When Steve Zhao was looking for investment for his virtual reality arcade business, he did something unconventional: He lined up all his meetings back-to-back and had the investors sit together in the same waiting room.
It was part of the young founder's "FOMO" strategy — fear of missing out — to build a hype around his business.
And it seemed to work.
Within five days, Sandbox VR closed out its Series A funding round with a total of $68 million, led by famed Silicon Valley venture capital firm Andreessen Horowitz. That took the company's total funding raised to $71 million.
"Investors are emotional beings, just like everybody else," Zhao told CNBC Make It. "It's important for VCs (venture capitalists) to see you're in demand."
It was the idea of Siqi Chen, the company's chief product officer and the brains behind journaling app Heyday.
As a serial entrepreneur, Chen knew the value of creating demand for a product, Zhao explained at RISE tech conference in Hong Kong. So they made it clear that their immersive gaming experience was hot property.
It was just the boost the young entrepreneurs needed to make it big, explained 36-year-old Zhao.
But they felt they had to build a following in the U.S. to really get their start-up off the ground.
"We started Sandbox VR in 2016, when the hype of VR was very palpable," said Zhao.
The engineer, who had relocated from the U.S. to Hong Kong for business, had seen the growing popularity of VR while working on a separate mobile gaming app, and decided to pivot.
At that time, other immersive VR gaming attractions — such as The Void and MindTrek VR — were beginning to emerge in major cities. But Zhao dreamed of creating an experience that put greater emphasis on in-headset interactions between players.
"There were a lot of VR experiences like what you experience at home. Then there were full immersive ones. We didn't do any of that. We felt the game experience was not about the environment, but your friend," said Zhao.
However, he lacked conviction from investors.
"Our business felt like a paradox. Lots of money was going into VR in the U.S., Japan etc., but not Hong Kong. People didn't see the VR tech potential in Hong Kong — they thought it would only have a local reach, " he said.
While Hong Kong has long been recognized as a global financial center, it has so far struggled to gain traction as a major start-up hub, particularly with regard to emerging technologies such as VR and artificial intelligence.
So, with their team of six having successfully built a pop-up venue and amassed a small cult following for its games in Hong Kong, they decided in 2018 to take their business stateside — to the mecca of VR, Silicon Valley.
"We thought 'okay, this is the VR center globally, we can either fail really hard here or not,'" said Zhao.
But, rather than fail, they launched a Sandbox VR center in San Francisco and quickly signed up investors to get on board.
"That was the second paradox: People were curious about us being from Hong Kong, so they were interested in investing," said Zhao.
Before long, the company attracted investment from U.S. venture capital firms Floodgate Fund and Andreessen Horowitz, and Stanford University with whom Zhao signed a deal at 1 a.m. in a local In-N-Out Burger restaurant in San Francisco.
That funding round, which closed in January 2019, took Sandbox VR's total funds raised to date to $71 million.
Zhao said those venues enjoy around 90% occupancy during peak hours, which are on weekends and in the evenings from 6 p.m.
"It's a fundamentally human experience, so the scope is global. But we're aiming for countries with high GDP (gross domestic product) initially," said Zhao, pinpointing other parts of the U.S., the U.K., Japan and China. A 30-minute session in the U.S. currently costs $48.
At the same time, Zhao's team of developers, which had grown to 75, started looking for other VR avenues to pursue beyond the traditional zombie, pirate and futuristic franchises.
"Zombies are easy," said Zhao. "Comedy and Esports are really exciting."
It's part of Zhao's grand ambition to create a "new movie industry" of VR content. For that, the entrepreneur will be looking to raise more funds next year.
Perhaps this time, he'll need to find a bigger waiting room.
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