How Sandbox VR grew from two months of runway to $80M revenue

Executive overview

Location-based VR was dismissed as unscalable by investors and US skeptics alike. Steven Zhao built Sandbox VR anyway — bootstrapping the technology, proving the concept in Hong Kong, and forcing a US launch to silence doubters.

The company hit Series A from Andreessen Horowitz, then lost 80% of its team to COVID, went through Chapter 11, and came back stronger. The core bet: shared physical VR experiences are a new category, not a niche.

Owning the full stack — technology, content, and retail — lets Sandbox iterate faster and build unit economics that scale.

From mobile games to VR pivot

• Led Blue T Games in Hong Kong; grew to 40 people making PC and mobile games
• Failed to adapt to mobile fast enough; lost competitiveness in the transition
• Lesson: build for what will be popular in 1–2 years, not what is popular today
• Spotted VR heating up in 2015; founded Sandbox to apply game-dev skills to a new medium
• Consumer VR headset market didn't generate enough revenue to sustain the company by end of 2016
• Pivoted to location-based VR: full-body experiences for groups in physical retail spaces

Building with minimal resources

• Two months of runway remaining when pivoting; investors wouldn't fund a Hong Kong team building physical retail
• Reduced camera hardware costs through custom software for full-body tracking — a constraint that later lowered per-location capex
• Solved marketing with a built-in distribution mechanism: auto-generated highlight videos sent to customers after each session drove word-of-mouth at zero ad spend
• Product-market fit confirmed before launch: test players screamed loudly enough that neighbours knocked on the door

Getting to Series A

• Funded by Gobi Alibaba after proving the Hong Kong location; used capital to refine unit economics and start franchising
• US investors said the model would not translate outside Asia; Zhao opened in San Mateo specifically to disprove this
• Mark Andreessen and Ben Horowitz tried the product; Andreessen Horowitz led the Series A
• Scaled to nine US locations by December 2019; flagship store opened in San Francisco

Surviving COVID

• All locations shut in March/April 2020; timeline for reopening unknown
• Reduced headcount by 80%; further attrition followed in subsequent months
• Filed Chapter 11 bankruptcy to renegotiate retail leases with landlords
• Used the shutdown to fine-tune technology, operations, and content to maximise post-reopening margins
• Focused leadership energy on maintaining team vision and morale through the closure

Post-COVID recovery and Series B

• California stores reopened in 2021; customers returned immediately — fully booked online even while malls were otherwise empty
• Used that demand signal to negotiate landlord-funded new locations
• Raised Series B on the strength of the recovery trajectory
• Grew from ~13 locations at Series B to 47 locations today

Growth strategy and vision

• Content partnerships with Netflix: Squid Game and Rebel Moon experiences live or in production
• Flywheel: more locations → more reinvestment into content → more demand → more locations
• Franchise model accelerates location expansion without full capital outlay
• Long-term vision: thousands of neighbourhood locations; Sandbox as the new movie theatre
• Home VR headsets and location-based VR seen as complementary, not competing