00:00you know running a startup is hard
00:01running a retail start during the
00:03pandemic is really really hard and
00:06running a retail stock during the
00:07pandemic while going through chapter 11
00:08is really really really really hard what
00:12would you do if you believed in an idea
00:13but no one would fund you everyone
00:15thought it would fail and the industry
00:17you're in also happened to be going
00:18through a nuclear winter well today we
00:21are talking to Steve Zao the founder of
00:23sandbox VR who encountered all of the
00:25above in fact about a year into founding
00:29sandbox he had to double down and invest
00:31all of his life savings into this
00:34but seven years after founding and one
00:36bankruptcy later Steve now has built the
00:38world's leading full body VR experience
00:40with over 30 locations All Around the
00:43World in this interview we get to chat
00:44with Steve about the early challenges he
00:46faced and trust me there were many but
00:49also how sandbox survived the pandemic
00:51the difficult task of building across
00:53Hardware software a new Computing
00:55platform and real estate and also how
00:57Steve thinks about the future of VR but
01:00before we jump in I thought I'd give you
01:01a glimpse of the full body experience
01:03that is sandbox VR and instead of trying
01:05to explain it to you I thought I'd show
01:07you instead as a reminder the content
01:10here is for informational purposes only
01:12should not be taken as legal business
01:14tax or investment advice or be used to
01:17evaluate any investment or security and
01:19is not directed at any investors or
01:20potential investors in any accz fund for
01:24more details please see acc.com
01:41have you ever done a VR experience
01:44no I haven't I did one of those like
01:46games and I think it was like a quest
01:50honors I don't know really what this is
01:52so on a Saturday afternoon I decided if
01:55I'm going to do this interview I better
01:56go try out sandbox for myself we get to
01:59this mall and candidly sandbox looked a
02:03little out of place it was wedged
02:05between all of these outdated apparel
02:09meanwhile sandbox is this new looking
02:11location a futuristic logo shining out
02:14front and so we walk in and sandbox
02:18actually has these machines where you
02:21check yourself in and as part of that
02:23you input your email which comes into
02:25play later when they send you your recap
02:28video pretty immediately after we have
02:32an assistant come over and bring us to
02:34the room that we're doing the experience
02:36in so he brings us to this bench and
02:40gets us to put on these sensors so one
02:43on each wrist and one on each ankle and
02:47then you walk into this room it's
02:49completely green kind of like a
02:52three-dimensional green screen around
02:54you and then on one wall There is almost
02:58like this closet and this closet has a
03:00bunch of different props you see these
03:02fake guns you see these vests it was
03:05actually pretty crazy to see how much
03:07gear there was for one one single
03:09experience oh and by the way each
03:11experience was in its own little room
03:13but it was kind of cool because as
03:16people were doing the experiences at
03:17different times as we were setting up
03:19you could see into another room where
03:21someone was doing another experience and
03:23you just see these people running around
03:24with all their gear on and they seemed
03:27really immersed so the interesting part
03:29for me was the onboarding which I
03:31thought would be done by the human and
03:33although the human did tell you you know
03:35put on this vest put on these goggles in
03:36this way once you were in The Experience
03:38the game itself on boarded you so it got
03:41you to touch things with your hands or
03:44try things out with your props live
03:47within the VR experience
03:49to kind of train you on how to how to
03:51use it so that included things like if
03:54your partner got stunned by an enemy in
03:57order to revive them you physically
03:59would have to walk over to them put your
04:02hand on their shoulder and revive them
04:04and it also had this box on the ground
04:08of course it's not a real box but when
04:10you're in the VR experience that box is
04:12what you have to stay within because if
04:14you exit that box you run the risk of
04:16literally running into a wall because
04:18remember you're in a confined space so
04:21from there we did our experience we
04:22chose one called Amber sky where we were
04:25in space and we were kind of on these
04:28platforms fighting off the enemies the
04:30enemies by the way included anything
04:32from a spaceship to these little eggs on
04:34the ground that would hatch these
04:36creatures that would come and crawl up
04:37on you to a standard alien that would
04:40come jump on the platform and try to
04:43attack you these creatures felt like
04:45they were right there in front of you
04:47and speaking of that one fascinating
04:50aspect of this experience was they're
04:52bringing you up these elevators and it
04:54really does feel like you're moving up
04:55which of course you're not but at one
04:58point we literally are brought up the
05:00elevators in a way where they separate
05:02like this and it felt like we went from
05:05being around a meter away from each
05:07other to maybe 100 meters away from each
05:10other and at the end it felt kind of
05:13strange returning to the real world and
05:16maybe the coolest part of the experience
05:18is a couple minutes after you leave you
05:22get shown a video of you in the
05:25experience both as the VR characters
05:28that you were in the game but also the
05:31real life characters of you running
05:33around this green room and it's pretty
05:35funny to see you also get a score so you
05:37can see how you did relative to your
05:39partner or other people you played with
05:41and then you get that video sent so that
05:44you can share it later so hopefully that
05:45gives you a quick view into what the
05:48experience is like and for me I was
05:50really surprised by how immersed I felt
05:52in it I think it's the closest I felt to
05:55being in another world
05:57but something that I'd like to see is
05:59the extension of new types of games and
06:02also I want a leaderboard I want to see
06:05how I compare it to other people I want
06:07to go back and I want to improve my game
06:09and so I'm very excited to hear from
06:12Steve how he's thinking about all those
06:13things all right let's jump into the
06:16interview so Steve we typically jump
06:18right into the founder the company that
06:21they're building today and where that
06:23company might be going but in doing
06:25research for this episode you have such
06:27an amazing story and I wanted to jump
06:29right to the beginning so people get
06:31really the lay of the land of where you
06:33came from and how you got into the
06:35gaming industry so let's start when you
06:37were a kid your parents were
06:39entrepreneurs themselves and I believe
06:41that's also around the time when you're
06:43you could say it love story for games
06:44began could you share a little bit more
06:46about how your parents also being
06:48entrepreneurs may have influenced you
06:50and also where gaming came into play you
06:53know I grew up in a bay area and my
06:55parents were immigrants and they they
06:57work really hard art and I remember
06:58during a summer I would follow them you
07:01know to where they work and it was just
07:03a grind every day but over time like I
07:06seen how being an entrepreneur like
07:08great things happened how you know they
07:10started you know uncle's garage then
07:12they bought their own small warehouse
07:14and then it just grew from there so my
07:16biggest takeaway from being entrepreneur
07:18is like it just takes time but it was
07:20during those times too when you know
07:22they're busy working that I have to find
07:24kind of solace in my own Pastime and one
07:26of the things I found early in life was
07:28just you know I was fortunate enough to
07:30have a computer pretty early night and I
07:32think it was about the age of uh 10
07:34years old when they just started
07:35creating these funny little games that I
07:37would just share my friend and just kind
07:39of go from there well that's over really
07:41I don't remember what I was doing when I
07:43was 10 but I certainly wasn't creating
07:44my own games and it sounds like very
07:46early on as well you not just played
07:48games for fun but you started building a
07:51business around it so later on when you
07:53were in University you started blue T
07:55games and I want to hear more about what
07:58this company was and what specifically
08:00inspired you to do that yeah so
08:02Bluetooth game was a game development
08:05Studio that created games online people
08:07can download it we call it shareware
08:09games back in the days and they would
08:11you know open up to a lot of input the
08:12credit card into the internet and they
08:15would buy the full game if they like the
08:17first hour of it so it actually started
08:19because of the stock crash of 2001 that
08:22was when I went to college my parents
08:25they saved up a nest April my tuition
08:27and everything crashed and they're like
08:30yeah you know you're gonna have to find
08:32work while you study University so at
08:34that time I saw that internet really
08:36took off and people were actually
08:38building games online and I thought that
08:40was really fun like I didn't know much
08:42about it I just love building games and
08:44I was thinking hey maybe I can put games
08:46online and see if people would play it
08:49and they did I was like Hey would people
08:51actually ask you want to buy it too and
08:54he also did and it ended up that during
08:57that three years in college when I
08:59created blue tea that I was able to
09:01really fund my tuition with just
09:03building games on the side so this is
09:05just after the.com crash when people are
09:07really doubting the internet in general
09:09let alone paying for games I mean I feel
09:12like as I was growing up it was so rare
09:14for people to for example buy an app in
09:16the app store even if it was 99 Cents so
09:18for you to be able to successfully
09:20monetize during that period was
09:21definitely impressive and from my
09:25research it sounds like actually some of
09:26the games were really successful one of
09:28them the dark Parable series was
09:29downloaded millions of times and so it
09:31sounds like this company was doing
09:33relatively well but ultimately you ended
09:35up shutting it down in 2016. so what led
09:38to that I think it was my own
09:40stubbornness so we did very well with PC
09:43games and we grew to a team of 40 people
09:46um so the game company was company
09:48bootstrapped after college but what
09:51happened was in 2009 that's when and you
09:54know the iPhone came and then there was
09:56a mobile games industry and for me I
09:59wasn't fast enough to adapt to mobile
10:01games and you know what we built were
10:04casual games and uh when mobile first
10:06came about it took a lot of the
10:09um shares away from the PC uh group so
10:12we saw our industry starting to shrink
10:14while the mobile industry started to
10:15grow grow so by the time I went to
10:19mobile it was too late uh we were just
10:21catching up and every year that we went
10:23in it felt like we were further behind
10:24so the company just really stagnated
10:27into uh 2016. that's when we saw VR kind
10:32of blew up yeah I mean it sounds like he
10:34went straight from booty games right
10:37into sandbox which to me is impressive
10:39in a way because after running a company
10:41for many years the reaction of most
10:43Founders is let me take a break and your
10:45reaction was actually no I see this
10:48opportunity I want to go all in on
10:50Sandbox and so tell me a little bit more
10:52about that what was the vision you had
10:54in 2016 that made you say hey I need to
10:57do this right now I think it was a fear
11:00of missing out you know the painful
11:02lesson of missing out during the mobile
11:04era was really ingrained it's like man I
11:07wish I was there earlier so when VR
11:09first came about I was like okay this is
11:11going to be a consumer headset the
11:12Oculus is going to launch and HTC by is
11:15going to launch we have to get there
11:17early so I just decided to dive down and
11:20just go with it you know I think what
11:21made it easy for me and my team at that
11:24time was also we knew how to build games
11:26we built games from multi-platform we
11:29knew how to build in unity which was
11:30used to build in VR and I also had a few
11:33folks left in blue tea and that's how
11:36everything started yeah so it sounds
11:38like you knew how to create games but
11:40one clear differentiator between what
11:42what it sounds like you did at Blue T
11:44and what you then were venturing into
11:46with sandbox is the physical in-person
11:49element to it which we'll get into later
11:51because you're doing those software and
11:53Hardware which is incredibly hard to do
11:55together but what made you specifically
11:58make that decision to say hey we're not
12:00going to just Venture into this new
12:02platform which is VR but we're also
12:04going to do that in person one of the
12:07biggest lessons I learned from mobile
12:09games is you don't create what's popular
12:13Because by the time you're done it's
12:16going to be 10 months too late so our
12:19job is to figure out what do people want
12:23so when we started sandbox VR it was
12:26called a different company at that time
12:27Glo we also created games for the
12:29headset because we want to be early but
12:31we also have like a second bet which was
12:34what do people really want out of VR in
12:3710 to 20 years like really trying to
12:39project that out and be super super
12:41early for that and for us it was I grew
12:45up watching The Matrix
12:47you know you can get plugged in and you
12:49can be anyone and be anywhere and I
12:51thought that VR was that last
12:54technological component to create that
12:56so we're like can we actually create a
12:58minimum viable Matrix a minimum viable
13:00Matrix that's a good that's a good way
13:02to put it you know we saw all the pieces
13:04and then we think you'll fit and I think
13:07people would like it but it will take
13:09so um when we first started the company
13:11it was okay let's build a game
13:14um let's make sure that the game can
13:15make some money while we really work
13:17through the idea Maze of what that would
13:19look like to build a location-based
13:21project and for us it was just hedging
13:24if the games worked really well we can
13:25double down on that and if the location
13:27works really well we can double down on
13:29that so I didn't even realize that you
13:31were pursuing both of these past in
13:33parallel were there any early data
13:35points in either direction that made you
13:37think huh this is really where we should
13:39be betting I think it was just the
13:41nature of how the company was founded
13:43when I built Bluetooth I moved to Hong
13:45Kong and I I built a community there I
13:48have friends there so when I started to
13:52seek out Angel Investors I told them hey
13:54let's try to build games where it's very
13:55organic right and we also want to learn
13:58what it takes to build in VR so while
14:00we're learning how to build you know
14:01content in VR we can really figure out
14:03how to build a platform that eventually
14:05became that location-based component to
14:07it you know but for us we also didn't
14:10raise that much in the beginning we
14:12raised about I think three hundred
14:14thousand four hundred thousand which
14:16might seem like a lot but if you're
14:18building a team that wants to build
14:20content and then build a technology
14:22platform that's never been done before
14:24and they eventually put it into a retail
14:26that's not a lot of money to go about so
14:29I was I guess a little bit naive in the
14:31thought that hey we're early enough and
14:32we build games that by the time the game
14:34launched that we can take the profit we
14:37earn from the game and reinvest back
14:38into the platform that was in 2016 and
14:41during that time you know there was a
14:42lot of hype and Buzz still around VR and
14:45we launched our game in December
14:48perfectly timed during the holiday
14:49season uh we went through Steam and we
14:52got an incredible exposure on Steam and
14:55we put our game on a store and we were
14:59like the top 20 title but it didn't
15:03um you know revenue for us and it was
15:05the same for a lot of developers at that
15:08and we're like oh crap we're gonna run
15:10out of money entering 2017 that was kind
15:13of like the start of the VR winter where
15:15funding was very very difficult because
15:17the holiday season didn't really pick up
15:19numbers that gave enough Trust of the VR
15:23so that just kind of became organic
15:25where it's like okay so we cannot really
15:27just do games anymore we have to put a
15:29hundred percent of our effort behind
15:31this full body uh platform that we built
15:35on the side and it sounds like you did
15:39call this nuclear year winter in 2017
15:42you had just been working on these
15:44digital games it sounds like they had
15:46some success but you were in a way
15:49pivoting but also as I said pivoting
15:51right into this winter where the amount
15:54of funding that you would raise prior
15:55would not hold you over so you made a
15:57decision that I think is
15:59really emblematic of your journey and
16:03the conviction that you've had
16:04throughout the years about the platform
16:06that you're building and you put your
16:07own life savings into the company tell
16:10me a little bit more about what
16:13conviction you had and why that made you
16:16actually decide to take your own life
16:18savings and bet it on this company I
16:20didn't want to put my life savings fast
16:22that was the first start but entering
16:242017 we had like maybe a hundred
16:27thousand dollars left in the bank and I
16:29went back to investors
16:31um I went back to institutionals also
16:33angels and it's like hey we have this
16:36great platform that will when they
16:39enable full body experiences with
16:41multiplayer but you know in a retail
16:44um it's like hey we just need a little
16:45bit more funding to kind of bring a demo
16:48and we couldn't get anyone to go for it
16:51we're like okay this is it so I had this
16:54conversation so uh with you know my
16:57friends my family I have just a guy say
17:00from Bluetooth you know 10 years working
17:01blue tea I saved this Nest Egg I can put
17:04everything into this and just get the
17:06demo out and just prove that this is the
17:08concept we're building for and of course
17:10you know I talk to my friends and
17:12they're like yeah Steve don't do it and
17:13talk to my parents like yeah this is
17:15really bad so when he started to do it
17:19naturally what we saw like in the market
17:23and location-based VR was company that
17:25raised a hundred times more money than
17:27we did with a product we felt was not in
17:30the right direction you know I think at
17:33that time people that raised a lot of
17:34money were about how do you interface
17:36with the environment you know you can
17:37touch the wall you can feel the heat and
17:39we're like yeah that's kind of cool but
17:41you know great thing about games it's
17:44really about playing a game with each
17:45other right and the game object isn't
17:48environment it is your friends nobody
17:50built for that we knew that people
17:52wanted that that was a conviction so
17:55that's when I decided to basically take
17:57my life saving and put it into
17:59um you know sandbox and I remember the
18:02moment I did that I was at the bank even
18:03the bank executive was like are you sure
18:06you want to do that that's that's like
18:0895 of you are saving like yeah let's
18:10let's just go for it but it was um it
18:12wasn't done in isolation because at that
18:15time we were down to a team of six and I
18:18had to sit down with them and I said
18:20like look I couldn't get any more
18:22funding this is it I'm gonna have to
18:24shut down the company but I do have you
18:27know um this much money left and I'm
18:29just going to put everything in it but
18:30if I do that I will need all of you to
18:33be fully committed to go for this now if
18:36you're not that's okay and I'll just
18:38shut the company down but if I'm gonna
18:40do this we're going to fight for it and
18:42then we sat down a circle and everyone
18:44gave the vote fortunately everyone
18:46agreed to fight on for the next six
18:48months to make it happen that's amazing
18:50I have to ask you it sounds like you and
18:52your team maybe you saw something that
18:54other people whether it be investors
18:56whether it be other Founders didn't see
18:58at the time and there are many reasons
19:00to say that this won't work right as I
19:03mentioned before you're doing both
19:05hardware and software you also are
19:07focusing on a social element which means
19:09that you don't only need to convince one
19:11person you need to convince many people
19:14you are doing so at a time where this
19:17technology platform being VR is kind of
19:20unproven it's in its early days so there
19:23are again many reasons to say you know
19:25what this maybe sounds like a good idea
19:27but in reality it's not worth pursuing
19:29so was it just seeing that certain other
19:32companies had raised so much money and
19:34were not delivering on the promise that
19:35you knew you could or what other data
19:38points were you paying attention to to
19:39say this is really worth pursuing for us
19:42it was it was the intuition of having
19:45built games for so long once you do for
19:48a time because they're just intuition
19:49about what could be really fun it just
19:52came from that for me it was able to
19:54kind of see that with this amount of
19:56funding we can actually bring a demo and
19:58then from there be able to show what
20:00exactly this is and get people on board
20:01in the beginning it was a demo but we
20:03end up not just building a demo we
20:05actually built like a full product and I
20:08think it just made it much easier by the
20:09time that it was launched
20:11so tell me about that demo because I
20:13went to a Sandbox recently and it's this
20:15large room there are so many different
20:17cameras there's like an entire closet of
20:20different tools that you use you're
20:22wearing a vest there's someone there
20:24helping you and so tell me about the
20:27challenge and how you solve that
20:28challenge of getting as someone might
20:31say an MVP it's a lot easier to create
20:33an MVP of a software site that
20:35Aggregates a bunch of data an MVP of
20:37sandbox VR sounds quite difficult yeah
20:41so we didn't have any like vast we
20:44didn't have any custom props
20:46um we didn't have the nice space then
20:47you you guys went into back in the days
20:49what we had back then was just 200 000
20:53300 000 with six people with the
20:55lifeline of six months left what we did
20:58was we had hard code everything like
21:00forget about Elegance in your software
21:03because we have to bring this out but
21:06also within that really tight constraint
21:08the biggest thing that we had to solve
21:10was with retail tell businesses you pay
21:13for what you get right if you put your
21:15product in a nice location with a lot of
21:17foot traffic it's going to be very
21:19expensive the rent is going to be insane
21:22and Atlanta would have to see your
21:24balance sheet to be able to judge if you
21:25can actually be there
21:27we do not have that luxury so we were
21:30figuring out how do you bring people
21:34with very little foot traffic
21:36it was during that moment that we
21:38created the highlight video it's like
21:40how can you get people to become
21:43marketers of your products like well we
21:45saw escape room you know share photos
21:48but can we push that connects it's like
21:51what if we couldn't experience where you
21:53can show how much fun they have
21:55but by the time they leave they can have
21:57that video and share with their friends
21:59and family so that we can build it from
22:01word of mouth so that product was
22:04created during this really intense time
22:06that came about of trying to solve for
22:09you know um our real estate like how do
22:11we get like a cheap rent place that
22:13works and that's what we did we end up
22:15getting a location in Hong Kong even
22:17though Hong Kong has seven million
22:19people we were able to find a building
22:21with a zero for traffic and the rent was
22:24insanely cheap you know the water pipes
22:26were broken and we were on the 16th
22:29floor there was no outside signage
22:31people don't know about us and we're
22:34like okay this is the perfect place
22:36because this is the only place we can
22:38afford something that has also come up
22:40for me as you're talking is the fact
22:42that you're marketing a fundamentally
22:45new experience for most people if you
22:47open a mini golf course you can say hey
22:49it's Steph's mini golf and people for
22:52the most part know what they're getting
22:53they know what kind of experience but a
22:56new location-based VR experience is is
22:58new it's even hard to articulate what
23:01that is to someone and there's no
23:03expectation linked to it so how did you
23:06go about those very first early days of
23:08opening the store and getting your first
23:11we grounded it based on the skate room
23:13we called it a hyper reality escape room
23:16which seems to where people have played
23:18escape room like oh okay which is a VR
23:20component to it so that was our initial
23:23way of getting people in and and it's
23:25really funny because once they come out
23:26of it they're like this is an escape
23:28room I don't know what this is but I'm
23:31gonna tell my friends about it so the
23:33education part was hard but the moment
23:35they saw the videos and the moment they
23:37they share it and they saw their friend
23:39having fun like that's when the viral
23:42Loop really kicked off yeah I I loved
23:44the video at the end and I'm impressed
23:46that you thought to include that at the
23:49so what happened then if you had these
23:52early customers people are starting to
23:53share what was that early traction like
23:56we got a little bit lucky so in the
23:58beginning we didn't do much
24:00advertisement uh we had some media
24:02reporters come in and you know they
24:04brought up some customers they loved it
24:05they tell their friends but you know
24:07there has to be a certain volume of
24:09folks who come in to really kick in but
24:12uh one of the reporter did a social
24:14media post and it blew up and it went
24:17viral and that kick-started the viral
24:20engine where people just booked in mass
24:22and then led to more and more people
24:24booking so what happened was pretty soon
24:27we booked out our space you know 100 100
24:31days in a row and it was really insane
24:33because when we first started building
24:35this business I have a good friend of
24:37mine who've done Escape rooms he said
24:39look if you can get to 50 occupancy
24:42you're doing well Steve but based on
24:45your business even if you get to 100
24:47it's still a tough business and that's
24:49what we've done we have people skip work
24:51and come to play sandbox we had a few
24:54people's um delayed their flights so
24:56they can play a Sandbox and pretty soon
24:59like people knew about our product and
25:01that's how we're able to actually get a
25:03our first seed institutional round done
25:05so you got this round done feels like
25:08you're finally hitting the traction
25:09you're looking for and this is one of
25:12the reasons I love your story is that
25:14there was just so many roadblocks that
25:16emerged out of nowhere and the next one
25:18for you sounds like it was the pandemic
25:20which is pretty fundamental to your
25:23business because it's an in-person
25:24business and so tell me about that how
25:26did you stay alive during this period
25:28yeah it was tough people would say
25:30during the recession companies will lose
25:32Revenue by 30 to 60 percent
25:35for us we lost 110 of our Revenue
25:38because not only did people we couldn't
25:41open any of our stores so there was no
25:43sales but we also had to refund everyone
25:47and the outcome was that was we had a
25:49great team but you know we had only we
25:52were trying to raise that series B
25:54during the early 2020 and we had about
25:56three three months of Runway left
25:58so we had to let go most of the folks we
26:01let go about 80 of our team and that was
26:03very difficult there were a lot of great
26:05people at the team that we wanted to
26:07keep but we couldn't so how do we make
26:09it work I think to a degree it was the
26:12same thing that I've done early in
26:14sandbox where we sat down and tried to
26:16get all the stakeholders to agree to
26:19fight on I mean it was much bigger this
26:21time it was getting the investors that
26:24backed us like hey this is what we're
26:26gonna do this is how we're gonna survive
26:27it do I have your support getting the
26:30people that remain in the team to get
26:32the support getting the secured
26:34creditors and unsecured creditors like
26:36hey we need to make sure sandbox have a
26:39long enough Runway so that we can all
26:41survive and just creating a very big
26:45now the challenge was we couldn't
26:49and because of that we had to go through
26:52chapter 11. we needed protection to get
26:56through that phase so in order to
26:58survive um that whole ordeal fortunately
27:00we got great investors kind of helping
27:02us including injuries and to kind of
27:04give us a Lifeline but part of that plan
27:07was also getting to folks that we
27:09borrowed money from the debt holders to
27:10really extend online and they're going
27:12through chapter 11 to work with the
27:14landlord's unsecured debt holders to
27:17find a way to make this all work out I I
27:20mean one of the most challenging parts
27:22of the pandemic I think for everyone was
27:24the idea that we didn't know when it was
27:26going to quote unquote end and I think
27:28that would be particularly challenging
27:29with your business as you said because
27:31you didn't go from 100 of sales to 70
27:34you went from 100 to zero and it was
27:36unclear when things would tick back up
27:38so is there a point during that process
27:41where you thought well a we should maybe
27:43just shut this down because we're not
27:45sure when things are going to bounce
27:47back or be fundamentally pivoted we did
27:50that was the first thing we talked about
27:51is how can we pivot we don't know how
27:54long this is going to last but there
27:55were a few reasons why we didn't go
27:58through that route number one was we
28:00knew fundamentally we had a great
28:01product before the pandemic people love
28:03sandbox so for us as long as we can
28:06survive it then it will work but the
28:09bigger telling point was the pandemic
28:11impacted every country differently for
28:14example we saw that in China things were
28:17opened up very quickly although there's
28:19a lot of rooms in place it felt like it
28:21was pretty normal we're like okay why
28:23don't we pick countries that that
28:24weren't really impacted by the pandemic
28:26and we start there and whenever other
28:28countries open up like the us then we'll
28:30go back there again so that was our
28:32strategy really just making sure we have
28:35the runway to kind of just uh hibernate
28:38you know there was for a long time like
28:41me and some of the core executive we
28:43didn't take salary people had to take
28:45time off so that you know they can
28:47control how we spend it was really tough
28:50but we just decided to fight on just
28:52focus on the countries that we can open
28:54in yeah I've mentioned this a few times
28:56throughout our chat but just you know if
28:58I were to have designed a business that
29:00I thought maybe would have one of the
29:02hardest times throughout a pandemic it
29:04would be something like sandbox VR it
29:06has a social element has the in-person
29:09but you made it you made it through the
29:11pandemic and I'm curious to know how
29:13post pandemic things have shifted
29:15whether it's that people are more
29:18interested in some of these digital
29:20physical experiences maybe this impacted
29:23your ability to get long-term leases as
29:25different other businesses are shifting
29:27but also just interested in how you've
29:30marketed it yourself as you've come back
29:32you know running a startup is hard
29:34running a retail start during the
29:36pandemic is really really hard and
29:38running a retail stock during the
29:40pandemic while going through chapter 11
29:41is really really really really hard and
29:44when times get very tough one thing that
29:47we learned is we had to be very
29:48selective on where we focus and where we
29:51focus we have to be looking for outsize
29:54outcome we were measuring everything
29:56against profit against sales but really
30:02like one example would be when we get to
30:04highlight videos that customers get
30:08um if you're able to hand them the video
30:10before they leave they have a 10x chance
30:13of just talking about us sharing it
30:15going about it but it takes us about 15
30:18to 20 minutes to generate the videos so
30:20people could be leaving before they
30:22actually get the video so for us it's
30:24like how do we shrink that 20 minute
30:25down to two minutes so we allocated the
30:29product team entirely to solving that
30:31one thing but we knew that the outcome
30:33was going to give us much more high
30:35shareability and we measured that
30:36afterwards and it really worked so that
30:38was just one facet of many like a dozen
30:41core things we've done that really turn
30:45so fortunately in early 2021 with the
30:48vaccination like there was a huge
30:50pent-up demand for people to come out
30:51and when they did oh boy did they really
30:56and everything just worked and the
30:58market actually there was a marked shift
31:00too where uh we're able to really
31:02renegotiate all the rent that we had for
31:05existing location but also for new
31:07locations not only that we were able to
31:10convince landlord to fund our project
31:13because we had no cap though so we had
31:16to find a way to create a win-win
31:19situation where the landlord is willing
31:21to bet a company that been through the
31:23pandemic they've been through chapter 11
31:26and said you know what we're going to
31:28give this company all the money so they
31:32and we're able to convince them on that
31:34how does that work generally in the U.S
31:38um Dino would give something called a
31:39tenant allowance usually is they would
31:41fund um retail tenant a certain
31:43percentage so that they can build up
31:45their place uh usually what we've gotten
31:47before it was about five to ten percent
31:50so we've made it work because we're able
31:53to show data point during the pandemic
31:57um we're able to open in our Chicago
32:00and during that time we were in a a mall
32:03that had zero foot traffic
32:06but a hundred percent of our customer
32:10and that was because of our marketing
32:12strategy of our highlight videos I mean
32:15we have stories where we actually had to
32:18meet people at a parking lot to take
32:20into sandbox because they would get lost
32:23but we were doing tremendously well
32:25people wanted to go out fundamentally
32:28what we're trying to solve is for people
32:30to have a great time together
32:32and that has made no more important than
32:35during the pandemic of how important
32:36that was so we shared these data points
32:39and then we're able to convince a few
32:41landlords to take a bet on us and then
32:43once that happened we were able to get
32:45more and more landlord to take uh bigger
32:46bets on us that's how we survived the
32:49pandemic yeah yeah it reminds me I think
32:51Apple in many occasions gets cheap
32:54releases because yes these Apple stores
32:56are almost just these Central locations
32:58that attract so much foot traffic that
33:00it's beneficial to the landlords of
33:03these malls Etc to to offer those deals
33:06so it's it's great that you're seeing
33:09something you mentioned though about
33:10sandbox ads really sandbox being this
33:15place where people socialize and come
33:17together reminded me of just the idea of
33:20competition like what what do you
33:22compare sandbox to and I can think of
33:24many examples you know maybe a movie
33:26theater maybe something like Topgolf
33:29maybe something purely digital like
33:31friends playing in fortnite so I guess
33:34from your perspective where does sandbox
33:37fit in that competitive Matrix who are
33:39your core competitors and what are you
33:41really challenging that exists today we
33:44do think ourselves as carving a brand
33:47um but if we were to take like a close
33:49example what we do want to become is
33:51like the new movies when we think about
33:53the movies you know it's a pretty
33:55passive experience and the outcome
33:57doesn't change when you watch a movie
33:58and you probably do it like not many
34:00times but for us is it's a very highly
34:03active experience that depending on who
34:06you go with the outcome can change when
34:08you played experience and and just a
34:10huge social media component to it where
34:12you can actually express yourself and be
34:14able to share that digitally with other
34:15folks and structurally it's like the
34:17movies because you come in and there's
34:19different experiences that comes out and
34:21you will chase for the next experience
34:23we're starting to have experiences
34:25that's starting to hit box office
34:26numbers our titles are starting to hit
34:29like theatrical releases the average US
34:31theatrical domestic box office release
34:35and as we scale uh there'll be a day
34:37where we could see Samba experiences
34:39even being a rival to like some of the
34:42boss office movie hits and is that the
34:45plan because I could see a couple
34:47different ways that you could approach
34:49the business one of them being you just
34:51focus on creating one great game that
34:54people come back to and when they come
34:56back they want to beat their previous
34:57score they want to go back with a new
34:59friend see how it's different or maybe
35:01another path which sounds more similar
35:03to what you're describing is having a
35:05suite of different experiences every
35:07time I go back I'm trying something new
35:09kind of like the movies right you don't
35:11often unless it's something like Avatar
35:13you don't want to go see something again
35:15and so from your own perspective but
35:18also from maybe the consumer behavior
35:20that you're seeing which one of those
35:21scenarios per se do you think more so
35:24fits what you're trying to do with
35:27well definitely the latter we do see
35:29people come back for new experiences
35:30that can share with their friends and
35:32family there is a very small subgroup
35:33that would chase a high score and we've
35:36seen people play our zombie experience
35:38over like 12 times just to get a certain
35:41outcome what really engages people what
35:43we've learned that's surprising about
35:44sandbox is it's really some it's
35:48experience that you guys want to delve
35:50into that you guys can share
35:52and the outcome of that is people come
35:54to sandbox because they want to build a
35:57relationship with someone so a date
35:59night it's extremely popular in sandbox
36:01or they want a parent having a fun time
36:04with the kids in a way that's very
36:05shareable or people haven't seen in a
36:08long time so we want to keep doing that
36:11but with different worlds they can be in
36:12a different characters that's great and
36:14in a perfect world you could have
36:16endless resources and launch a new game
36:18every single day and they'd all be
36:20amazing and there'd be this endless
36:21Suite of games that people could try out
36:23but obviously there's a resource
36:25constraint and so tell me a little bit
36:27more about how you think about the
36:30rollout of new games and also the amount
36:32of resources it takes to build a new
36:35game I think you have six right now is
36:37that correct yeah that's correct so
36:39generally it takes about 12 months to
36:40build a title internally three months of
36:44um nine months of production work but we
36:46also work post-production to make sure
36:47things look uh goes according to planet
36:49or any changes that we make well it's
36:51live to the audience so the way we think
36:55in the beginning we have to build
36:57everything ourselves because it doesn't
36:59exist but over time you know other
37:01people can build on our platform that if
37:04you're a VR game developer over time you
37:06can find it more lucrative to build on
37:08Sandbox than other options
37:10so how we scale location is a factor of
37:13that the more locations we have the more
37:15tickets we sell the more tickets we sell
37:17the more third-party developers
37:18interested in us so in the beginning we
37:21built a lot of locations ourselves
37:23and we've proven this to be a very
37:25lucrative retail business model and over
37:28time franchising will really kick in and
37:30really bring sandbars all across the
37:31world once you have that then you can
37:33start needing developers that you know
37:35with their unique skills that to bring
37:37that either local content or IP branding
37:40content are really good at or genres
37:42they're amazing at and just create this
37:49heavily on the build versus buy options
37:53you built your own platform you built
37:55the content on top of your platform when
37:57others in a similar scenario might have
37:59chosen to borrow right or buy from
38:02another company whether it's the
38:04technology whether it's the IP and so
38:06tell me about that and specifically tell
38:08me about the IP aspect of things because
38:09it does sound like you're starting to do
38:11Partnerships I think one of your titles
38:13was in partnership with Star Trek we
38:15have to build because we wanted a good
38:17experience perfect we want to full body
38:20experience and you know we couldn't just
38:23take say a VR game desk for the consumer
38:25headset with float you know with
38:27controllers to work where you have to
38:30use the full body and you have to play
38:31with someone in the same space it
38:33wouldn't really take advantage of that
38:35platform and it wouldn't be a great
38:36experience we thought that it would
38:38drive people to our location it was
38:41built really out of necessity but once
38:43we've proven that we can actually share
38:45that news with other brands like hey
38:47wouldn't it be awesome to be in a
38:50universe to be a Cadet where we can be
38:52in each of different planets and you can
38:54use a tricorder and go from there you
38:57know at that time it you know it made a
38:58lot of sense we did a lot of shooting
39:00experiences in the beginning because you
39:02had to wear a bulky VR backpack and you
39:04know you're pretty limited but now with
39:07wireless streaming it actually enables a
39:10lot uh more different different genres
39:14I think an analogy that we would use is
39:18um what sound is to silent films is what
39:22the widest streaming is to our VR
39:24platform because once you add a sound
39:26there's a genres that wasn't possible
39:28before that you can realize now
39:30so with wireless streaming there's a lot
39:33more Mobility there's a lot more
39:34movement and you can create experiences
39:37where every part of your body movement
39:38matters and that is why we decided
39:42partnering with Netflix on squid games
39:45what a great partnership
39:47thank you thank you it's a great uh um
39:50it shows a lot of trust in us Netflix to
39:53be able to give us you know one of the
39:54best IPS but I think it's also a good
39:57marriage in a sense that we can really
39:59create a great experience where you have
40:03multiple people in the same space where
40:05you can collaborate or even sabotage one
40:07another moving freely in a in a shared
40:11space so not only do we get to work with
40:13a great IP but also we're able to create
40:17an experience that fully utilizes our
40:20I think that's so important to your
40:22point about what the technology enables
40:25actually I was too scared to watch squid
40:27game but I know the premise and I know
40:28some of the games within squid game and
40:30some of them would just be inherently
40:32underserved if they were done in you
40:35know even a VR headset if you didn't
40:37have access to your hands because you
40:39know one of the games is where you're
40:40kind of like cutting open a shape within
40:42a cookie for example
40:43you can do that with your mouse or your
40:45keyboard but it's not the same and
40:47that's something that I really was
40:48impressed by when I went to sandbox
40:50which is as you said it's like a full
40:52body experience there's haptics on your
40:54vest you you know if my partner got
40:57killed I go you know restore him with my
41:00hand and so there was just so many
41:02aspects where it was like you are fully
41:04in this experience and I also think
41:06another element of VR which
41:08is probably my favorite from the few
41:11in-person VR experience I experiences
41:13I've done is the ability for you to
41:16truly immerse yourself and what I mean
41:18by that is to start experiencing
41:20emotions like fear or joy that I don't
41:24think I've experienced to the same
41:25degree in other games to give a quick
41:28the first time I ever went to a VR
41:30experience was in Japan and they get you
41:32to walk across this balance beam in VR
41:35and they get you to jump to grab this
41:38there's like a helicopter with a ladder
41:40hanging down and really you're about
41:43four inches off the ground on this
41:45balance beam but because of the
41:47immersion that happens
41:49you get scared you're like oh gosh I
41:51don't like I don't know if I can make
41:53this jump because in VR there's a big
41:55city below you and the same experience I
41:58did at sandbox there was this point
42:00where they raised both of us up but we
42:02went in different directions and it
42:04truly felt like I was then 100 meters
42:06away from my partner instead of you know
42:09in reality we were one meter away so I
42:11don't know I I'm just sharing that
42:13experience because I do think your point
42:15about the actual technology enabling
42:18concretely new experiences is really
42:20important and Squid games seems like one
42:22of the best options to actually pursue
42:24that with it's really interesting
42:26because when we first started sandbox
42:29and the first experience we built was a
42:31zombie experience called Deadwood
42:32Mansion we were inspired by you know
42:35Residents Evil left for dead and those
42:37titles generally is a very very male
42:40dominated experience that people love
42:42but when we launched that we were
42:44surprised that half the audience were
42:46female and we asked you know our
42:48customers like hey you know what do you
42:49think of my experience and for them they
42:51say hey it doesn't feel like a game it
42:52felt like a real life it felt like I'm a
42:54star of my own me and my friends that
42:56starts our own movies and we're
42:57transporting into this world
42:59so we end up that we didn't create just
43:02a gaming experience it felt like a like
43:04experiential consumer product the
43:06Insight that we took from this was that
43:09the believability once you hit a certain
43:12level it just clicked and it just become
43:16and and that's the reason why we built
43:18what we've done because when we first
43:19started out with the consumer VR headset
43:21we still know that we were in the game
43:23because when you put on your headset
43:25okay you look at your body you don't see
43:27your body you look at your controller
43:28just too like floating joysticks right
43:30and you can't really move in your space
43:32and then if you're next to like another
43:34player online you can't really
43:35physically interact with them
43:37but you put on your sandbox they forget
43:40they're in assimilation and there are
43:43many times we would tell we would get
43:45complaints about noise I remembered in
43:49um we work with IMAX to bring uh sandbox
43:51in the New York space it was right next
43:53to the theater and we found out that we
43:56had to shut our store by 5 PM I was like
43:59why and they said well because people
44:01were screaming so loud that all the
44:03theaters around could hear random
44:06and like they tried everything they put
44:08mattresses they tried to muffled all the
44:10time it did not work
44:12you're fine you're fine it's all right
44:17you don't get that unless you create
44:20something that's very real and
44:22it felt very real I actually avoided the
44:24zombie tracks when I went because I was
44:28I was scared of how real it would be and
44:30I instead went with the space option
44:33um but on this note of
44:35truly immersing people and
44:38almost like replicating reality in a way
44:40what does that take I I saw it for
44:43myself but just for listeners like how
44:45many cameras are required how many props
44:48like what what is really going into this
44:50experience makes it fundamentally
44:52different from let's say an Oculus
44:54headset it starts with outside in
44:55technology because in a shared space it
44:59needs to be tracked from the environment
45:00rather than from the headset which is
45:03inside our technology which is tracking
45:06you know from a single like cameras
45:08within a headset because uh once you
45:11have that then is building a very lowly
45:13conceived environment that tracks your
45:17and load you can see is really important
45:19because when you're playing experience
45:21and it kind of like um you know it
45:24stutters a bit then you remember that
45:26you're in a simulation so for us it
45:28being able to have like really
45:29streamlined Wireless low latency
45:31experience that's full body
45:33and once you hit that level and that
45:36physical element of being able to
45:38interact with your friends that's when
45:40you start to believe that this is real
45:41life I I definitely was surprised that I
45:44didn't get a headache either because I
45:46know that can be a feature or I guess a
45:48bug in this case of other VR experiences
45:50and I get carsick probably 50 of the
45:53time and so I'm very you know
45:54susceptible to that feeling but I went
45:57through the whole experience and never
45:58had one inkling of that so that was
46:01surprising but what I guess
46:03differentiates sandbox and being able to
46:05build this low latency environment yeah
46:08so when we first started out like um
46:11it it doesn't work like when we've got
46:14the headsets and we got the cameras and
46:16then we try to put everything together
46:17this gives a very it's a very buggy
46:20experience back in the days when we go
46:22out to try other VR locations
46:24um it was really buggy too and I think
46:27for a lot of folks that felt like it was
46:30because hey that's just what VR is but
46:33even as a small company back in 2017 you
46:36know with the limited resources we cut
46:39Corners one thing we never cut was the
46:41Fidelity of experience because for us
46:43the end product we wanted to do was to
46:46have someone believe that they're in
46:48real life and to do that it cannot
46:52so we have to be very precise on how we
46:55do our tracking and how we do the
46:58streaming which also led to some of the
47:00patents that we had early on which was
47:02we're able to create this uh prediction
47:04algorithm which actually allows people
47:07to be able to move and be in VR even if
47:10they're being blocked so dealt with one
47:12component to it and the other component
47:14was we're able to batch the data how we
47:17send wirelessly so that if things
47:19doesn't go well you will still have a
47:21very smooth experience
47:24so in a way the technology that we
47:26created was like how we ran our startup
47:28like when things don't go well we find a
47:30way to make it go well
47:35Beyond this idea of building both
47:36hardware and software people often say
47:39that building Hardware just on its own
47:41is like building on hard mode and you've
47:43decided to integrate both you've
47:44integrated real estate into the equation
47:46and so here's to know about if we start
47:49looking forward in terms of sandbox how
47:52do you how do you think about the
47:53business evolving where are you focusing
47:55is it about opening up a bunch of new
47:57locations is it about extending the
47:59content variety that you have is it
48:02about getting better deals with your
48:04real estate Partners how do you think
48:07about the evolution and where to
48:09prioritize yeah to answer your first
48:11question building Hardware is really
48:13hard fortunately in the beginning we've
48:16uh we didn't have to worry about
48:17Hardware because everything was off the
48:19shelf so all we had to do was make sure
48:21the software works really well with all
48:23the hardware that we've used we got very
48:25lucky in that respect and over time we
48:27started building like our own haptic
48:30wands and wireless props
48:32and you know in the future we do want to
48:35invest deeper into Hardware to have a
48:37more integrated product in terms of how
48:39we want to see our future on how we grow
48:41is it just continue to do everything
48:43that we do but really to double down on
48:46our content you know I always see us in
48:49movies in the first five years of
48:51sandbox it's like it's a sign-in film of
48:56and now that we just created wireless
48:58streaming now we can add sound to it so
49:01now we have all these uh genres that we
49:03can explore that we can provide for our
49:06audience and over time we'll figure out
49:08what that color is we can add the color
49:12um you know black and white sound film
49:13and then build even more genres of
49:16experience that can utilize that and
49:18just grow from there as you expand your
49:20your content mix I'm also curious to
49:22know if you plan to or thinking about
49:24venturing outside of the social realm so
49:27it sounds like that is the priority that
49:29is the focus but as an example of when I
49:32went I asked my husband who was the
49:34person I went with if he would go again
49:36he's like yes this was great but I would
49:39love an experience like this to work on
49:41my surfing that's something that he's
49:43trying to get better at today but the
49:45problem with surfing is that you have to
49:47wait for the waves you know you can go
49:50out in a day and the waves aren't good
49:51and you can't get the experience that
49:52you're looking for but you can imagine
49:54in an equivalent VR experience you could
49:58have waves non-stop you don't have to
49:59wait for the next one you don't have to
50:01paddle out and you can really I guess
50:03condense the learning period
50:05to get better and so that's just one
50:08example of where VR could be a more
50:11educational resource instead of a social
50:13resource and so how do you think about
50:15that if you plan to expand your content
50:17mix do you think that that might
50:19actually expand past social we do we do
50:23and I think it's how we started the
50:24company always having hedging on
50:26different bets so one of the things
50:28we're doing is actually we're creating
50:31we're rebuilding our operating systems
50:33so that it's white labeled that other
50:35developers can actually build on top of
50:39that if you want to learn surfing it
50:41might not be in sandbox but it might be
50:42somewhere else but someone can leverage
50:44our technology to create a full body
50:46experience that allows people to be on a
50:48board and be able to Surf and just train
50:51at different type of Temple to get to
50:53replicate how the waves are we'll see
50:55how that goes but we do understand that
50:58what we have is beyond just our business
51:00and we do want to support how the
51:02ecosystem can change over time speaking
51:05of the full ecosystem since we've
51:06already kind of ventured into the future
51:08of VR I have to ask about broadly the
51:12sentiment of VR being a new Computing
51:14platform and as you mentioned when you
51:17started sandbox in 2016 it existed back
51:20then so we're now in 2023 and I think
51:23there have definitely been some
51:25impressive strides in the industry but
51:28the challenge that many people would
51:30make about VR is that it still remains
51:32in this zone of novelty and so I guess
51:35the way I pose the question is how do we
51:38change VR from being a novelty to a
51:41necessity we have to really double down
51:44on content in a way that can really
51:46extrapolate the power of VR
51:49because if we look at say the consumer
51:51VR Market what you're competing with not
51:53us you're competing with fortnite you're
51:56competing with you know your console
51:59your PlayStation 5 your mobile phone
52:01does someone entering their home want to
52:03put on their headset before anything
52:06so to do that you're going to have to
52:07have a 10x content that can drive people
52:10to really want to put on their house at
52:12the moment to get home and that's a very
52:13hard thing to do but I feel like over
52:16time we'll get there
52:18but they have to be a Content that's
52:19just really native to VR that cannot be
52:21replicated across the phone or the PC or
52:24the or the TV screen and I think people
52:27have been trying to figure out what that
52:28is and eventually they're going to get
52:30it and more people will start using um
52:32consumer VR headsets when I think about
52:34how word positions uh like out of phone
52:36VR say compare to in-home VR I think
52:40what we're seeing is the evolution of
52:43in consumer VR you're seeing that um you
52:47know vrs has not been plugged into the
52:49PC anymore uh consumer has been very
52:51light weighted and over time just might
52:53be a headset that you can actually take
52:55outside and go wherever you go it's very
52:56highly accessible now to do that which
52:59is fine is they sacrifice uh immersion
53:02like deep immersion for it which might
53:04be okay for the product lines you're
53:05building for us we're going to double
53:08down an inversion we're going to make it
53:09as real as we can and there's still a
53:11lot of tricks in our bags we haven't
53:13used yet so if you want to have like a
53:16great experience with um with your
53:18friends or family and to be really
53:21absorbed in a world that's where sandbox
53:26you're saying that you don't feel like
53:28you're competing directly with an Oculus
53:31for example you're competing actually as
53:33we discussed before or more so with the
53:35movie theater would you say that's an
53:37accurate depiction yeah we're definitely
53:39in the out of home realm that is
53:42different from what the needs are in
53:44home which kind of makes sense because
53:47when you think about out of home the the
53:50audience and these are different right
53:51usually when it's out of home it's like
53:53you want to invite other people to go
53:55with you there might be a reason to go
53:57and you really want to cater to that
53:59reason and make it really worthwhile and
54:02whatever you have that's out of home
54:04must be 10x of what you can get at home
54:06otherwise people will just do this at
54:09so you can say movie theaters but to
54:12degree it's any type of experiential
54:14that's outside but I wouldn't say it's
54:16directly in competition I say it's more
54:19like we're working together to just
54:21bring people outside and if we know
54:23anything about the pandemic that is
54:25really important for people to go out
54:28and socialize I agree and I love that
54:31you're adding to the Matrix of things
54:32that you can do with friends which
54:35aren't just eating and drinking and
54:37that's been a little qualm of mine
54:38recently which is when I look at what I
54:41do with my friends and I think many
54:44that's the tendency is to just go hey
54:47let's go for dinner let's go for drinks
54:48I also grew up loving games and loving
54:51the activity of you know solving a
54:53problem with friends or doing a sport
54:55with friends and I've found as I got
54:57older that became either less available
54:59or just less obvious less of the Habit
55:02that um people had and so I love that
55:05this is an opportunity to venture back
55:07into that realm in person but I think
55:10recently I saw a number where sandbox
55:12has sold maybe a million tickets in the
55:17what do you think it would take for
55:19sandbox to go from 1 million to 10
55:21million or even 100 million in a year is
55:23it just the content Matrix that you
55:25mentioned before or is it some other
55:27thing maybe it's the generation that
55:29grows up with sandbox maybe it's the
55:31price point what do you think it would
55:33take to 10x the business for us it's
55:35just getting more locations because in
55:37the end of the day it's a retail
55:39business that's constrained by space and
55:41time so as long as you can solve that
55:43then we can have more people playing
55:45sandbox and with more people playing
55:47sandbox we can have the acceleration
55:50and well basically to convince people to
55:52bill for sandbox is to show that first
55:55this is a great product that people love
55:57all over the world and that is a very
56:00great business for people to run that
56:01can generate a healthy return I'm
56:03curious to know throughout the journey
56:04from when you first started sandbox to
56:07today which were different places are
56:11you surprised by anything have you seen
56:13anything in the consumer Behavior the
56:15buying Behavior the way that people
56:17interact with the product itself that
56:20has surprised you in terms of you know
56:23this is a little different to my
56:24original Vision but I'm leading into
56:26this and it's helping me build my
56:28business in a better way when we first
56:30started we thought that we created say a
56:32VR escape room that that was going to be
56:35the extent of what we built and that it
56:40I guess it's more of um a product that
56:44is shared on many different occasions
56:46we've seen people hold bachelor and
56:48bachelorette parties we've seen
56:50obviously birthdays people out of town
56:54you know date nights it's just a lot of
56:56reason to use sandbox as a way to have
57:00we even done a wedding proposal or a
57:04couple in sandbox because that's when
57:07they first met they actually went and
57:08played sandbox so it became kind of like
57:11a conduit for people to to really meet
57:14and have a great time and get to know
57:15one another so that was really
57:17surprising for us and I think another
57:20facet that we found surprising was when
57:22we did the highlight videos we thought
57:24great this is something that will work
57:25really well people share on Facebook you
57:28know I'm at that generation where
57:29Facebook is still a big deal to me
57:30nowadays people are splicing our videos
57:33and putting it on Tick Tock and we're
57:35getting like 10 million views 15 million
57:37views and and it turns out that what we
57:40created was sort of an expression that
57:43they can use to you know to Showcase
57:46themselves and the light that they have
57:48and we're like wow we can really uh
57:51provide more of that over time and how
57:53we can really amplify that yeah and I
57:55love that that was such an early
57:56addition to the sandbox product and so
58:00it's fascinating to see how that's
58:02continued on throughout so many years
58:04yeah like we couldn't have done that
58:06without that you know trial period of
58:09like running out of money and figuring
58:10out how can we get people to come to a
58:13location that has no foot traffic so
58:15constraint breeds creativity I think
58:17that's a great place to end off but I
58:19will give you the mic Steve if there's
58:20anything else that you want to mention
58:22maybe particularly for Founders who are
58:24in those early stages they may be
58:26hitting similar roadblocks they may be
58:29asking the question of whether they
58:30should continue on whether they should
58:32pivot and I think again your story is
58:34just so emblematic of what the startup
58:37Journey can be like versus you know from
58:39the outside it can look like an
58:41overnight success so yeah any any final
58:43parting thoughts there from my
58:45experience I think sometimes you know
58:48kind of throwing let's say spaghetti on
58:50the wall is something that some Founders
58:52might do you know trying to figure
58:54things out to a degree that's important
58:56but once there's enough conviction
58:58behind it the need to be able to grind
59:01and persevere on a few focused area
59:05I can't stress how important that is
59:07I mean when I think about us pre-product
59:10Market I mean there were a lot of things
59:13we could have done we could have like
59:14amplify our Hardware we could have
59:17um made better design on our store we
59:20thought those were cool but those aren't
59:22game changing we had to figure out how
59:25do we get people to come to our store
59:26without good traffic right that was one
59:30place that we doubled down on and we
59:32created a shareable experience uh like a
59:35highlight video because it was very easy
59:38for us to just stop at a photo it's easy
59:41to take a photo but we thought no we
59:43have to do something the world has never
59:45seen before so we had to do not just a
59:47video but a video that places real life
59:50with VR but that's not good enough
59:53because we also have to dig deeper and
59:55find what are the biggest elements that
59:58people will react the most to
01:00:00right and so we created a game based on
01:00:02those elements and we capture those
01:00:03elements and we thought that's not good
01:00:05enough we have to be able to once you
01:00:08see the video make sure that you can
01:00:10download the video right away so that
01:00:12level of depth on that one facet was
01:00:15critical to Our Success so that was our
01:00:18pre-product Market phase and during the
01:00:20pandemic was the post-product market
01:00:22phase where we've learned that there's
01:00:25only a few levers that really changes
01:00:27the profit margin of the business it
01:00:30just figuring out what those levers are
01:00:31and just doubling down on it in a very
01:00:33deep way to get the margins up and I
01:00:36think that's really important in the
01:00:37environment like today when fundraising
01:00:39is really hard and you know getting to
01:00:41profitability is key for companies I
01:00:44think I heard you say in another
01:00:45interview that your locations are
01:00:48profitable or at least when you're
01:00:49opening up new locations and to me
01:00:51that's really impressive because I think
01:00:52if people were to guess based on the
01:00:55scope of the business even though that
01:00:56you're many years in that with all the
01:00:58hardware required that wouldn't be
01:01:00profitable but is that right yeah every
01:01:02location that we open up in about within
01:01:05two months of operations are profitable
01:01:07there are some locations that the profit
01:01:09margin is comparable to a software
01:01:11company that's incredible and I think
01:01:13for us the reason why I think we're able
01:01:17to do that is we've created a product
01:01:20that people didn't know they want
01:01:22and we're able to charge a price point
01:01:25that we felt like was fitting to the
01:01:27product is 50 to 60 dollars per person
01:01:29per ticket but when we look online and
01:01:31people ask about the price like it's
01:01:33totally worth it yeah as we talked about
01:01:35before for this idea of an in-person VR
01:01:39experience that wasn't a comparable
01:01:41category and so you got to set the
01:01:43pricing terms for that category based on
01:01:46the value you delivered and honestly I'm
01:01:48sure you've done a bunch of testing on
01:01:50this but it wouldn't surprise me if you
01:01:51could charge 80 or 100 for a visit
01:01:54because it does feel fundamentally
01:01:56different than let's say a twenty dollar
01:01:57movie experience for us it was a very
01:02:01organic process we started at thirty
01:02:03dollars and then during the weekend it
01:02:05was booked out two three weeks in
01:02:06advance so we try to like control the
01:02:08volume and we adjust it and it kind of
01:02:10peaked around thirty eight forty dollars
01:02:12and then the pandemic happened and then
01:02:14we made all these changes to the product
01:02:16and then when the world reopened up
01:02:18again we're seeing the same pattern but
01:02:20now we're able to to organically adjust
01:02:22it to 50 to 60 and to us like the way we
01:02:25think about a product is we want to
01:02:27create like a thousand dollar product
01:02:28you know that's kind of like the
01:02:30direction and that if they're paying
01:02:31like sixty dollars for it then it's a
01:02:34great time for them so that is kind of
01:02:36how we're thinking and how we're
01:02:38iterating is how do you create something
01:02:39that's so valuable that they think
01:02:42they're getting a good deal as they uh
01:02:45absolutely and you're seeing that based
01:02:47on the bookings being completely full
01:02:49and I'm sure people are going to be very
01:02:52excited to see what happens with your
01:02:53new squid game partnership so we can
01:02:55look forward to that yeah we can't wait
01:02:59thanks for listening to the a16z podcast
01:03:01if you like this episode don't forget to
01:03:03subscribe here on YouTube to get our
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