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Celebrity sightings aren’t unusual at the Consumer Electronics Show (CES), the big tech industry trade show that takes place in Las Vegas each January. But Ray J, an R&B performer and TV personality, was there to do business.
Hoping to capitalize on his fame (or, if you will, his infamy), Ray J started an electronics company called Raytroniks a few years ago and began shipping an electric bike called the Scoot-E-Bike in 2016. He got promotional help from his cousin, rapper Snoop Dogg; his sister, singer Brandy Norwood; basketball star Stephen Curry; and other Hollywood celebrities. Electric bikes were already popular in Asia, but Ray J’s bike took off in the U.S., thanks to the star-studded promos.
He also cut a $31 million distribution deal with Cowboy Wholesale, a consumer electronics distributor based in New York. Now the combined company, called Raycon Global, is expanding its lineup of electronics gear with other “lifestyle” products. These include Bluetooth audio devices, smart watches, and drones. Ray J serves as chief strategy officer, while Ray Lee runs other parts of the business. At CES 2018, they made a lot of noise about the new markets they are going after.
The expansion of the business is ambitious, and if it succeeds it will set Ray J apart from the many failed celebrity tie-ins out there, but he wouldn‘t be the first to make it work. Kim Kardashian, Ray J’s ex, made more than $74.3 million with Glu Mobile in the first year of her mobile game, Kim Kardashian: Hollywood, in 2014. An obvious advantage for Ray J is his more than 1.5 million Twitter followers.
I interviewed Ray J recently about the transition from show business to consumer electronics.
Here’s an edited transcript of our interview.
VentureBeat: How is the electronics business compared to show business?
Ray J: It’s on a whole ‘nother planet. It’s a different kind of ride. I love it. Of course I want to bring the entertainment that I know, that I’m accustomed to, into technology, into the marketing and the product. I’m trying to create my own lane, whether it’s technology or transportation. I’ve got a strong team. We can do a lot of wonderful things and grow the company year by year. I’m excited.
VentureBeat: What lessons from the entertainment side carry over into running this kind of business?
J: I’ve always been independent with my music. I’ve always run my own music label. I’ve always invested in myself, whether it was marketing or putting an album together and paying for radio. Spending eight months to a year working on one single to try to get it where you know it’s a hit and you can take it into the top 20.
That alone is a really long ride. It’s a lot tougher in the music game when you’re independent, running your own company, trying to compete with major labels and major artists out there. I was able to break the ice and come out with songs like “One Wish” and hit millions in sales on some of my music. That taught me how to not just invest, but to take time and have patience to realize how successful the brand or the project can be.
I just took my intelligence from that side. Once I realized that the Scoot-E-Bike was the product that was talking to me—that was the greatest thing I’d ever seen at that moment. That’s when I went to the bank and took out most everything I had and put it all into the technology and into Raytronics, which turned into Raycon Global. Now I’m going strong.
VentureBeat: Does this represent a big investment for you, in terms of your time or your money?
J: The big investment in terms of money was when I started the company, four years ago, when I was all alone. I made a lot of mistakes, buying a bunch of retail stores and really not taking my time. I should have taken one store and built it up. I needed a lot of help. I was in places I wasn’t familiar with. There were times where I felt like giving up and going back to entertainment, but I just kept going.
When I did the deal with Cowboy Wholesale, everything changed. I had a stronger team. We can buy more inventory. I can market the way I want to market. It’s a whole ‘nother level when you have a full team of people believing what you believe and helping you learn what you don’t know.
VentureBeat: What’s your best seller so far?
J: The Starship headphones are our best seller. We’re selling a lot of headphones right now, hundreds of headphones going out daily. That’s the new earbud. You don’t even know it’s in there. We have tons of different colors. It has a built-in microphone. The sound is amazing. You can talk on the phone and go about your day without moving your hands or even touching your phones at all. The headphones are really starting to take off.
Of course, the Scoot-E-Bikes are in second place. What’s cool about the new Scoot-E-Bike brand is we have five new different versions. We started out with the classic Scoot-E-Bike, which was $1199, $1299. Now we have five different styles. We have the World Bike, the Flex Bike, the Classic, the Mini, and the Icon. They range in different prices, from $499 all the way up to $1299. You can pick and choose in whatever budget you have. It’s a lot more flexible.
VentureBeat: What helps it stand out? I’m sure the brand name helps.
J: In any product, it’s all about marketing, all about the people who believe in product. Also, it has to still have a unique style to it. When I introduced the E-bike to America, nobody knew what it was. Nobody was riding them. It could be a product that anybody can find and fall in love with, but you have to have something to make it special, whether it’s marketing—it needs to be a great product, but people have to believe in the people selling it, and once they buy it, it has to be good.
People get the product and they start to use it in their day-to-day life, going around in a 10-mile radius on the Scoot-E-Bike every day. They come back and they buy more. Same with the headphones. I don’t think anybody has the kind of style we have, as far as the different colors and how it fits in your ear and how we’re marketing it right now. It’s unique. It’s new.
I don’t think people in the entertainment business or the music industry are really putting their money and time into this kind of thing. There’s a lot of endorsement deals happening, but me, I go to work every day, 6PM to 8PM. I put my money into the products. I put my time in. I put my love and music in. It’s just a different way that we do it.
Ray Lee: Along with the marketing and the celebrity-driven brand, we’re also trying to market at a really accessible price point. That stands out. The wireless headset, we have ones that start out at $50, $80, $100. We have smart watches at $30. We have a collection of bikes starting out at $500, up to $1200. Celebrity-driven brands, usually the price points are pretty high to make up the margin from marketing. But Ray J’s goal, as well as mine, we wanted to make technology that’s accessible to everyone. That’s definitely different in the space we’re in.
VentureBeat: Did you feel like you found some lessons along the way looking at examples like Beats Audio?
J: Not really? I haven’t ever had a chance to sit down and have a conversation with Dre or other people in this industry, doing technology. Of course I look up to Dre and what they did with Beats. But for us, it’s just a little bit different, all the ups and downs I had to go through myself before I got together with Cowboy Wholesale. It was a different way, a really independent way, where I had to build it all the way from the ground up.
VentureBeat: You could still sell your company for a billion dollars, just like they did.
J: [laughs] For me, I just want to keep growing. I don’t want to stop. I want to keep doing this technology for a long time. I want to come to work. I want to market. I want to find more interesting products. I want to build our components, get our own patents. We’re growing as a company. We’ve only been in business for 10 months. We had our coming-out party at CES in 2018. We had a lot of people coming in and checking out the products, just embracing the energy we had. It was a lot of fun.
VentureBeat: You’ve had a chance to try two different careers. Is there something that attracts you to technology and electronics in the same way that you were drawn to music?
J: Technology is the future. I love technology. I want to be the first when it comes to education and marketing. With music, I want to take the music we’re doing, as well as some of the other celebrities and influencers that are coming on board—we’re taking this music and integrating it into the products that we’re selling too, coming with different ways to cross-promote albums and technology, be it through a smart watch or a speaker or the headphones. We’re cooking every day trying to come up with unique ways to market music and technology together, so everything can have its own story, but also be in one place together.
VentureBeat: Have you figured out where you can have a more defensible space for your products, a space where you can make money? It seems like there are many places in electronics and hardware where you can lose money trying to compete.
Lee: That’s why we have an ecosystem of products. There’s a trend in electronics where a company comes out with only one or two products. They launch on Kickstarter and then just revolve around that product. We wanted to approach it a little differently and diversify our risk in that way. That’s why we have a catalog of 30, 35 products, split across five major categories – electric transportation, Bluetooth audio, smart watches, digital speakers, and drones.
We see margins go up and down. Some products that we use for marketing, we take a loss on them. But there are others where we see very good margins. And it’s not just product categories that affect margins. It’s also regions. We have different sales reps across the country. We definitely focus on some areas more than others, like the east and west coasts. Those are definitely more profitable for us.
Thinking globally, as far as e-commerce, right now we’re just start to enter the international market. We’re opening up to Canada, Asia, Europe. We’re going to be seeing different profitability across different regions with different products. We’ll be doing a lot of data analysis. But we’re pretty diversified in that respect, and I think that’s what’s important for us.
When Ray J and I started we had this discussion. We didn’t just want to do a few million in revenue and then die out. We wanted to be a long-lasting brand. That’s why we came up with that more diverse entertainment and product strategy.
VentureBeat: The electric bike seems to have become a very competitive business all of a sudden, with a lot of different companies. What is the key to succeeding when there are so many other fresh startups in competition?
J: I’m excited about everybody coming in to the E-bike world and electric transportation. It gives more awareness of what they are and how usable they can be. I’ve always been a fan, always been trying to wake people up, and now, this year, people are suddenly alive and moving around. You go from city to city, you see people on all of these apps using electric transportation. Building the company and selling the bike, it gives us a lot more space. People are aware of what’s going on.
As far as the competition, we haven’t gotten into the bike-sharing space yet. We’re still selling wholesale and retail. For us, the more the merrier. Let’s all make money together.
VentureBeat: There seems to be an interesting opportunity in social media. When I saw Kim Kardashian and her Hollywood mobile game, it was amazing how much money that made, because she was able to promote it with all of her followers. Do you see things that playing a big role in the success of your electronics line?
J: Absolutely. With social media and electronics, it can be big. People need to continue to try to break the ice and get it there. It’s different from selling makeup or selling other products. People have to really love the brand and trust the brand behind something like the headphones or the electric bike. The trust factor for technology is stronger. People have to really know who you are, know what the brand is for them to fall in love with it and consistently buy from you.
With social media sometimes it’s just a one-time hit and you’re off to the next product, the next endorsement. With technology it’s a different kind of trust that people have when they’re buying tech, as opposed to other products.
Lee: I find that the celebrity brand space is growing really rapidly. I see a lot of explosive growth. If you look at Rihanna, she’s seeing a lot of growth with her brand in the beauty space. Kylie Jenner just released her cosmetics line and that’s seeing rapid growth. For us, in terms of sales, we’ve been seeing 300 percent month-on-month growth, at least early on.
A lot of that is due to what you mentioned. When you have influencers and people like Ray J who are in the tastemaker and marketing realm, things can accelerate a lot faster. You’re putting more gas on the fire. We’ve been part of other consumer electronics brands, and going to market takes much longer. Having Ray J and his marketing expertise around the social media aspect makes things grow much faster than we’ve expected.
J: The Scoot-E-Bikes took off really fast once Steph Curry and those kinds of stars started to post about the bike, talking about how cool it was and starting to use it in their day-to-day. It really started to pick up the awareness. It all started to change. Celebrities with influence really helps, not only with technology but all kinds of products.
VentureBeat: Your own connections to other celebrities can help you a lot, then.
J: Yeah, it’s all about relationships. I consider myself a businessman, not a celebrity or a music star. When I’m getting involved with something I need to executive produce it or be a part of putting it together as an investor. I want to play both sides. That’s more important to me than just being a celebrity. I feel like after another 10 or 15 years of hard work, I’ll be more of a businessman than stepping out into the forefront and playing the celebrity role.
VentureBeat: How do you get along with people in the technical side of the business, the engineers and the real propellerheads?
J: I try to make sure that everything’s on time. When people are buying our products, it has to really work well. We don’t get a lot of returns. That’s the most important thing to me, and then for me to be able to stay out and continue to shake hands, promote the product, use the product, and believe in the product.
VentureBeat: You leave the engineering to the engineers, then?
J: Exactly. And Ray Lee, my partner—it’s Raycon because it’s Ray and Ray. We play different sides of the fence in the business. He takes care of the engineering side more than I do.
Lee: I handle the product side a bit, but actually, Ray J—in terms of working with engineers and the tech side of things, he’s able to connect with everybody on a fundamental level too. At the end of the day, whether you love tech or not, Ray J is still able to make connections with a lot of people. With the engineering team, he may not know all the technical lingo, but everybody knows exactly what his vision is.
J: I’m like the Phil Jackson of technology.
VentureBeat: I imagine you could be pretty good at taking feedback from your fans and consumers and communicating that to the product people.
J: I use it. I use the product. If it’s a new product I’ll ride it for weeks. I’ll try to go through water, go through every pothole. I’m like a stuntman meets businessman at the same time. I play a lot of different roles. But I am the people, you know? I’m the people that come out looking at the product, trying it, finding out how easy it is to use. I just take what I do when I use the product and I go to the team and say, “This is cool, let’s make some adjustments here.” Sometimes it might be an outrageous idea, and sometimes it might be something that sticks. I just keep going.
If you’re just a musician and you’re trying to reach a billion dollars, to make that kind of money, it’s not in arm’s reach. That process and that kind of time, that kind of success, it’s a different work ethic. It’s not realistic, compared to being in the technology business. If you get something going well with the right team, you can build an empire for generations to come.
That’s what we’re excited about. We’ve had our ups and downs. We’ve made some mistakes. But as long as we stay together and look at the long term, build a long-term company, everything can be good in the long run.
VentureBeat: How many people are working in Raycon now?
Lee: We have the team, and we have the partnership with Cowboy Wholesale as well, the distribution part. The Raycon team is about 10 people. Then Cowboy is about 30 people. We also have international partnerships to consider. We have offices in China, South Korea, and Mexico City as well.
J: We’re growing. We have a ways to go, but we’re in the gym and working out.
VentureBeat: Do you have any revenue projections for where you are and where you want to be?
Lee: Right now we’re seeing rapid growth, as I said. We’re seeing 300 percent month to month growth in sales. We’re acquiring a lot of new customers, both on the B-to-C and B-to-B side. But for fundraising reasons we’re not able to release exact numbers right now.
VentureBeat: Are you raising money from VCs or other sources right now?
Lee: After the first round of capital last year, we also had some vendor financing. We may be raising at the end of this year, so you might see another series.
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