By playing, you agree to uListen's Terms and Privacy Policy and YouTube's Terms of Service.
a16zThe Challenge of Replicating Reality with Steve Zhao from SandboxVR
Summaries, chapters, transcripts, and FAQs on this page are made by uListen, not YouTube.
CHAPTERS
- 0:00 – 6:25
Teaser and Steph's First-Hand Sandbox VR Experience
Steph Smith introduces Steve Zhao and the obstacles he faced, then recounts her own visit to Sandbox VR. She describes check-in, sensors and props, in-game onboarding, the Amber Sky space experience, and the highlight video afterward.
- •Steve's founding story includes putting in his life savings, a bankruptcy, and 30+ locations worldwide
- •Players wear sensors on wrists and ankles and enter a green room with a prop closet
- •The game itself onboards players, including reviving a partner by touching their shoulder
- •Amber Sky has players fight enemies on platforms in space, with elevators that separate partners
- •A recap video and score are sent after the experience
- 6:25 – 10:33
Growing Up Building Games and Blue Tea Games
Steve describes growing up with entrepreneur parents in the Bay Area and making games from age 10. He explains how Blue Tea Games funded his college tuition after the 2001 crash, and why it stagnated after the shift to mobile.
- •His parents' entrepreneurial path showed him that success takes time
- •He began making games on a computer around age 10
- •Blue Tea sold shareware games online and paid for his tuition
- •The team grew to 40 and was bootstrapped, but he was slow to adapt to mobile
- •The company stagnated until 2016, when VR took off
- 10:33 – 15:36
Chasing VR and the Minimum Viable Matrix
Steve explains how fear of missing out after mobile pushed him into VR in 2016. He describes betting on what people would want in 10 to 20 years, the idea of a "minimum viable matrix," and hedging between games and a location-based product.
- •Missing the mobile era drove the urgency to get into VR early
- •His team's Unity and multi-platform experience made the move easier
- •Don't build what's popular today; figure out what people want in a year or two
- •The Matrix inspired the goal of a minimum viable matrix
- •Games and location-based were pursued in parallel as a hedge
- 15:36 – 20:11
VR Winter and Betting His Life Savings
Steve's VR game launched in December 2016 but earned little, and funding dried up in 2017. With no investors willing to back a demo, he put nearly all his savings into the company after getting his six-person team's commitment.
- •The game did well on Steam and Oculus but generated little revenue
- •2017 marked the start of the VR winter
- •Investors and angels declined to fund a demo
- •Competitors raised far more money but focused on interacting with the environment rather than friends
- •The six-person team voted to fight on for six months
- 20:11 – 25:06
Building the MVP and Hong Kong Launch
Steve describes how a tiny budget forced hard-coded software and a cheap, low-traffic location in Hong Kong. That constraint led to the highlight video, and a viral social post then booked the space out for 100 days in a row.
- •The MVP had no vests, custom props, or nice space
- •Cheap rent in a zero-foot-traffic building drove the highlight video idea
- •The experience was marketed as a hyper-reality escape room
- •A reporter's viral post led to 100% occupancy for 100 days
- •The traction helped secure the first institutional seed round
- 25:06 – 29:33
Surviving the Pandemic and Chapter 11
The pandemic cost Sandbox more than 100% of its revenue because of refunds, forcing layoffs of about 80% of the team. Steve explains how rallying stakeholders, supportive investors including Andreessen, and Chapter 11 kept the company alive.
- •Revenue fell 110% because stores closed and bookings were refunded
- •About 80% of the team was let go during a Series B raise
- •Investors, employees, and creditors were asked to agree on a plan
- •Chapter 11 provided protection
- •Pivoting was considered but rejected because the product was proven and some countries reopened early
- 29:33 – 32:50
Focused Recovery and Landlords Funding Expansion
Steve explains how the company focused on a few high-impact levers, such as speeding up highlight video generation, and then rode pent-up demand in 2021. He describes how data from empty malls convinced landlords to fund new locations.
- •Measuring everything against margin and focusing on outsized outcomes
- •Highlight videos handed over before leaving give a 10x chance of sharing
- •Shrinking video generation from about 20 minutes to 2 minutes
- •Landlords normally give 5 to 10% tenant allowances, but some funded the projects entirely
- •Chicago data showed full online booking despite zero foot traffic
- 32:50 – 36:13
Positioning Sandbox as the New Movies
Asked about competitors, Steve says Sandbox is carving a new market and compares itself to movies, but active and social. He says customers come back for new experiences, often for dates and family time, rather than chasing high scores.
- •Sandbox sees itself as a new market similar in structure to movies
- •Experiences are active, outcomes vary by who plays, and sharing is built in
- •Some titles approach average US theatrical box office revenue
- •Most customers return for new experiences; a small group chases high scores
- •Date nights and family outings are popular
- 36:13 – 42:25
Content Pipeline, Build vs. Buy, and IP Partnerships
Steve explains that titles take about 12 months to build and that Sandbox built its own platform out of necessity. He describes plans for a third-party developer ecosystem and the Star Trek and Netflix Squid Game partnerships, enabled by wireless streaming.
- •A title takes about 3 months of pre-production and 9 months of production
- •More locations should attract third-party developers
- •Off-the-shelf VR games would not suit a full-body shared-space experience
- •Wireless streaming is compared to sound arriving in silent films
- •The Squid Game partnership fits the platform's multiplayer, full-body strengths
- 42:25 – 47:31
Immersion, Believability, and Low-Latency Tech
Steve describes how the zombie experience drew half female players who said it felt like real life. He explains that outside-in tracking, low latency, and patented prediction and batching techniques make the experience believable.
- •The Deadwood Mansion zombie game surprised the team with a 50% female audience
- •Players said it felt like real life, not a game
- •Screaming forced the IMAX New York location to close by 5 PM
- •Outside-in tracking and low latency keep players from remembering it's a simulation
- •Prediction and data-batching techniques keep the experience smooth
- 47:31 – 51:04
Hard Mode: Hardware, Content, and Moving Beyond Social
Steve discusses building hardware and software together, noting early reliance on off-the-shelf hardware and plans to invest more in it. He says the focus is doubling down on content and rebuilding the operating system as white label so others can build non-social experiences like surfing training.
- •Early on, off-the-shelf hardware let the team focus on software
- •The company now builds its own haptic wands and wireless props
- •Future growth centers on doubling down on content
- •The first five years are likened to a silent film, with wireless streaming adding sound
- •A white-label operating system could let developers build things like surfing training
- 51:04 – 58:17
From Novelty to Necessity and Scaling Locations
Steve says consumer VR needs 10x content native to VR to compete with consoles and phones, while Sandbox doubles down on immersion out of home. He says scaling comes from more locations and discusses what has surprised him, such as celebrations and TikTok sharing.
- •Consumer VR competes with Fortnite, consoles, and phones
- •Out-of-home experiences must be 10x better than what you can do at home
- •Sandbox is complementary to experiences like movie theaters and brings people outside
- •Growth is constrained by space and time, so more locations are the lever
- •Customers use Sandbox for bachelor parties, birthdays, and even a proposal
- 58:17 – 1:03:17
Founder Lessons, Profitability, and Pricing
Steve advises focusing deeply on a few areas once there is conviction, citing the highlight video before product-market fit and margin levers during the pandemic. He says new locations are profitable within about two months and describes how ticket pricing moved from $30 to $50-60.
- •Constraint breeds creativity
- •Once conviction is there, grind on a few focused areas instead of throwing spaghetti at the wall
- •The highlight video was refined to be something the world had not seen
- •Locations are profitable within about two months, some with software-like margins
- •Pricing rose from $30 to $50-$60 with the goal of a $1,000-value product
