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Katy Perry, Will Smith invest in Hong Kong virtual reality startup

Sandbox's fully immersive experience gains thumbs up from Hollywood A-listers

Sandbox VR gives players an opportunity to immerse themselves in virtual reality escape rooms powered by its full-body motion capture technology. It plans to open more than 16 U.S. stores by the end of 2020.   © Sandbox VR

PALO ALTO, U.S. -- A Hong Kong-headquartered startup that specializes in fully immersive virtual reality -- no clunky controllers, no long cables -- has just added some big Hollywood names to its investor list.

Justin Timberlake, Katy Perry, Orlando Bloom and Will Smith have invested in Sandbox VR, the Nikkei Asian Review learned on Tuesday.

Together with Silicon Valley venture capital firm Craft Venture, the A-listers have committed a total of $11 million in the startup.

Other notable investors include Japanese football player Keisuke Honda, former Walt Disney President Michael Ovitz and the Andreessen Horowitz Cultural Leadership Fund. The latest capital injection brings the total funding of the company to $83 million.

Founded by Steve Zhao in 2016, Sandbox provides players an opportunity to immerse themselves in virtual reality escape rooms powered by its full-body motion capture technology. With different science-fiction and fantasy scenes, players can fight aliens or sail as pirates in Sandbox's green rooms after being suited up with motion trackers.

Players are geared up with motion trackers in Sandbox's green room   © Sandbox VR

Virtual reality became one of the most talked-about buzzwords in the U.S. tech scene after Facebook paid $3 billion for VR headset maker Oculus VR in 2014. Tech giants -- including Google, Samsung and Sony -- raced to bring consumer headsets to the mass market. Venture capitalists poured billions of dollars into the sector.

However, the hype started to die down due to the slow adoption of commercial use. A 2014 forecast had projected VR to become a $4.4 billion market in two years. The actual figure for 2016 was just $1.8 billion, and the adoption rate in the U.S. hovered at 6%, according to global market research firm Ipsos.

The problem, Zhao said, was that the user was "chained" to the platform.

"When I looked into the consumer VR headset, I tried it and I was sitting down and was tethered to a computer, and I'm holding two controllers. No, this is not VR!" Zhao recalled of his founding days. The user would be in a digitally simulated scene, but without the ability to see one's own body or to be able to roam freely.

Sandbox decided to create a fully immersive VR experience by using motion capture technology that is widely used in big-budget action movies.

Despite the cooling of the VR boom, Zhao never doubted the potential of virtual reality and how it could revolutionize gaming and storytelling.

Nikkei visited Sandbox's first store in the U.S. this past summer. The players still need to wear a VR headset, but they can roam freely in the room and see their characters jump, dodge and shoot along with them in their headsets.

"We believe that VR is finally ready to take off as a mass-market phenomenon in malls, where it can be optimized for a social experience," said David Sacks, co-founder and general partner at Craft Ventures.

"We chose the Sandbox team because of their background in game design. Their VR experiences have a level of interactivity --- with both the VR world and other players -- that we couldn't find elsewhere," Sacks said. "We believe that Sandbox VR is poised to become the first VR experience for millions of consumers around the world."

In 2016, Zhao threw in his entire savings of $300,000 to launch Sandbox. He had just suffered a setback, failing to grow a personal-computer gaming company he had founded in Hong Kong in 2013 due to the rise of mobile games.

He opened the company's first pop-up store in Hong Kong in 2016, which soon became a hit. Sandbox caught the eye of e-commerce giant Alibaba Group Holding and took in a $3 million investment.

For further growth, however, the California-born Zhao believed that the company needed to go to the U.S.

"It's hard to get funding if you are just native to Hong Kong," Zhao said. "There are a lot fewer investors in Hong Kong than the rest of the world."

The U.S. was a different story.

Sandbox's first store opened in Hillsdale, California, in Silicon Valley in 2018. Many tech celebrities including Elon Musk were spotted in the store. That is how the company attracted many of its Silicon Valley and Hollywood investors: by asking them to experience the escape room.

"We opened a pop-up store in West Hollywood, Los Angeles, earlier this year and Andreessen Horowitz helped us invite some of the individuals to check it out," Zhao said. They liked it and that was how the relationships began.

Sandbox's pop-up store in Los Angeles   © Sandbox VR

The newly added Hollywood investors are more than just financial backers in Sandbox. The company said the investment will lead future collaborations such as adopting certain movies and other intellectual properties into new types of VR escape rooms. The company has already signed a deal with CBS and will provide a Star Trek-themed experience later this year.

"Their support is a vote of confidence that our platform will one day become the new medium for the future of sports, music and storytelling," Zhao said.

Sandbox is aiming for a rapid expansion in the U.S. to dominate the market before competitors join the race. A tailwind for the company is the strong pull from the brick-and-motor retail industry to collaborate.

For its first store, the company said it has paid nearly nothing in rent to the mall operator since opening, which has significantly cut down operation costs.

When Nikkei visited the location on a Monday morning, two of the three rooms in the Hillsdale store were already occupied.

Siqi Chen, the company's chief product officer, said the venues have more than 90% occupancy during peak hours, which are in the evenings and on weekends. Because of the heavy traffic, the store will soon move to a larger venue in the same mall.

"We found out that over 80% of our customers had never visited the mall in the past year, and for 60% of them it was their first visit to Hillsdale Shopping Center," Zhao told Nikkei. "They came because of Sandbox, and I think the landlords are incredibly excited about that."

The company has partnered with mall operators such as Westfield Malls and will be opening stores in San Francisco, New York, Austin, San Diego and Chicago, with a total of 16 locations planned in the U.S. by the end of 2020.

"The company was born in Asia, so we always look into the region, and definitely Japan and China seem very compelling to us," Zhao said. "But our strategy has been, instead of trying to be everywhere at the same time, we focus on one place, and try to saturate that market."

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