00:07:22 · Steven Zhao
[00:07:22] S7: I'd be able to interact closely with friends. And to us, like, you know, I grew up watching The Matrix. It's like, hey. Do we have the technology to actually create The Matrix? And then we look backwards like, hey. We do. So we did a regular consumer game, and we basically iterated on what The Matrix looked like. Come the end of twenty sixteen, we launched a consumer game. It was like a top 10% best selling game, but the market just wasn't there. Like, we weren't able to make enough revenue to keep the company going. So at the end of twenty sixteen, like, all our bet was putting into building this other project, which is basically... It's now Sandbox VR, location based VR experience for a group of friends to play together. But for us, that was our pivot. At that time, it was what we call the winter of VR. The Christmas sale didn't live up. People thought the hype of VR, us trying to race in 2017 was essentially impossible. So we had just two months of runway left, and then I really wanted to build, you know, this physical space in VR. None of the investor came in. One of them, investor, would ask us, well, you're just a team of six people. We didn't have a big team. So that was one big challenge we had. The second challenge we had was you are not located in The US. There's a geography challenge. You know, our team is based in Hong Kong, and it comes to a certain type of perception, but really, like, you know, you're not in the dominant market. How do we know that this is something that can work in a different country? So for us, we have to build our technology, build our content, and build our retail location. So there's not a lot of money to come around. We have to be very resource creative. And, you know, for us is how do we use technology to solve something that can be replaced by using a lot of hardware. So for instance, in order to do full body tracking, you need a lot of cameras. But each camera were very expensive, so we spent a lot of time figuring out how to use software to minimize the amount of cameras. And this turns out to be a blessing because it was very important later down the road as we scale that every location will be as low cost as possible. Another challenge we had was in terms of being resource constrained. We try to figure out how to either get people to come to our location.
00:09:21 · Steven Zhao
You know, one of the hardest thing is marketing our business. As a small company, you don't have a big marketing budget. So we had to be very creative. Like, how do we get people to come? So we decided that, hey. Why don't we productize it? Why don't we make it so that we create a software video that after you come and play, we'll give it to you? And this video is gonna be capture the most embarrassing and funny moment of you playing with your friends, and then you can easily share on social media. And when we created that, every customer that comes in start putting it on social media, and it generated an insane word-of-mouth. So that taught us, like, two important thing. Number one is every problem is, looking really deeply into it, like, doctor really analyzing it. There's probably a creative way to solve it with less resource, but also to get a much better outcome. And the other thing that we've learned is it's not only important to just build a product, but it's also really important to build a distribution strategy for that product. So at that time, I took all the money I had and I put it into Sandbox. And then in six months' time, we built the technology infrastructure, and we opened a really small shop in Hong Kong. And I remember vividly, there's a story where we try to hire a game producer, and he asked how can Sandbox beat Sony or Nintendo or any big VR players in The United States? And, of course, coming from a Hong Kong company where we never seen success in Hong Kong at that scale, that was a very valid question. And what I told him was, I always believed that in order to make a big change, you have to have a direction that's uniquely different. And for us, we believe that what we are building is something that no one else in the world is doing right now. The moment we felt like we had product market fit was during a test run before we even launched a product. My friends came and played and within experience, they were like screaming and yelling and so loud to the point that the neighbors came knocking on doors saying, hey, is everything alright? Like, we didn't know the type of visceral reaction that customer would get. And we felt like that visceral reaction is something that has never been done before. And we're like, okay. There's probably something there. So after we got then a product market fit in our one
00:11:23 · S0, S1, S2, S3, S4
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00:12:30 · S4, S5, S6
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00:13:03 · Steven Zhao, S8
[00:13:03] S7: Hong Kong location. We got funded by Gobi Alibaba. That allowed us to really build out our location, to really find to our unique economics, to restart franchising. And at that time, things were going well. But one of the biggest feedback that we've gotten is like, well, this works in Hong Kong. It could work in Asia, but this probably would not work in The US. That kinda pissed me off. So I thought, okay. You know what? We're gonna bring this to The US. And we decided to open in San Mateo in the heart of Silicon Valley. We put the location there, and people came and played. Many of the people there, if not all of them, it was like, wow. We never experienced anything like this before. And pretty soon, I remember Marc Andreessen and Ben Horowitz, they came and tried it out. The partners did. And they're like, yeah. This is really awesome. We're gonna bet on you. And that became my series a. And the funding was able to allow us to really scale out the business and open about nine locations across The US. And I remember we're sitting here in a San Francisco downtown location. This was at December 2019. We're, like, very excited, you know, and this is our flagship store. We're able to share this with the world. And, of course, we're ready for the next stage, which is get to series b. But a couple months later, the whole world shut down. [00:14:10] S8: We have a new name for the coronavirus. The World Health Organization has officially called it COVID nineteen.
00:14:26 · Steven Zhao
[00:14:26] S7: Around March, April twenty twenty when the pandemic hit, all the stores that we had had to close right away, and we didn't know how long this was gonna last. I thought it was like it was like a funny joke. It's already really hard to run a startup, and it's really hard to run a retail startup. The first thing we did as a company, which unfortunately was we had to downsize. It was pretty dramatic. We lost about 80% of our team, and you can imagine morale was like at all time low. And the people that stayed like in the months following that, a good amount of them left as well. So it was really number one we had to do was keeping the team motivated, kinda having that vision of, like, hey. We can survive COVID. What does this mean for Sandbox? What does this mean for us? And it's just repeating that message and just kinda, like, being a cheerleader and be, like, hey. We can fight through this. You know, this is one of the biggest tests for any of us. It's a tough story. Something that you'll be proud about even if you fail. And that's what we wanted to set was having that really strong story of the future. And the last part is we had to go through chapter 11 bankruptcy because as a retail business we have a lot of leases and there's no way to get out of leases at that time. So we had to go through chapter 11 to get an emergency and work through with our landlord to figure out how do we survive out of this. That was just a lot of collaboration with people that we owe money to. We work with different lawyers across different group. But during that period, we also took the opportunity to really fine tune our business, like, to the minor, minor details. Like, how can we build the most economically strong retail that we can, you know, in terms of how we improve our technology, our operations, our content so that when we do reopen back up again, not only will we have a very strong... People will come back in drool, but we also have very strong profit margin because that's what we need to come out of this. And around that same time, in 2021, it's kinda when the world started to open up again, especially for our stores in California. And the moment they did, people came back in droves. I remember there was an incident where if the mall was completely empty, but 100% of customers booked ahead online.