This VR startup impressed Andreessen Horowitz so much that the VC firm flew back from Vegas to hammer out a $68 million deal at In-N-Out

Sandbox VR

• Sandbox VR makes virtual reality experiences which combine off-the-shelf hardware, green screens, and custom content.
• Now it's raising $68 million from investors including Andreessen Horowitz to expand to New York, L.A., Austin, and Chicago. 

In Sandbox VR founder Steve Zhao's thinking, his company goes against all of the major trends in technology and investing.

But Sandbox VR is also a lot of fun when you experience it - which has helped the VR startup raise $68 million from top-tier investors, led by Sand Hill Road stalwart Andreessen Horowitz.

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The round was joined by Mike Mapels from Floodgate, Stanford University, TriplePoint Capital, CRCM, and Alibaba. It's an interesting investment for those firms as interest in early-stage virtual reality investments has cooled lately. But Sandbox VR is a peculiar VR company - instead of making hardware and software that you can use at home, it creates experiences in malls and other public locations that you have to travel to in order to experience content that's not available elsewhere. 

Sandbox VR was started in Hong Kong, where it quickly found an audience. "When we first opened in Hong Kong in 2017, when we opened the location, for the next 60 days we were sold out from morning until night," Zhao said. 

At the time, Zhao was running the Sandbox VR system on the cheap - it uses a lot of pricey VR hardware, and Zhao had to create the software to stitch it together as well as the content that people experience. The company was close to running out of funds at one point. Now the company has 45 employees and a war chest to expand. 

Sandbox VR currently has seven locations in the United States, Canada, and Asia. It's a virtual reality experience - you and your friends gear up, donning some of the latest VR headsets and high-tech computer backpacks, and then you're dropped into a virtual world alongside your friends, whether it's a pirate ship, facing a zombie invasion, or a vision of what Hong Kong could look like in 2088.

Sandbox VR plans to use its Series A to expand its experiences to new locations. It costs about $40 per person for an hour-long experience, which you book online.

It's also going to use the money to create different experiences - games - for people to play at Sandbox locations. "We have locations planned for L.A., Austin, New York, and Chicago, and we've inked multiple deals with Westfield malls across the country," Zhao said. 

Even if investing in new retail locations and content can be expensive, the Sandbox VR team believes that it can keep the new locations booked up with enough new groups to make the investment worth it. 

Kanye West and Marc Andreessen are fans 

Sandbox VR expected a difficult fundraising process, but it was helped by a couple of factors, including that its experiences are basically designed to go viral on social media.

"We are in three sectors that just aren't hot right now, there's VR, which is in nuclear winter, there's content, which is never hot, and there's retail, which basically nobody invests in, and we're a company that's in all three of them at the same time," Zhao explained. 

Part of how Sandbox VR markets itself is through social media. Participants in Sandbox VR get video of themselves all rigged up, and then there's a wipe and they can share a clip of themselves as the characters inside the game.

"Seeing it on Instagram is going to be one of the really killer secrets of this business," Andreeseen Horowitz partner Andrew Chen said."When you are having such a good time, and it creates a video of you and all your friends screaming and ducking and like all this happening and it's so fun, that's this leap that so many people share."

"They've cracked the code on getting new customers in to try the experience, and I think that's really special," he continued. 

Sure, lots of Silicon Valley insiders tried have out the game at Sandbox's San Mateo, California location - but so have some celebrities, like rapper Kanye West, who posted an image of him trying it out.

"He was cool as a cucumber inside the experience, and we were worried, 'Is he having fun?'" Sandbox VR Chief Product Officer Siqi Chen told Business Insider. "But he came out of there super super excited, he's tried a bunch of VR, just like me, and when he tried Sandbox, it was just different."

"It was pretty surreal to walk through the mall, Kanye and [Andreessen Horowitz partner] Ben [Horowitz] were there, it was insane that day," he continued. 

Another group of players that loved the experience ended up being the partners of Andreessen Horowitz, which eventually led the startup's Series A. SandBox VR's founders said that Andreessen made an "offer you can't refuse," although the company isn't disclosing its valuation. 

The overall vision for the company is to create a holodeck, like in Star Trek, a concept that's alluring to technical and nerdy valley venture capitalists. "The next day after trying Sandbox, some Andreessen partners flew to Vegas to try out other VR experiences. That same night, they flew back and called us up to meet at In-N-Out, and after 3 hours, at 1 a.m. in the morning, we hammered out a deal on a napkin," Zhao said. 

"[Venture capitalist] Marc [Andreessen] told us he believed in the HoloDeck, then he asked how much would it cost to have one in his house," Zhao said. That might not be possible, but soon there will likely be a location in a mall near him.