So I see. Three days before you launched, TechCrunch did a piece on you saying, “This $20 security camera is aiming for the Nest Cam’s throne.” That is part of the reason why you guys sold out, that Greg Kumparak or someone at TechCrunch got a sample and was encouraged to write. And was that you personally doing it or did you guys at that point have a team to help you?
Yun: We have a team.
Andrew: Okay. All right. So that explains where you got the . . . how you did with the first batch. How did they do? The first batch, any issues, quality problems?
Yun: The first batch has no quality problem. We just had supply constraints because the demand was so high, and also that was because a holiday 2017. So we just chasing the demand. So that was the problem or challenge we solved during that time. However, we did encounter a quality issue when we launched the v2, which is upgrade version, on February 15th.
Andrew: What were the issues that you had there?
Yun: The issue is the reason we launched v2 because we want to continue to challenge ourselves and continue to improve the product. So we implement a new chip, so it had a better visual quality, had a better audio quality, and had better night vision as well. And also, make it capable to do the Alexa integration in the future. However, we got all the units down and ship them to Seattle. We have about 70,000 units sitting in Seattle warehouse. We had a very successful launch on February 15. Same thing, we sold out immediately 10,000 units on the first day and many more units after that during weeks after that.
So we’re ready to ship the 70,000 units from the Seattle warehouse, but before we ship, we did another [inaudible 00:43:02] QA. We opened the 70 units. We found dust objects on the lenses, inside the lenses of the camera. Then, we made a call of . . . We don’t know exactly how many being impacted, but we made a tough call to hold all the shipments and then return 70,000 units back to our manufacturer. And then, [inaudible 00:43:34] that will cost . . . basically, we rework the whole manufacturing process and it delayed these v2 shipments for a month.
Andrew: And how did that affect sales? Did people start canceling?
Yun: That’s an interesting question. So it was a tough call for us. However, we think it is our responsibility to make it transparent, make a transparent communication with customers. So every week we send out . . . so we tell our customer why we cancelled this and why we do this, why we want to upgrade from v1 to v2 without any price change. Why we do this, and why it’s difficult, and why we hold down the shipment, and what is the root cause? Every week, we send updates to customers. Surprisingly, the cancellation rate from all these pre-order customers is only 0.2%.
Andrew: Less than 1%?
Andrew: Wow. I want to . . .
Yun: This [inaudible 00:44:35] thing I learned it from Amazon. At Amazon, every year holiday, we have a program called [call quickly 00:44:42], which is . . .
Andrew: Called what?
Yun: Call quickly.
Andrew: Hold quickly?
Yun: Totally. It’s an internal term. So the program is looking at all the customer orders placed for Christmas delivery and see if there is any risk you cannot make it. If there is risk and you cannot make it, you better tell a customer as early as possible.
Andrew: Oh, call quickly. So if there’s . . . Basically, what it is is . . . I think the connection is a little bit weird today, but what you’re saying is as soon as you know that there’s a risk that you can’t make it, you’ve got to let the customer know that this . . . so they can anticipate it. And you said, “This is what we’re going to do, too, internally.” Where most people would say, “I’d rather not tell them because maybe we can pull it off,” “I’d rather not tell them because if I can wait a little bit longer, I’ll have more time to fix it, and then it’ll come to them sooner after I alert them.”
Yun: Yes, yes. A lot of companies will do this. Like, they try to wait, try to solve, and try to hide the information there. On the last day, they [inaudible 00:45:50] then sending information, “Hey, sorry. Your order is canceled.”
Andrew: I would get it. I would do that. And you’re saying that’s not the thing to do? All right. I should talk about my second sponsor. It’s a company called Toptal. I’ve talked a little bit about how I hired someone, a finance adviser from Toptal. You know, big companies, they get to hire McKinsey when they want to have some help, when they want somebody to help them think through their finances, the way that they manage their team. But smaller companies, the kinds that can’t hire or can’t afford to hire McKinsey, what do they do? In fact, let me ask you. Who do you have as an adviser on your finances, Yun? Who’s the person who looks at your business and says, “You guys could be spending a little bit more money here. You should be anticipating cash flow issues there.” Who is that?
Andrew: That’s you? All right, so at some point, you might say to yourself, “I need another pair of eyes, someone to help me think this through and find problems that I can’t find myself. Someone to give me good, long-term advice.” Now, you can get a mentor and a mentor will do it whenever they have time, once a month, once every other week, whatever. Or you can start hiring experts, and they get really expensive, or you could go to Toptal.
Tell you what I did. I went to Toptal. I said, “I want somebody who’s going to look at my finances on a regular basis and give me feedback.” They introduced me to a guy. I’m going to tell you guys his name, you could look him up on Toptal. His name is Jack Barker, and I’m going to read to you a little bit of his bio. He is a former McKinsey partner, Carlyle Group Principal, 30 years international experience. This is the person who I get to hire from Toptal, venture capital experience, M&A experience, management experience. And so this is who I get to bring in, and he looks at my finances in a whole new way.
And I’ll tell you something else, one thing I learned about McKinsey people, they are not lazy. They will get on a plane and go wherever they need to go. Same here. He doesn’t have to go on a plane for me, but if he and I are talking and I say, “That sounds really tough,” he’ll say, “I’ll do it. I’ll take care of it.” And it costs hardly anything compared to hiring from McKinsey. That’s what I do.
Yun, keep this name in your back pocket. Not just Jack, but the company where I get to go and hire Jack from. It’s a company called Toptal. They want to be like the McKinsey for the small to medium-sized companies, the growing businesses, the startups. If you guys are looking to hire somebody to help with your finances by putting together spreadsheets, presentation decks, help you think through your business, whatever it is, go and talk to Toptal. See if it’s a good fit for you.
Here’s the URL where you’re going to get 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period of up to 2 weeks. And just to remind you guys, if at the end of the period you’re not 100% satisfied, you will not be billed. But don’t worry, the person you hire will get paid. All right, here’s the URL. It’s toptal.com/mixergy to get that exclusive offer. Top as in top of your head, tal as in talent, toptal.com/mixergy. You know, and you should hire Jack also. He’s fantastic. All right. I’m saying you, Yun, but also I’m saying to the audience, they should hire Jack. He’s really fantastic.
I can’t believe it’s still just you. You don’t have, like, a . . . I saw you guys raise money. Who’d you raise money from?
Yun: We had a seed investor.
Andrew: How much?
Yun: I cannot disclose that information.
Andrew: Okay. It’s from an organization, I forget the name of the . . .
Yun: It’s iSeed Ventures.
Andrew: iSeed Ventures?
Andrew: All right. But it’s not that much, right? And so there’s nobody from iSeed Ventures who you go to for feedback, for advice, for direction?
Yun: We do. We do have people who can help us from there.
Andrew: Okay. All right, so I get how much you learned, by the way, from working at Amazon. Did it feel tiring at the time? Did it feel like boot camp where you’re almost going to pass out?
Yun: Sometimes, but it was a great time to know many, many smart people. And most of my team members here including the other three co-founders at Wyze Labs all came from Amazon. We all know each other [inaudible 00:49:57] over there. And so I really miss the Amazon time.
Andrew: Yeah. You guys have four founders. Why do you need four co-founders?
Yun: Because each of us have strengths and very obvious weaknesses. So we play as a team. So one cool . . .
Andrew: What are the strengths?
Yun: So my strength is looking at opportunities across the border between China and the U.S. and then how to bridge them together. Another co-founder strength is very strong at multi-tasking and running all kinds of business operations and drive efficiency. And the third co-founder, his strength is content creation. He’s also a social media influencer. He’s also a musician. He was, last year, The Voice, on a stage. And then, the fourth co-founder, his strength is full of curiosity of all kinds of technology and products. So that’s a team we play together.
Andrew: And what’s your big weaknesses?
Yun: My weakness is I’m not very organized. So I think faster, think bigger, but I will need a very strong team to execute it very well.
Andrew: All right. Let’s go back then to what you ended up doing. You took all the feedback that you were getting from lots of different places. We didn’t even get into your forum. We didn’t even get into . . . I guess we got a little bit into it. You have 1,000 core users who give you daily suggestions. You got to them on a regular basis, too, right? How do you communicate with 1,000 users?
Yun: It’s increasing. So we have a social media. We have a few social media closed groups. Right now, we have 1,600 members in that core user group.
Andrew: And it’s just, like, a social media Facebook group or something?
Yun: Facebook group, yes.
Andrew: It’s just a Facebook group. And so what makes them different from people in another Facebook group?
Yun: So they are very active. So they use our product. They give feedback on daily basis. And we respond all of the feedback as well, and then we take that feedback and put into the road map of next round of firmware or app upgrades. So we make it very transparent. So what is the list for next upgrades? And then, this is the upgrade to solve this issue. So make it a close loop, very transparent.
Andrew: Okay. And so you take all of that, you then come up with version number two. How did sales do for version number two compared to version number one?
Yun: So our approaches have very limited [skews 00:52:53], but have focused all the resource on that. So once we launched our v2, we discontinued the v1 immediately. So we always have one skew in the market, but keep the price the same with better features. So v2 is stronger than v1.
Andrew: And you can tell that it’s because of the new features that people suggested?
Yun: This is one reason. So people know they talk, we listen, and we make it happen. So people come back to buy more because they are feeling, “This is what I suggested. They make it happen. I’m part of the community. I’m part of these people building a better product,” so they buy more. And also, they recommend. Because this is a high-value product, so they recommend their friends to buy the product. Because we don’t have a marketing budget, so how we can reach more and more people, that’s a challenge for us. It mainly based on word of mouth, and that’s another reason I want to do this interview with you, because we want to reach out to more people know this value.
Andrew: You want them to get to know you so they trust that this actually makes sense. It feels like that’s a big part of what you guys need to do. The price point is so low you need to keep building trust. That’s why you respond. That’s why you’ve got the group. Am I right?
Yun: Yes, yes. And also another reason the sales is growing because now more and more people got our product, they use our product, and then we have more and more [inaudible 00:54:30] at Amazon. So Amazon review is objective. They don’t filter reviews, and we didn’t do any fake reviews. So all the reviews are from real customers. So now, all of these [inaudible 00:54:43] will be another testimony for new buyers.
Andrew: Yeah, that’s a thing that Farhad Manjoo pointed out in his article. He said you don’t have to have a big marketing budget if you can sell in the Apple store . . . sorry, on Amazon because the reviews will help close more sales. But he did mention that one of the other companies that was following in the same path as you was buying a lot of Amazon ads, the sponsored ads that we see all over. You guys aren’t doing that?
Yun: No, we don’t. We don’t have the budget. Unfortunately, we don’t have the budget, so we pass all of the savings to consumers.
Andrew: Yeah, that’s the challenge with charging so little that it gives you little margin to promote.
Yun: Yes. And then, we have little room for error, so we need to ensure all these things that we do from manufacturing, to operation, to sales, we need to be very efficient and almost no error.
Andrew: Look at this. Even the Amazon product, the one that they’re using to compete with you, 120 bucks. But it’s the best-seller in the category if I type in “cam.”
Yun: It’s because Monday and Tuesday, the Prime day, Amazon . . .
Andrew: Got it. So that skews things. And they were offering a discount then.
Yun: Yes. So the Wyze Cam was the best-seller at Amazon for months.
Andrew: Okay. What about the Wyze Cam Pan? How did that come about?
Yun: So Wyze Cam Pan came from the idea of . . . so we have a Wyze Cam which is . . . Wyze Cam is a smart connected device which help you to establish a connection for you. So we focus on the clarity, the faster connection, and the ease of installation, and the deployment. So that’s a Wyze Cam. Now we think about how we can empower this product to see more. So Wyze Cam has a restriction of the field of view, so it cannot see 360. So we think of how we can see more, how we can have this flexibility? So the Wyze Cam Pan’s approach is use rotors, have two rotors, one pan and then one tilt. So that’s the idea of the Wyze Cam Pan, give the user more flexibility to see 360 degree.
Andrew: Did that come from user feedback where people are specifically saying, “I want to be able to look around a little bit more. I want to be able to move the camera?”
Yun: Some of these from user feedback because if we do not have this ability, then you will need to have multiple Wyze Cam to achieve this.
Andrew: All right. I think I’ve got the story here. Is there anything . . . Oh, you know what? Here, there’s one other thing that I took in my notes. Oh, here it is. People on Product Hunt went to your Terms of Service and said, “We’re worried because the Terms of Service say . . . ” There it is, “You acknowledge to understand and agree that as a result of issues unrelated to Wyze Labs’ fault, including the inherent limitations in all hardware and software, unauthorized access to your recorded data may occur as a result in addition to and without limiting to any other provisions of the agreement, you shall indemnify and hold harmless Wyze Labs.” What about that? That you’re basically saying, “Look, this stuff could actually leak out. Whatever you’re showing on a camera could get shown, and you’re agreeing that we will not be held responsible.”
Yun: So, first off, we are revisiting and then reviewing our Terms and Conditions. So, very soon, we’ll have a new version because we are such a small setup, so we have limited resource, but we are working on it right now. So that’s first of all. Second of all, all the . . . So we have a 12-seconds video clip triggered by a motional sound and stored at AWS for 14 day free. So that storage is at AWS. So that’s how we store the 12-seconds recorded video. And then, the live stream is P2P, so it’s not go through any cloud relay. So it’s . . .
Andrew: It could go straight from my camera or my Wi-Fi to my phone?
Yun: Yes. It’s stream P2P and encrypted. So these are the approach we’re using.
Andrew: You know, I’m on nest.com, I’m going through their Terms of Service. Point number seven is indemnity for third-party actions and it clearly says, “To the fullest extent permitted by applicable law, you agree to indemnify, defend, release, and hold Nest and its licensors and suppliers etc. etc. harmless.” Got it. So it’s not unusual to do that. Did you ever think of maybe just increasing the price? Because all of us are so incredulous. We keep looking all over to say, “How could this be? How could this be?”
Yun: No, we’re not going to increase the price.
Andrew: You’re not? This is who you’ve decided to be, “We’re going to be so low that people are shocked and have to do this kind of research?”
Yun: Yeah. And the more and more people will be inspired to use it, and that will unlock people’s imagination and creativity and inspire other people. So that is our goal.
Andrew: Look at this. Somebody created what looks like a mount that makes it into, like, a bird feeder looking mount. Have you seen this? It’s not you guys creating it. It’s someone named Marian. It’s a Wyze Camera wall mount bracket that makes it weather-proof. It looks like a bird feeder and it’s a place to hide the Wyze Cam so people don’t know that it’s there and also protect it.
Yun: Yeah, there are so many accessories. People just create it, you know, for other Wyze users.
Andrew: And that’s a big advantage of having such a low price point that there are lots of customers and so it makes sense for people to start building add-ons for it.
Yun: Yes. That’s exactly our goal.
Andrew: You know what? I don’t want to take away from how amazing this story is, that you’re able to do this, that you’re able to be so lightly-funded and compete with such big players and still do well and have such high ratings. Sorry, let me close it out with this. The latest two products, Wyze Cam 2 and Wyze Cam . . . what’s the one that can pivot? Sorry, and Pan. You guys created that yourselves, or is it one more time where you went back with the manufacturer, found a design that you liked and improved on it?
Yun: We found a manufacturer who has a design, and then we did a software including firmware and the app.
Andrew: Okay, so you said, “We need this pan. Let’s see who has it. We’re going to go and find the one that we like best and then we’ll add firmware to it?”
Andrew: Okay. All right, that’s amazing. Overall, about a year in business, we said what? Ten-million dollars?
Yun: Half a year, 2018.
Andrew: Oh, right. Since October. So we’re not even at a year in business. It’s a year since you launched, but less than a year since the product was available.
Andrew: All right. Congratulations. I can’t believe it. All right, the website . . . You know what? Actually, here’s what I didn’t say because I don’t know how to fit it in but I think this is a good way for people to end it. They have such a freaking funny good video on their website. Not funny for the sake of funny, just really well-done video. It’s four minutes. I just wanted to watch it fast for like a minute and move on. I couldn’t stop watching it. It’s that good. It’s on their homepage. There’s a good chance that most people who are going to listen to this or going to listen to this far in the future when this video is gone. For now, it’s super good, the one with the cyclops. Go check it out. It’s right on wyzecam.com, and I think it will give you a sense of the way that these guys are building the brand. And they understand their audience really well with this. So go check it out, that’s wyzecam.com.
And I want to also thank my two sponsors who made this interview happen. The first is the hosting company that will host your website really well. It does it for so many other people including me. It’s called HostGator, check them out at hostgator.com/mixergy. And the second is a company that will help you hire a phenomenal developer, or in my case, I hired long-term finance manager, it’s called Toptal. By the way, Jack only works with me, like, three, five hours a month but that’s all I need. Go check him out at toptal.com/mixergy.
Yun, thanks so much for being here.
Yun: Thank you, Andrew.