Raymond Nobu-Chang has had a series of highly successful startup launches and exits. That includes taking his first company public when he was just 29. The venture, LuckyPai has raised financing from top-tier investors like Lehman Brothers Holdings Inc. Tenaya Capital, DT Capital Partners, and Intel Capital. Raymond’s next company, Agrify is also making waves having acquired three organizations like Precision Extraction Solutions, TriGrow, and Cascade Sciences.
In this episode, you will learn:
- The future of the cannabis industry
- Raymond’s top advice before launching a business
- How he thinks about dilution when it comes to fundraising
- His two key lessons for surviving economic cycles
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About Raymond Nobu-Chang:
Raymond is a serial entrepreneur and the managing director of NXT Ventures, an early-stage investment fund based in Boston. He is also a Lecturer in the Practice of Entrepreneurship at the Yale School of Management, and an Adjunct Professor in Entrepreneurship at Babson College.
Raymond founded GigaMedia, the first broadband internet company in Asia. In 1999, GigaMedia received a US$35mm strategic investment from Microsoft, and in 2000, the Company went public on NASDAQ and raised US$280mm, one of the largest IPOs for an Internet company prior to 2000. In 2007, Raymond founded Luckypai, a leading TV shopping company in China, and raised venture financing from Lightspeed Venture Partners, DT Capital, Intel, Lehman Brothers, and Goldman Sachs. In 2010, Luckypai was sold to Lotte Home Shopping for US$160mm.
From 2012-2013, Raymond served as the CEO of New Focus Auto, the largest automobile after-sales service company dual-listed on Hong Kong & Taiwan exchanges, (US$1 Billion in market cap). In 2013, Raymond completed a US$160mm investment from CDH Capital, a leading Chinese private equity fund. In 2000, Raymond was selected by FORTUNE as one of the twenty-five Next Generation Global Leaders Under 40, (5/2001), and by BUSINESS WEEK Asia as one of Asia’s 20 most influential new economy leaders in the 21st century, (7/2000). He was also featured as a panel speaker at World Economic Forum in Zurich, Switzerland in 2005.
Raymond also participates in various social, charity, educational, and Christian faith organizations. He Co-founded Shanghai West International Fellowship, was the Former Treasurer/Elected Board Member of Shanghai American School and was a member of the Young President’s Organization-Shanghai. He is a member of Launchpad Venture Group, Hub Angels, CEVG, and a mentor at Techstars Boston. He also serves on the Board of The Skating Club of Boston. Raymond received his BA from NYU, MBA from Yale, and MPA from Harvard JFK School of Government.
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Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. He is a very exciting founder that we have today. We’re going to be talking about doing IPOs at 29 years old and other crazy stuff. I think that you’re all going to love the episode that we have here waiting for you. Without further ado, let’s welcome our guest today. Raymond Chang, welcome to the show.
Raymond Nobu-Chang: Alejandro, thank you for inviting me. I really appreciate the opportunity. Thank you.
Alejandro: Born and raised until you were 13 in Taiwan. How was life growing up there?
Raymond Nobu-Chang: You know, I think Taiwan is a really nice place. People are super friendly. The country has shown that we’re very innovative, we’re very tech-focused, and education is, obviously, a big part of everyone in Taiwan. I remember while growing up, my parents would tell me, “The most important thing is to get the best education possible.” That was one of the reasons why we moved to the States, as well, which was to pursue and get a better education.
Alejandro: You moved here to the U.S. at 13, but that was also motivated by military duties. Is that right?
Raymond Nobu-Chang: Yeah. In Taiwan, you either have to leave the country before you turn 13, or you have to finish military service before being able to go abroad.
Alejandro: Wow. So you landed in Texas.
Raymond Nobu-Chang: Yes.
Alejandro: I’m sure that was quite a culture shock for you guys.
Raymond Nobu-Chang: It was. Back then, I needed the 26 alphabets, but if you actually put them together in any way, I wouldn’t know. I sat through all of my classes the first one to two years. I remember that I was super-advanced in math, so I was taking high school math as a junior high schooler in 6th or 7th grade, but everything else, I was struggling. So, it actually took me about two years before I could do basic communication in English.
Alejandro: You didn’t do that badly because you went to some of the best schools. You landed at NYU, then Harvard. You were here and there in other interesting positions in public policy and the United Nations and working with politicians. In your case, one thing I found very interesting is the path that you were going to follow was around politics. That’s why you were in Harvard to pursue that but ended up taking a different turn. What happened there?
Raymond Nobu-Chang: I think because I was very heavily influenced by my father and my grandfather were heavily involved in politics, so somehow, I thought that was going to be my career was to get involved in politics. But while studying public administration at the Kennedy School at Harvard, I realized that I’m maybe not fundamentally that interested in politics. In fact, I was more interested in high tech and innovation. Somehow, I basically switched, and I never pursued anything in politics thereafter.
Alejandro: Tell us about the idea because, literally, it came while you were in that process of figuring out if politics was for you or not, obviously, one idea that came all of a sudden.
Raymond Nobu-Chang: What happened was—this was December of ’96. I was sitting in my old apartment in Cambridge. Back then, the only way to get on the internet was to do this thing called the dial-up internet, where you have to unplug the telephone line, and it was super-slow, and somehow, I couldn’t get connected to AOL. So, I got frustrated. I went back out to the living room, and the Patriots were playing that Sunday. I looked up, and my old apartment had an exposed cable line. All of a sudden, I asked myself a question: the cable line is thicker than the telephone line, the copper wire, so why can’t we use it to transmit data. You might be able to do it quicker and faster. Very quickly, I went back on the internet and got on Yahoo because Google wasn’t around back then. I typed in two words: cable and internet. Sure enough, I discovered there was something called broadband technology, and there was a startup company in Silicon Valley that was looking at this technology. Literally, I quit school the next day. I went back out to Silicon Valley. I learned everything about technology, and six months later, I founded the first broadband telecom company in Asia.
Alejandro: Wow. Why did you go to Asia versus staying in the U.S.?
Raymond Nobu-Chang: Obviously, the technology was based on cable, cable TV. I didn’t know any cable operators here in the U.S. It just so happens that we have a family friend in Taiwan that owned all the cable assets. I figured, “Okay. I should probably approach him.” Originally, I actually just wanted to introduce the technology to him, to the family, and somehow, they said, “This is great, but you’ve got to run it.” So I had no choice but to keep going. I founded the company at the end of ’96. By ’99, we got enough traction that got Microsoft to be interested in us.
Alejandro: How did you get Microsoft to be interested in your guys. You were quite far away from Microsoft.
Raymond Nobu-Chang: Yeah. I think we were buying their operating system. At the time, they were very interested in the WebTV Platform. We approached Microsoft at that Taiwan office, and we told them, “We have all this cable network; we have the technology, etc. Originally, we bought the operating software. They saw what we put together and the opportunity. I guess one conversation led to another. They ended up investing in my first startup, GigaMedia.
Alejandro: Not bad, and what is not bad at all is doing an IPO at 29-years-old. So how did that happen, Raymond? That’s incredible.
Raymond Nobu-Chang: When somebody like Microsoft takes 10% of the company, it completely raises your profile. Then the next thing you know, Goldman Sachs came knocking on the door. They wanted to do an IPO for us. I had no idea what an IPO was. We had to read it up, but eventually, six months later, we managed to pull together a $280 million IPO on NASDAQ. It was Goldman and Deutsche Bank that were our two underwriters.
Alejandro: That’s amazing. So you were able, as well, to get through that dot-com bust. It’s funny because there are a lot of entrepreneurs nowadays that haven’t gone through one of those corrections. I think, as an entrepreneur, it’s good to be able to experience the highs and the lows so that whenever you have another correction, you know what you already experienced and how you can apply some of those lessons learned. So how was going through that dot-com bust for you, and what were some of the lessons that you learned?
Raymond Nobu-Chang: I think, basically, the key lessons are: 1) Timing is important. 2) Don’t play into greed because nothing lasts forever. At the end of the day, you need to have very solid core technology. You need to have very strong balance seats, and you need to make sure that the company has the resources to go through the ups and downs. The other thing that I realize is that if you actually built a business around—if the only motivation is about making money, then this is probably not for you because, I can tell you, 90% of the time, people fail. You learn from it, and you do it again, so it’s a number of iterations. Yeah, sure. We hear about all of these successful, glorious outcomes, but not everyone gets lucky. You really just have to enjoy the process and realize that you are, hopefully, helping to solve big problems for society. So you need to be motivated beyond just financial and money, and I think it’s very important to understand that.
Alejandro: With GigaMedia, you worked for almost six years, but then, GigaMedia stayed around as a company, which is a miracle because most of the companies at that time went bust with the bubble—evaporating. But in your case, as they say, once an entrepreneur, always an entrepreneur. Tell us about your next baby, LuckyPai.
Raymond Nobu-Chang: In 2003/2004, I realized that, at the end of the day, Taiwan is still a market of only 20 million in population. It’s a small market. Basically, I figured that maybe I should look at something else. In 2003, 2004, that was the beginning of the amazing China growth story that everybody talked about. I decided to venture over to China. As a Taiwanese going over to China actually was not easy because even though we speak the language, historically, there have been tons of conflicts between Taiwan and China. So I had to overcome that. But nevertheless, when I got to China, what I discovered was even back then, television was ubiquitous. It’s the scenario where there’s rising consumer spending power, so I said, “Maybe we could use television as a way to penetrate the market.” That was the idea. Somehow, I managed to convince the television company, which is state-owned, which is not all government-owned, to set up a 24-hour dedicated home television home shopping channel with me. It turned out to be an immediate success. I remember nobody actually believed that we could pull this off, but even in our first year, we did close to $100 million of sales.
Alejandro: Wow! First year. That is unbelievable. How did you guys go about capitalizing the business?
Raymond Nobu-Chang: I raised capital from three VC funds: Lightspeed, which is a U.S.-based venture fund, DT Capital, which is a China VC, and Intel Capital. I realize that you’d never want to go into a business underfunded. You’ve got to make sure you have enough capital. I was actually able to raise $15 million with only a ten-page PPT. Somehow, I convinced these three guys to back me. I remember, for example, when I was talking to Intel Capital, they absolutely loved the idea, but the question they asked me was, “You know what? We’ve got to make sure that everything we do has to have a strategic angle. So what is the strategic angle with Intel?” I said, “I believe we’re going to sell a lot of the PCs to a lot of these Chinese homes. If you invest in LuckyPai, I’ll make sure that every single PC that we sell has an Intel inside. Otherwise, we’re going to sell AMDs. [Laughter] We didn’t have that conversation, but I’m sure that they didn’t make their investment decision based only on that. At the time, somehow, I was able to convince both international and local VCs and make sure that we had sufficient funding to get everything started. We started out with $15.5 million in capital. Subsequently, I raised capital from Lehman Brothers and Dolman. In fact, we raised $50 million from the two of them combined. Two months after we received Lehman’s investments, they got into trouble. So, again, timing—we were very lucky because if we had waited, that probably would not have happened. I lucked out on that one as well.
Alejandro: How did you go about being overseas? Before then, at that point, VCs were always of the mindset of only investing in a company that was a bike ride away from their office. Now, the mentality has shifted quite a bit, especially with COVID, where they all had to get adjusted to Zoom and do it all via online. At that point, I’m sure it was not easy to convince investors in a different country that are investing in the early stage to invest in your business. How did you manage to do that?
Raymond Nobu-Chang: Fortunately, all these VCs—that was the beginning of the China boom. Basically, everybody that talked about it had big China operations, so they either had a dedicated China fund or local offices in Hong Kong. We were able to get in front of those guys. One thing that was very important was I want to make sure that we have capital from both overseas and also domestically from China because I believe that is a nice balance to have both. We were very careful not to only raise capital either domestically or only raise capital from overseas.
Alejandro: Got it. In your case, there was a nice outcome here. There was a nice exit, and it was reported for $160 million. Tell us how this acquisition came about?
Raymond Nobu-Chang: In 2011, we had a pretty successful business then. One of the largest conglomerates in Asia is called Multigroup from Korea. They had a successful television shopping business in Korea, so they wanted to do the same in China. But instead of doing it all from scratch, they figured maybe it would be easier just to buy an existing business, and that’s what happened. They approached us. I decided to sell the business because, at that point, I had been in China for six or seven years. My kids were growing up, and I thought, “Maybe it’s time to come back to the States.” Also, it was because I saw the emergence of players like Alibaba that I believed would eventually take over everything, so I thought it would be a good time to exit, so I did in 2011 when we sold the business.
Alejandro: Nice, and even before coming to the U.S., you got tapped on the shoulder by your neighbor. What happened there?
Raymond Nobu-Chang: I was going to wait a couple more years for my son to graduate from high school and then come back. One of my neighbors approached me because he had started to consolidate a bunch of car dealerships and service locations throughout China. He asked me to help him to restructure the business. Eventually, the company was listed in Hong Kong and Taiwan. It was a dual listing. I helped him to bring in additional capital. We raised money from CDH, one of the largest private equity funds in China, and handed over the business to them a year later. That was a very short gig that I did and spent less than two years on that one, but it was also a successful one in the sense that we also helped to manage and raise about $160 million for the business.
Alejandro: Coming to the U.S., when you were here, unfortunately, your mother-in-law was going through cancer, and that experience and that journey got you closer to seeing the benefits of cannabis. What were some of the benefits, and how did that lead you to start your next company?
Raymond Nobu-Chang: Yeah, she was going through chemo. Her lifestyle was horrible. She was having pain all over her body. Seeing her going through something like that, which is so sad. Somehow, the doctor that we had a good relationship with suggested that maybe we should look at some of these natural, alternative methods. He introduced us to cannabis, and my mother-in-law decided to use it. Immediately, we saw a huge turnaround in terms of her ability to cope with pain. Also, she fundamentally had a much better lifestyle. That was like, “Wow! This is really quite amazing.” But the experience she went through was not consistent because most of the time, when people use cannabis, inconsistency and the inability to produce good quality cannabis all the time and to be able to repeat that process continues to struggle. As a result of that, we would see that she was good one day and then not so good other days. I thought, “You know what? The medicinal benefit of cannabis is awesome, but somehow, we’ve got to use technology and science to ensure that we treat this as more of a medicine, so halting the inconsistency is so important versus just a recreational artform. That’s why I got into the industry.
Alejandro: What was that process like of getting into it, because the industry is full of regulations and very new.
Raymond Nobu-Chang: Yeah. What happened was I went out to Vegas to attend the largest trade show, MJBiz. When I got there, I didn’t know anybody in the industry. But when I walked the floor, what I realized is that everyone is actually only providing piecemeal solutions. For example, you see a bunch of people who do only LED lights. But the only thing they care about is the impact of lights on plants, but they assume that everything else is being held constant or everything else is irrelevant. When you talk to the growers, you realize that lights are important, but airflow, humidity, temperature control, fertilizer are just as important, if not more. In order to grow and produce good-quality cannabis flowers, you need to have a very different mentality, which is you need to look at this in totality and take a more systematic approach where you can control every aspect of growing to ensure that the quality is going to be there at the end of the day. That’s exactly what we’re offering, which is an integrated solution. It’s like we’re the first one to introduce an Apple-like ecosystem, where everything works and is all connected so that you can control every aspect of it. And as a result of that, we deliver high consistency and also repeatability, which is super important for the medicinal use of cannabis.
Alejandro: How do you guys make money there?
Raymond Nobu-Chang: We have two business models. For people who can afford to buy our system, we will sell them the hardware, and there’s a 10% recurring SaaS revenue. That’s one approach. But the other approach is we actually come in, and we build the facility for you. It’s a ten-year partnership whereby we get compensated based on the amount of good-quality cannabis which is being produced. It’s like a yield-based partnership. We’re the solution provider. We don’t actually plant and touch the plants directly, so we’re a non-plant-touching company, but we give you all the turn-key solutions. We help you to do it, and we’re a system integrator that gives you the whole end-to-end solution.
Alejandro: You’ve always been very strategic in the way that you would finance your companies, and here, you took a different approach very early on. Tell us how you went about bringing in the capital to be able to wrap up.
Raymond Nobu-Chang: I’m always in the belief that you need to make sure that you never undercapitalize the company and don’t care so much about dilution. I would rather own this smaller percentage of a hugely successful company than be a solo investor of a tiny little company. So I don’t really care about dilution. I want to make sure the company is well-capitalized and has the ability to scale and solve big problems. I think that has always been my approach to things. A lot of the founders don’t think strategically, and they don’t think big. As a result, we’ve seen so many opportunities missed. In good time, sure. You can always go out and maybe raise money when you need it. But during the bad times, if you’re not well-capitalized, you become irrelevant.
Alejandro: In this case, you guys went public. Is that right?
Raymond Nobu-Chang: Yes. We went public early. We went public in January of 2021. I think we were probably the third or fourth non-plant-touching company. We called it the ancillary companies in the cannabis space that went public. We initially, though IPO, raised $50 million. But because the demand was so strong, we followed it up immediately, two weeks later, with another $80 million raise. In total, we raised a bit over $130 million, and that gives us a nice cushion to build and scale the business from that point.
Alejandro: In terms of the business itself, imagine you go to sleep tonight, and you wake up in a world where the vision for Agrify is fully realized. What does that world look like?
Raymond Nobu-Chang: We want to work with the best partners to be able to produce the best quality cannabis flowers for both recreational and medicinal use using our solutions. I believe fundamentally—we’re only touching the service because there’s been so little research done thus far on the medicinal benefits of cannabis. If people do more and more research, they are going to find more. So far, for example, we only know the impact of TSC and CBD, but in the cannabis flower, there are over several hundred different chemical compounds. So I think there are going to be a lot more medicinal benefits that could be discovered, but knowing that is not enough. Somehow, we need to be able to produce the same consistent, good-quality flowers every single time. You can’t have a scenario whereby the doctor tells you, “You know what? Take between one to ten pills. How is that going to work? It’s very important that somehow, we allow our customers to produce high-quality biomass every single time, very consistently, so that the medicinal benefits of cannabis can be realized.
Alejandro: That’s amazing. What a run it has been, a tremendous entrepreneurial journey that you have embarked on. One question that I wanted to ask you is if I put you into a time machine, Raymond, and bring you back in time, perhaps to that time when you were in Harvard, and that idea came to your mind, and you were thinking about maybe building a business. If you were able to sit down with that younger self and give that younger self one piece of advice before launching a business, what would that be and why, given what you know now?
Raymond Nobu-Chang: Enjoy the process, and don’t be motivated only by greed. The more important thing is about helping to solve big problems. If you do that successfully, you’ll get well compensated. But the focus should be on solving problems, not just financially-driven.
Alejandro: I love that. Raymond, for the people that are listening, what is the best way for them to reach out and say hi?
Raymond Nobu-Chang: They can always reach me by email. It’s [email protected] That’s probably the best way to reach me.
Alejandro: Amazing. Raymond, thank you so much for being on the Dealmakers show today.
Raymond Nobu-Chang: Thank you so much for having me. I really enjoyed the conversation.
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