Matt welcomes Stephen Zhao, founder and CEO of Sandbox VR, who shares his journey of building the company amid challenging economic conditions. The episode explores how Stephen's vision for VR gaming evolved from a small startup in Hong Kong to a global presence, despite facing a pandemic and financial hurdles. Key insights include creating unique user experiences, leveraging video marketing, navigating bankruptcy, and maintaining focus. Stephen also discusses Sandbox VR's collaboration with Netflix for a Squid Game experience, offering valuable lessons for founders facing tough market conditions.
About the Guest(s):
Steve Zhao is the founder and CEO of Sandbox VR, a cutting-edge location-based virtual reality (VR) company. With a lifelong dedication to game development, Steve initially founded Bootstrap, a PC and mobile game development studio. His vision led to the creation of Sandbox VR in 2016, a company known for delivering immersive, full-body VR experiences. Despite facing numerous challenges, Steve's leadership has steered Sandbox VR to global success, with locations in multiple countries and partnerships with major IPs like Netflix.
Episode Summary:
In this episode, Matt hosts Steve Zhao, the innovative mind behind Sandbox VR, for an enlightening discussion on the rollercoaster of innovation and survival in the VR industry. Steve shares his journey, from the inception of Sandbox VR in Hong Kong to embracing the vast potential of VR technology. He excitedly details the company's rise and the strategic scaling that turned Sandbox VR into a global name. Steve's story is not just about technology but overcoming the odds in less prominent startup hubs and forging pathways in the VR market.
As the conversation unfolds, Steve reflects on the pivotal moments in Sandbox VR's growth. Emphasizing resilience and focus, he narrates the challenges of expanding into the U.S. and securing notable investments, including a Series A from Andreessen Horowitz. The episode delves deep into their groundbreaking marketing strategies and the transformative challenges posed by the 2020 pandemic. With Matt, Steve explores how these experiences honed his strategic focus, leading to post-crisis triumphs, and exciting collaborations with major entertainment brands like Netflix for projects such as the Squid Game VR experience.
Key Takeaways:
Focus on User Experience: Steve Zhao emphasized the importance of crafting a VR experience that customers would be excited about, pushing the boundaries of technology to create a "minimal viable matrix."
Creativity from Constraint: The necessity to innovate under financial constraints led to Sandbox VR's unique shareable customer experience videos that significantly boosted their organic growth.
Navigating Bankruptcy: Facing the Covid-19 pandemic, Sandbox VR filed for Chapter 11 bankruptcy protection, a crucial step involving operational restructuring to navigate financial challenges.
Revival and Growth: Post-pandemic, a focus on operational efficiency and product optimization led to higher than pre-pandemic profitability and the opening of new locations.
Long-term Vision: Steve stresses the importance of the broader vision over short-term challenges, suggesting that survival and eventual growth can often vindicate temporary sacrifices such as funding rounds at lower valuations.
Navigating the VR Roller Coaster: How Sandbox VR Survived and Thrived Amidst Global Challenges
In the ever-evolving landscape of virtual reality, one story stands out for its dramatic lows and incredible highs — the journey of Sandbox VR under the leadership of Steve Zhao. As a pioneer in offering full-body VR experiences, Zhao's story offers invaluable insights into startup resilience, strategic pivoting, and the unyielding pursuit of innovation. Through an intimate discussion with venture capitalist Matt, Zhao shares his experiences navigating the turbulent waters of entrepreneurship, offering lessons in survival, adaptability, and vision.
Building During Down Cycles: Resilience and Adaptability
In the nascent stages of Sandbox VR, Steve Zhao faced an uphill battle, particularly with his company's base in Hong Kong, a location not known for being a startup hub like Silicon Valley. As Zhao recounted, "fundraising kind of outside some of the spirits of the world… is a different type of atmosphere." Despite these heightened initial constraints, Zhao leveraged what he describes as creativity born from necessity. This innovation was evident when they cleverly used highlight videos for social media to drive foot traffic to their VR experiences on the 20th floor with “zero foot traffic.”
However, no entrepreneurial journey prepares one for a global pandemic. Zhao explains, "We lost 110% of our revenue. How can you lose more than 100%? Not only did all our stores shut down, we had to refund all our customers." Sandbox VR resorted to survival mode, necessitating hard decisions such as reducing the company workforce by 80%.
Zhao's tale is a testament to the resilience required to bounce back from setbacks that could easily shutter a business. His experiences highlight a striking lesson for founders facing the contemporary challenges of 2023's economic strains—adapting swiftly and with determination can turn survival into a resurgence.
Customer-Centric Approach: Innovation from Constraints
Zhao's strategic inclination to understand the VR customer experience and deliver it directly became the core foundation powering Sandbox VR's success. “In the beginning, we just focused on a user experience,” Zhao recalls. His ambitions were not just to ride the VR hype wave but to innovate a product with lasting appeal—"can we actually build a minimal viable matrix?"
Sandbox VR overcame their initial hurdle of low location visibility by creating shareable adventure highlight reels. The strategic innovation not only enhanced user experience but also essentially transformed customers into brand ambassadors, catalyzing a viral growth strategy. This change spearheaded a transformation, booking their store “100 days in a row.”
Pivoting from crisis management during the 2020 pandemic, Zhao's team used the downtime to heighten their focus. Zhao notes, “there were just maybe about 10 things that we've done with our product,” that ultimately improved efficiencies and customer satisfaction when the market reopened.
Strategic Scaling and Relentless Focus on Core Operations
Zhao’s path from humble beginnings to the helm of a multimillion-dollar VR enterprise offers noteworthy insights into scaling successfully. Once tasked with scaling from one small shop to multiple international locations, Zhao stressed the learning curve for operational business: "how do you build a great business around it?"
Faced with economic calamities like the pandemic, Zhao returned to essentials by emphasizing operational excellence and focus. "It's about things that you do that ties correlated to your profit margin," he advises. Zhao was compelled to make challenging decisions even when fundraising was daunting, reflecting a committed focus on retaining and enhancing cash flow and extending runway strategically.
This pragmatic approach paid dividends; once Sandbox VR emerged from the pandemic shadows, the rebound was prodigious. "Even much stronger than before the pandemic," Zhao proudly asserts. This success is further underscored by recent collaborations with high-profile IPs such as Netflix for a VR iteration of "Squid Game," affirming Sandbox VR's industry position and growth capabilities.
Surviving and Thriving in the New Global Reality
Steve Zhao's journey with Sandbox VR encapsulates the triumphs and trials of forging ahead in an uncertain world. From the initial bootstrap days in Hong Kong to scaling globally and navigating through a revenue-collapsing pandemic, Zhao's multifaceted experience offers a lens into the requisite innovation and adaptive strategies critical to thriving as a modern entrepreneur.
Sandbox VR's rebound story epitomizes entrepreneurship’s core—relentlessly striving for that vision despite unforeseen challenges. Zhao’s insights and strategies echo broadly beyond the virtual reality market, serving as a blueprint for startups weathering today's unpredictable economic climate. As Zhao poignantly exemplifies, the focus should not be on avoiding crises but readying to transform them into springboards for future growth.