Welcome to “How I Made My First Million,” Fortune’s newest series in which we interview today’s most powerful people about how they amassed their wealth. You’ll hear from founders, entrepreneurs, investors, and creatives across the globe on how they joined the seven-figure-club, what they’d do differently, and their best piece of advice for building wealth.
Lucy Guo knows a thing or two about money. The 28-year-old entrepreneur co-founded Scale AI, a generative A.I. startup that helps companies build out their own A.I. systems, in 2016. Scale AI is currently valued at $7.3 billion, and Guo, who left the company in 2018, owns 5.99%—nearly 47 million Class A shares.
After Scale AI, she went on to co-found venture capital firm Backend Capital, which centers its funding on engineering breakthroughs. Through her firm, Guo has invested in an array of early-stage unicorn startups, including digital payments platforms Ramp and Pave and e-commerce platform Fabric. Now in her next act, Guo is CEO of Passes, a Web3 platform she founded last year that offers monetization tools for digital creators.
Along the way, she’s built a massive net worth. Fortune reviewed a screenshot showing Guo’s 5.99% ownership in Scale AI, which she said comprised the lion’s share of her net worth. At a $7.3 billion valuation from Scale’s last funding round, this would put her net worth at approximately $437.3 million. Guo notes that Forbes has a lower valuation for her net worth, admitting that she doesn’t quite understand it, but that it’s roughly $100 million lower now because of a fall in tech sector valuations.
In an interview with Fortune, Guo explains how she grew up in a frugal household to two electrical engineers and began making money as a child selling Pokémon cards on the school playground before taking on odd jobs as a teenager. She made her first million in high school—only to lose it. Her parents’ frugal mentality stayed with her as she went on to make more millions and continued to live “very cheaply” until she had racked up $10 million, with the exceptions of a few big-ticket purchases.
She shares her best savings advice, what you can take away from her own journey, and why your network is your net worth.
This transcript has been lightly edited and condensed for clarity.
How would you characterize your financial upbringing?
My parents were incredibly frugal growing up. I’d be kicked outside if I complained about it being too cold in the house. We saved on heating costs, bought very cheap clothes, and licked the plate clean because they said other children weren’t so lucky to get food.
I got in trouble selling Pokémon cards, colored pencils, and such on the playground in school. From there, I started doing jobs such as mowing lawns. However, my parents soon realized the best way to punish me was to take my money away, so I ended up going to the internet where they couldn’t touch my funds!
How did you make your first $1 million then?
In high school, I bought around $5,000 worth of Bitcoin—nothing insane, Bitcoin was incredibly cheap at the time—with money I made on the internet through websites and eBay. That Bitcoin is theoretically worth several million, but I left it on the exchange and never put it in a wallet. So I didn’t actually make that first million.
After that, I was earning salary, equity, and investing as well. My first $5 million was through Scale AI’s Series B [funding]; I did a small secondary [offering] and invested it, honestly, pretty well, and that turned into more money.
What kind of websites?
I was selling internet marketing tools and hacked Pokémon games online. For instance, you could buy a Pokémon game with all Pokémon already in your Pokédex and everything at level 100.
And is that Bitcoin still in your possession?
No. The website, I think, got seized by the FBI. Someone told me that if I want to get the money back, I could get another passport that wasn’t a U.S. passport, and then get it. I have no idea if this is true, by the way. I thought, okay, my loss. I’ll think about it later.
Did you spend your first $1 million on anything?
No. I tried to live very cheaply until I made my first $10 million. [Until then], I thought, how can I extend my lifestyle as much as possible?
So I managed to get a buddy pass for free flights. [Editor’s note: A buddy pass is a standby pass from a friend or family who works for an airline.] I was eating for free, because I would just book a cancellable ticket on Southwest and then go through airport security, go to the AmEx lounge, eat, and go back. I got a place that was only around $70,000 or $75,000 in Las Vegas, right next to the airport. I could just ride a skateboard and get there in five minutes. I had reduced my spending to near $0 per month.
When did you get your first big paycheck and think, ‘Holy cow, that is a ton of money?’
I think it actually was on the small secondary [investment] for Scale. But I still didn’t think it was life-changing money. To this day, I don’t want to think that until I either do another secondary [offering] or scale like IPOs.
What is the most expensive thing you’ve ever purchased for yourself?
Definitely my home, but I don’t really view that as a purchase, because if I sold it, I’d make a few million right now—even today. That’s a pretty good, quick turnaround on my investment. I consider my home a long-term investment; it’s a piece of art, and has already gone up in value.
Outside of the house, what’s the most expensive thing you’ve splurged on?
A $500,000 Audemars Piguet (AP) Tourbillon watch with white baguette diamonds. I just don’t wear it ever, because I view it as a piece of art that I will hand down to my grandchildren one day, potentially. I wear it for really fancy events, but I’m not trying to get murdered. [laughs]
What is your current net worth?
My current net worth—I think—according to Forbes, was $300 or $400 million. They have their own way of evaluating it, and we take it from the last valuation of Scale. I think it was around $440 million, and then, because of how tech has dropped, or Forbes’ own valuation, I think they had me at $350 million. I don’t know. [Editor’s note: Forbes currently lists Guo’s net worth at $360 million; a screenshot she showed to Fortune of her ownership of Scale indicates her net worth is around $437 million.]
It’s not easy to make $1 million. For you, it seems effortless. Do you see the chase as competition, or is it more or less just a means for you to get to the next level?
More as a means to get to the next level. I’m a very competitive person. But that competition doesn’t mean I need to get richer than everyone else very quickly. If I’m at Barry’s Bootcamp, I want to be the fastest, strongest person. I love being a teacher’s pet.
It’s not that hard to get to your first million in tech, if you’re in product design or software engineering roles. Another fast way to grow is to take a growth role when you’re young and get creative.
Even my offer letters [for product design and product management roles] straight out of college were seven figures-plus. So if I had just worked at companies the whole time, it would have reached that point. (Editor’s note: Guo majored in computer science and human-computer interaction with a design focus at Carnegie Mellon University, but dropped after two years for a Thiel Fellowship, which gives $100,000 to young students to leave the classroom.)
Any advice for people looking to extend their wealth a ton, especially in tech?
I would go onto Reddit and look up Lean FIRE (financially independent, retire early) and Fat FIRE forums, because they really do teach you a lot about money management and wealth. If you’re young, you can afford to get a lower salary.
And you should go work for a startup.
Most startups fail, yes. But you can go to the top VC funds out there and ask them, ‘Hey, I’m looking for a Series A company. What’s your fastest growing Series A company?’ You’re going to be pointed in the right direction. And your chances of success, or choosing the right company, is much higher from there, where there’s metrics. If a VC is telling you this was one of our fastest-growing portfolio companies, the chances of success are just much, much higher.
Why did you learn about FIRE?
I was reading these things up in college. My friends actually introduced it to me.
What was appealing about it to you?
I thought it was interesting that you can retire off of, essentially, not that much money and still live a pretty nice lifestyle. This buddy pass got me first class flights to pretty much anywhere in the world for free.
You don’t know if you’re actually going to make it off of standby. But we created a little script that would show us how many seats are available, where you are on the waitlist, and your percentage chance of getting on the flight. So it was very easy.
I’m not someone that needs to have a plan before going anywhere, or doing anything really. I could just go to the airport, and if I didn’t make it onto a flight to LA, I would go on this app and find what other flights were available.
And I’ve never really been a picky eater. I would say I just like food that tastes good. I love McDonald’s. And I also like Michelin star restaurants. I could eat very cheaply. I thought, [the AmEx lounge] has good food and lunches. So I think I was living a phenomenal lifestyle while spending no money.
What’s your best investing advice for people looking to make their first $1 million?
Real estate is probably the best way. There are tons of cheap properties in hot spots such as Las Vegas that you can Airbnb out year round. Long-term, real estate always goes up, too. [Editor’s note: while home values do tend to appreciate over time, they, like any investment, are subject to market fluctuations, and can easily suffer in the event of a recession or natural disaster.]
If you had to invest in one thing, what would it be?
Biotech. I actually did invest in this company that’s trying to extend dogs’ life spans by a few years, but the ultimate goal is to extend humans’ lifespans. That’s a trillion dollar company—extending human lives, right?
Other than that, A.I. is very hot, and it’d be really nice to get in on OpenAI on better terms. But right now, all the secondaries that you can buy for OpenAI have crazy fees—I think they’re 30% management fees, or some percentage up front. It still probably makes sense, but it hurts me to pay that.
What do you think people looking to grow their wealth can learn from your journey?
Be frugal and always live below your means. A lot of people up their lifestyles when they start making more money, which causes them to not save as much. The more money you save, the more you can invest, which compounds over the years.
Your network is your net worth. One of the easiest ways to make money is being a broker and taking a percentage of the transaction. For example, if you’re well connected to a lot of funds, and also early-stage startup employees or founders, you can make good money brokering secondaries in hot startups.