How I Built an $80M/Year VR Gaming Startup From Bankruptcy | Sandbox VR, Steven Zhao

What were the initial challenges Sandbox VR faced?

Sandbox VR faced significant obstacles in its early stages, battling both market skepticism and financial constraints.

• Market Skepticism:

  • Many doubted a Hong Kong-origin startup could compete with industry giants like Sony or Nintendo.
  • Critics believed its success might be limited to Asia and fail to resonate in the US market.

• Financial Constraints:

  • The company had to launch with limited capital and resources.
  • Challenges included building technology, content, and retail locations on a tight budget.

• Geographical Challenges:

  • Being based in Hong Kong, the team faced perception issues and logistical hurdles in penetrating the US market.

These hurdles demanded innovative solutions and strategic pivots to establish Sandbox VR as a frontrunner in the VR gaming startup space.

How did Sandbox VR pivot from its initial business model?

Sandbox VR's journey started with developing VR consumer games. Despite launching a consumer game in 2016 that ranked within the top 10%, the market wasn't lucrative.

"We weren't able to make enough revenue to keep the company going."

Recognizing the market's nascent state, the company reimagined its business approach. The shift from creating consumer VR games to offering location-based VR experiences was pivotal. This transformation allowed groups of friends to engage in immersive, shared VR adventures.

Inspired by movies like The Matrix, the team envisioned a fully immersive experience. Realizing that consumer headsets alone couldn't deliver the desired level of interactivity, they decided to build physical spaces where people could interact in VR.

"We wanted to be fully immersed. We want to be able to interact closely with friends."

This strategic pivot was fortified by the uniqueness of their concept, something no one else was doing. The decision to focus on location-based experiences allowed Sandbox VR to create a niche market and meet future trends head-on.

The transition marked a significant turning point, transforming the company into a frontrunner in immersive VR experiences.

What innovative strategies did Sandbox VR use to market its product?

Sandbox VR employed several creative marketing techniques to attract customers without a hefty budget.

• Social Media Sharing: The company created software that captured gameplay videos, highlighting the most entertaining and embarrassing moments.

This encouraged players to share their experiences on social media, generating significant word-of-mouth promotion.

• Productizing Experiences: After each gaming session, customers received a video capturing their in-game moments.

This not only delighted users but also served as a powerful, viral marketing tool when shared online.

• Leveraging User-Generated Content: Encouraging customers to share their gameplay videos amplified Sandbox VR's reach and authenticity.

• Focus on Visceral Reactions: The uniquely intense and engaging experiences offered by Sandbox VR led to organic buzz as players discussed their adventures with friends and family.

These innovative marketing strategies were pivotal in propelling Sandbox VR into the spotlight and establishing a loyal customer base.

How did Sandbox VR expand into the US market?

To enter the US market, Sandbox VR embarked on a strategic journey, beginning with the opening of their flagship store in Silicon Valley.

• Flagship Store in Silicon Valley:

  • Opened in San Mateo, the heart of Silicon Valley, to draw attention from tech enthusiasts.
  • The location was pivotal, allowing the company to showcase its unique VR experiences to a broader audience.

• Gaining Support from Major Investors:

  • High-profile investors like Mark Andreessen and Ben Horowitz experienced the VR setup firsthand.
  • Their endorsement was crucial, leading to a successful Series A funding.

This calculated expansion into the US was essential. Establishing a presence in a key tech hub and securing influential backers solidified Sandbox VR’s position in the market.

How did Sandbox VR survive the COVID-19 pandemic?

Sandbox VR faced unprecedented challenges during the COVID-19 pandemic but managed to navigate through the storm with strategic actions.

• Downsizing:

  • Faced with immediate store closures, the company had to downsize drastically.
  • Unfortunately, about 80% of the team was let go, affecting morale deeply.

• Chapter 11 Bankruptcy:

  • To handle unmanageable lease obligations, they sought protection under Chapter 11.
  • This involved intense collaboration with landlords and legal teams to restructure debts and leases.

• Fine-Tuning Business Operations:

  • The downtime was used to meticulously refine their business model.
  • Enhancements were made to technology, operations, and content, ensuring stronger profit margins upon reopening.

• Customer Engagement Strategies:

  • Once restrictions eased, meticulous plans were put in place to safely attract customers.
  • Remarkably, even empty malls saw Sandbox VR locations fully booked, demonstrating successful execution.

These determined efforts allowed Sandbox VR to emerge stronger, poised for rapid growth once the world began reopening.

What are the future plans for Sandbox VR?

Sandbox VR has ambitious plans for the future, aiming to solidify its position as a leader in the VR space.

• Content Development:

  • Continual creation of captivating VR experiences.
  • Working with renowned IP holders to integrate popular franchises organically.
  • Innovating new content to keep users engaged.

• Franchising:

  • Expanding the franchise model to reach wider audiences.
  • Increasing the number of locations globally.
  • Reinvesting franchise revenue back into technology and content.

• Expanding Locations:

  • Aiming to have a Sandbox VR venue in every neighborhood.
  • Targeting thousands of locations in the next decade.
  • Making immersive social experiences accessible to more people.

By consistently enhancing their offerings and growing their presence, they aim to provide unparalleled VR adventures to users worldwide.