90. The lowest-risk way to scale a start-up | Jake Wilmot-Sitwell

0:00Welcome to All About Business with me, James Reed, the podcast that covers everything about business, management, and leadership. Every episode, I sit down with different guests who bootstrap companies, masterminded investment models, or built a business empire. They're leaders in their field, and they're here to give you top insights and actionable advice so that you can apply their ideas to your own career or business venture. What does it take to build a successful business around experiences people can't get at home? Today on All About Business, I'm joined by Jake Wilmot-Sitwell, co-founder of Sandbox VR UK, one of the leading players in the fast-growing world of immersive virtual reality entertainment.

0:46In this episode, we discuss what it takes to build and scale a hospitality business powered by technology.

1:00Today on All About Business, I'm really delighted to welcome Jake Wilmot-Sitwell. Jake is the co-founder and COO of Sandbox VR. VR stands for virtual reality. And this is a company that offers immersive virtual reality entertainment experiences where users can play video games with their friends. out of several locations now, as I understand it, Jake. Before that, though, before starting this venture in 2020, sort of at the time of the pandemic, Jake works in venture capital and investment, including roles at Hambro Perks and Celica Investments. So Jake, I'm really excited to talk to you and discover more about the world of VR and what you're offering in terms of entertainment and experiences, the sort of experience economy, I suppose.

1:53But what was it that attracted you to virtual reality in the first place? What made you think this was both an opportunity and an exciting area to go and work in? Of course. Well, firstly, thank you very much for having me on, James. It's a pleasure to be here. The start of our journey with Sandbox VR, it was quite a sort of serendipitous beginning. My best mate from university had just flown back from living in Singapore during the height of the COVID pandemic. He rang me up and said, Jake, I've done this unbelievably exciting virtual reality experience called Sandbox VR in Singapore. I think there's an opportunity to bring this to the UK market.

2:37We saw the UK market as a thriving leisure sector. There's lots of new entrants coming into this kind of competitive socializing space and I think the British population and consumers are very kind of willing to try new things and try kind of funky new experiences and at the time I was kind of in between jobs and going back to your question on was it you know VR that led me into entrepreneur or entrepreneurship or was it being a business founder, company founder and starting my own business. And I think coming from my venture capital days, I used to sit on the other side of the table as the investor.

3:18And I was always really jealous of all these founders who had these brilliant companies and the kind of independence and freedom to create a business from scratch and to create an identity, a company culture, build their teams. And I always thought, God, that sounds so much fun. I mean, obviously, huge amounts of work, stress, but actually at the end of the day, it's yours. It's your business. You've created that. You can be the master of its own destiny. And I was always really, really jealous sitting across the table looking at these founders. And when this opportunity landed with one of my best and oldest friends from university, someone who, when we were at university, we always joked about setting up a company together.

4:05it just felt like the kind of perfect opportunity and I was in between jobs at the time it was in the middle of COVID and I just thought well this could be a productive use of my time whilst we're all sitting in our bedrooms living rooms waiting for the storm to blow over why not just give it a go and set this business up and I kind of fell into it now looking back I don't think I could ever be I could ever go back to that kind of corporate role I think I'm now fully in on entrepreneurship and and and and running a business i absolutely love it it's fantastic when you said i fell into i was actually thinking at the time that you took the plunge you know you dived into it and you know you were sitting in your bedroom thinking i've had enough of this and um and good for you for doing that because um i think quite a lot of companies were born out of the pandemic and sometimes the hardest moments are the best times to start a business in my experience so your friend went to sandbox in singapore as a customer and was sort of blown away by the experience and realized that you could set this up as a franchise as i understand it in the uk so you create your own business and then become a franchise exactly um where did the sandbox concept originally come from where was it sort of first created yeah originally founded in hong kong and then they created the technology in Asia and Hong Kong, but then quickly moved to Silicon Valley and got some pretty major funding from some big Silicon Valley VC companies, investors.

5:40And that helped them scale to a level and invest in the technology and the game development. And they've got an unbelievable team of game developers that have come from Ubisoft and that division. and they are there creating these incredible bits of content that we then give our customers in their headsets. So I think it's important that we explain, or you do, to me and our listeners what actually happens when you become a customer at Sandbox. So you walk in and what happens next? So look, we're a leisure business that uses some very advanced technology for our customers. So at the heart of it, we're still a people-led business that welcomes our customers into a location-based site.

6:24We have sites across the UK. We have three in London, one in Birmingham, and one in Dublin. A customer walk into our site. We have these VR rooms or holodecks, we call them, which is about the size of half a tennis court. Within that space, you've got these Hollywood-grade motion capture tracking cameras that sit on the top of the room. that they take your body position and your body movement and map it into our experience, into our game. You wear a haptic feedback vest that gives you this sort of haptic sense. You know, think... What's the word haptic mean? Think of a zombie scratching your back.

7:03You'll feel the tingles. You'll turn around. So you have this kind of almost 360, 4D experience where, you know, if something's behind you, you'll feel it. Okay. depending on the experience we have 11 different experiences you'll have some sort of prop you know a weapon a rifle pistols swords so you have 11 experiences so these are different games we have 11 very different experiences what's the most popular experience? zombies zombies people absolutely love killing zombies I don't know if that's a sort of indication about the sort of mindset of the population zombie movies are popular aren't they?

7:40they just want to go and murder hundreds of zombies for a half hour So that's one of the entertainments. And what are a couple of the others? So we then have a time with Netflix. We have a Squid Game experience, which is kind of a mini tournament, slightly less violent. We've got a Stranger Things experience, which is, again, kind of shooter-based. A lot of them are shooter-based. But we're also going into more educational content that's much more family-friendly. So we've just released a dinosaur experience. So you're kind of walking in the land of dinosaurs. And it's a very kind of - So for younger children.

8:13Yeah, much for the younger crowd. You know, we're trying to get into the school market. It's very popular with young families. So how many people need to book at a time? So you go into this room about the size of half a tennis court. You've got all this unbelievable technology that's sort of all around you. You put on the headset. You can have up to six people in the room. You put on the headset and you have a 30-minute fully immersive free roam experience where you're walking around the room, interacting with your co-players, shouting at them to turn around because there's a zombie or competing against them.

8:49But they're all doing the same thing. We're all doing the same thing. You're mic'd up. You have audio. So you haven't got children looking at dinosaurs while someone else is shooting. No, it's a shared experience. Right. And the great thing about that is, you know, everyone's glued to their phones these days. And, you know, for 30 minutes, you put away all distractions and you're fully locked into a shared experience. There's nothing else distracting you in the world. There's no text. There's nothing coming through that's going to pull your attention away. And so that's, I think, where we've found this experiential business really exciting because I think, you know, consumers now, they're looking for more than just, you know, your kind of traditional forms of leisure.

9:32And they're also prioritizing experiences over products. So we're seeing consumers are much more willing to spend on experiences versus buying a pair of these sneakers. No, very interesting. It reminds me of paintballing years ago. It's a sort of virtual reality version which would be different in two important respects. The place I used to go to was called Combat Splat. And it was great, but it was in a rural area. So you're obviously in city centres. So it's much more accessible for people. And you can probably process more people at a time. We'll do about a quarter of a million guests this year through the sites.

10:09And it's, I mean, you know, when I often say virtual reality, kind of the immediate thought goes to, you know, solo player in a home, at home, maybe sort of in a kind of teenage segment, traditionally male. That's kind of the most people's initial thought on virtual reality. But we're a much more broader offering. um you know our main customer segment is 25 to 35 year olds it's a pretty even split between male and female it's about 49 51 um we're very popular with families that's about 30 of our business and then corporate so you know we were discussing before the show that we're going to get you in for your christmas party yeah well i was thinking about that so um that's a popular choice for people it's people love it but just shooting colleagues doesn't cause a few problems afterwards or well you know you know you never shoot other players it's always a team oh okay environment so you're you're actually working together against a common enemy which is typically zombies oh i okay so you're all on so you're on the same side i was just worried at the as the boss i might get machine gunned by no no no we wouldn't do that colleagues have had enough of me all year so that doesn't happen there is a bit of friendly fire but you know i can't help that Okay, well, that's good to hear.

11:31Did you know that there are nearly 1 million 18 to 24-year-olds who are currently not in education, employment, or training in the UK? This is simply not good enough, and I want to do something about it. That's why REED is launching a new initiative giving£20 ,000 to young entrepreneurs to help them grow their small business. Visit reed.com forward slash entrepreneurs to find out more. We want to support and encourage the next generation of entrepreneurs. So, Jay, interestingly, you chose to take the franchise route and start a business that was a franchise. Why did you decide to do that? So I think the advantage of being a franchisee and working with a larger brand owner is that they have created this.

12:24this, in my experience, they have created this brilliant product. And there was already an existing technology, brand identity, and product that was a proven concept in other markets. And I think we, as the franchisee, were able to shortcut a lot of the risk in getting from zero to one and then it's from us taking it from one to a hundred in our own market and we're operating in the UK and Ireland and that's the market that we know best. So we know the British consumer the best, we understand the geography of the country, we have the network in the country to find sites and raise capital and hire.

13:14And so I think on a kind of franchisor-franchisee relationship, it de-risks the global expansion for the franchisor because they don't have to go into new markets that they're not familiar with. And as the franchisee, we are getting this pre-packaged business that we then just have to go and find sites in good locations, raise a bit of capital to invest in those sites, hire the teams, market locally, and then run those businesses to the best degree possible. It allows us to run the UK and Ireland business to the best of our abilities and be laser focused on that part of it without having to worry about the technological development or the sort of the global IP of the brand, the intellectual property of the brand.

14:03So it simplifies our life a little bit. And then it allows our franchisor to scale across the world quickly into new markets, putting their trust into local operators like ourselves. There's a lot of trust, listening to you, Jake, there's a lot of trust both ways in this relationship, because they've got to trust you to get on with opening the outlets and making it happen, delivering the entertainment. And you've got to trust them to maintain a high quality experience and to continue to invest in it is that right absolutely i mean trust is the the key here and we are both bound by each other's fortunes and successes so you know for this to be a successful global brand we need our partners to succeed and they need their franchisees to succeed so So absolutely, we're completely in bed and we are completely reliant on each other's successes in the nth degree.

15:07So trust is one of the most important elements of this and we were one of the earlier franchisees. We invested in them or in the concept during a very challenging period of the kind of global hospitality sector being COVID. And, you know, we took a punt and they took a punt on us. And, you know, we now have three of the top or the top three performing sites globally in terms of revenue and guest numbers. So I hope that we've done, you know, our bit to kind of bring them, you know, the brand success. And, you know, they continue to bring exciting new experiences to us and we can then sell them to our customers.

15:52Well, thank you for explaining that because I think franchising is a very interesting model that many entrepreneurs might usefully consider if they want to start something because as you say, de-risks. I like the way you put it, zero to one and then you can go one to one. You're essentially, and I think it's a concept in the US that's huge. You go to the US and everything is franchised. In the UK, it's a bit more of a, in Europe, it's a bit more of a novel sector. I think it's growing. I think you're seeing US-led brands coming to the UK on a franchise basis. If you're a budding entrepreneur that doesn't maybe have the skill set to go and create a very advanced bit of virtual reality technology or if you wanted to set up a restaurant chain but maybe didn't have the catering experience, franchising is a great way to take a proven playbook and replicate it to your local market and I think that gives you know people like myself an opportunity to create a brilliant business that has an amazing product but without a lot of the risk that is involved in getting to a proven concept and I think that's where when I spoke about kind of falling into it, I was a young, ambitious, slightly naive person who wanted to create a business and this franchise route gave me that opportunity to get a fantastic product quickly to market with a lot less of the risks entailed in completely creating a brand new concept.

17:40And there are quite a lot of companies that offer franchise opportunities for people to go and research, aren't there? If other people wanted to follow you in that journey. Yeah, look, I think it goes back to our founding story, which was it was a bit of luck. It was my business partner going and doing this experience in Singapore. and he took the headset off and just thought, wow, that was completely novel and unlike anything I've ever done. And I think the UK consumer base would absolutely love this. And, you know, we then did the research and found that there was not a huge amount of offerings in this field.

18:20And, you know, we could have a USP in our local market. And, you know, I think if you're someone that may be interested in taking franchises, it's go out and look at new markets, go to, you know, look at brands or products that are doing really well overseas that you as a potential consumer would be interested in and then try to see if, you know, maybe these novel brands that aren't massive might be interested in kind of opening up a presence in a new market. And that instinct proves to be correct. Yeah, I think so. 99 % of our customers come out with a massive smile on their face, a bit of a forehead sweat, their heart rates up.

19:05The Google reviews are very good. I saw 4.9 on it. I think every site. Yeah, yeah. That's a good site. We do our best. so did you think um when you were starting the business that it was quite risky going into something which involved people coming together at a time when everything was going in the opposite direction really with more and more remote sort of working shopping entertainment you you bravely headed in the opposite direction as i see it yeah well i think what was going through your mind well Well, naivety. Well, that's often a great strength. I've heard that before. Don't overthink it.

19:42Don't overthink it. I think the fundamental sort of human nature always wants to come together in a social environment. And, you know, during COVID, we took a punt that COVID wasn't going to last forever. and once the lockdowns are restricted and once people were allowed out their homes we would see an immediate bounce back of these kind of in real life forms of socializing and people want to get out of their homes and and you know physically interact with other humans i think that's just a kind of core human desire which is definitely happening now which is definitely happening now and i think you know that that's not going away you know that's a fundamental aspect of of of human civilization is to kind of be coming together.

20:28And our experience, while sort of technology-led, is it's still the fundamental pieces. You bring together friends, family, colleague under one roof, and you do a shared experience that's completely wacky. You get your heart rate going. There's a bit of a sweat. You come out. You think, what the hell have I just done? And you have this kind of endorphin-led kind of buzz afterwards where you're sort of all thinking, well, there was that bit that you had that zombie on your face. So people relive this. Yeah, you're bouncing this thing. And then you go on to go for a dinner or you go back to the office and there's a kind of collegiate feel to it.

21:06And I think we're just creating a memorable, happy experience for our guests. And we're bringing them into a site, out of the home. I see families with their teenage kids who may be being dragged out of the house by their parents. And then they all come out and it's kind of this buzzy family environment or it's the same with colleagues you know you see this kind of great team mentality after they've done it um and you know if you look at the sort of the digitization of life people are spending more time on you know platforms and online shopping and working from home businesses are still investing in kind of getting their teams together and actually you're seeing it more you're seeing companies think okay well if i have a lot of my workforce are working from home we need to bring them out of the home together physically to kind of build that relationship and i think you know no business can operate fully remotely you have to have that physical presence and i think so you're helping people to get to know each other better or to build relationships and yeah and people laugh and enjoy each other's company there's no better way than in a crisis where you're defending yourself against an invasion of aliens or a...

22:19And the happy knowledge that it's not real. And the happy knowledge that you will come out alive. Yeah, well, that's quite important. Maybe a few nightmares that evening. So what makes... I mean, you've sort of started to explain, but I often, as you say, think of virtual reality as someone doing something by themselves. So the key here is it's immersive VR. in terms of bringing groups of people together, isn't it? That's right. It's a location-based entertainment play. We are bringing people together under one roof. It's as simple as that. The VR element is sometimes a distraction of what we are.

22:59We're ultimately a hospitality or leisure business that is a huge part of our business is the people that work in our company and my colleagues. And, you know, half the battle is just ensuring that we are able to give our guests the best end to end experience with 30 minutes of that in a room where you're kind of isolated from the world. But before or after, there's a huge amount of, you know, customer interaction and getting them ready mentally for the experience of psyching them up, you know, getting them to choose their characters, their names, their weapons. and then afterwards you know we have a whole sort of highlights video bit where you can kind of see your your best bits and there's a scoreboard and then you can get some drinks afterwards and sort of chat about it so you know we try to give this sort of you know otherworldly end-to-end experience where you're kind of stepping into our venue which you know we design them to be very futuristic we have you know weird things like robotic bartenders that are serving cocktails and mocktails um we tried to sort of give this you know impression that we're a sort of very future focused future led technology business but ultimately we're just a we're a leisure business we're a hospitality business that but you are using sort of high-end tech yeah we you know we we use a fusion of the two absolutely some of the most advanced technology that you can you can you you can get to create this very, very immersive, world leading experience that can't be replicated at home.

24:33I think that's the big thing is, you can play a headset at home when you're living on your sofa, but you can't create the environment that we create, which is shared physically with other people in a space that gives you the movement to walk around. You're not tripping over your cat or your coffee table. And you have this incredible motion capture tracking system that maps out your entire body so that it's synced to your avatar in the experience. So that when I'm wearing the headset and I'm looking at you and you're wearing the headset looking at me, we can high-five. I can pat you on the shoulder.

25:12I can push you out the way if there's a sort of... Without actually doing any of those things. Well, no, we are physically dramatic. You are doing those things. Yeah, yeah, we'll physically high-five. Because your body is completely synced. Well, you could do that anyway, couldn't you? Well, not on a kind of otherworldly planet. Okay. Or on a pirate ship. Okay. Or with a T-Rex coming in. Of course. I forgot all that. Sorry. So when I think about this as a business person, what you're describing, from a consumer customer point of view, I think that sounds really fun. How exciting. I'd like to try it.

25:43From a business person point of view, I'm thinking that sounds quite expensive. You know, that's a serious investment because you've got to get a property. You've got to fit it out. You've got to invest in these cameras and technology. You've got to hire people to look after the guests. You're going to have a robotic bar person. You're going to serve drinks, a bar. So there's a lot going on here logistically in business terms. So this is a big investment for you. Yeah, absolutely. Each one of these sites must be a substantial investment. Yeah, millions in capex. Millions. So you had to raise a lot of money to set this business up.

26:18Yeah, we raised, I mean, today, I think, 7.5 million in equity and then 2.5 million in debt. Right. So you've got 10 million funding to start with? 10 million of funding to get five sites up and running. Right. We have two models in terms of the venues that we run. We have flagships, which are big 10 ,000 square foot sites. So where are they? We've got one just down the road in Covent Garden. We've got one in Birmingham in the Bullring, and we've got one in Dublin just off Grafton Street. So those are your flagships? Those are our flag shows. But they're all key. They're inexpensive locations, city centers.

26:53Yeah. So we went, you know, prime location, city center, big, invested a lot in the kind of fit out, the look and feel of the site. But, you know, they push huge footfall through them. They're actually the top three. So you didn't fall into the, you really did take the plunge. Yeah, yeah, yeah, yeah. This is a bold, bold endeavor. I credit where it's due. I think you really stepped up to make this happen, you and your university buddy. Yeah, look, we fell into it, but it took a lot of hard work. It took a bit of luck. We were lucky to be able to raise the funds to get the first site. We were lucky to get the first site.

27:36When we were walking around London during COVID, there was a moratorium on landlords who weren't allowed to kick out tenants through the COVID period. It was a government incentive to protect the tenants, but that meant that there was limited stock for new entrants like us. We were laughed at the door from many landlords because they just saw two late 20-year-olds with no experience in running a hospitality business with a sort of wacky VR concept. They thought, we're not going to sign you guys up to our space. Where was the first one? First site was in Covent Garden and we were able to get a site that hadn't been taken for a while.

28:18So it had been sitting there vacant and the landlord wanted to offer their books. It was uniquely placed that it was sort of on the edge of kind of the West End, but also kind of encroaching into Hoban and the city. So you had a good melting pot of, you know, sort of social leisure, 25 to 35 year olds, going out into Soho and Shaftesbury Avenue who are looking for things to do. So there's a sort of high density of kind of leisure consumers there. You got all the businesses in sort of city in Hoban that, you know, we're on their doorstep. So great opportunity to get kind of corporate dues going.

28:55And then we're on Museum Street. So we're on the sort of thoroughfare into the British Museum. So again, tourism plays a massive part of our London operation there. So we got lucky with that location. I mean, you know, we knew it was going to be a good location for those three customer bases. And that's worked well. Yeah, we got off to a flying start there. And that kind of gave us the momentum to keep growing. And it gave us the reputation from landlords to see us as a, you know, a strong kind of covenant business to get into their centers. I thought with, you know, so many high streets struggling to attract people and, you know, exciting new businesses, you could almost ask them to pay for you to go well yeah when yes and no i mean you know we do get some good incentives from landlords to to kind of come into their schemes it'd be a big draw for them to bring footfall into the shopping centers so you know you know i think you're seeing a lot of these big shopping centers pivoting slightly away from retail and kind of and diversifying their their portfolio so you know historically those shopping centers would be you know their mix would be 90 % retail, 10 % food.

30:07Now they're trying to create a much more even mix where it's maybe 30-40 % retail, 30 % the food court, 30 % leisure. You might get a cinema or a bowling alley in there. We fit into what we describe as the competitive socializing sector, where we have seen a lot of new entrants, and we're one of those. Competitive socializing. Competitive socializing. I haven't heard about this. You see brands like Flight Club or Toka or Putt Shack, and it's a sort of technology-enabled form of leisure. So Flight Club's Dart, but it's with an augmented dart board. So people love to compete with each other. Yeah, and again, you're going down that new form of leisure where consumers are looking for maybe something slightly elevated to what they've historically done in their spare time.

31:01And they're up for trying a new novel experience. And, you know, we fit into that sector. So it's a novel experience, but is it an experience that people repeat? Do you have a lot of repeat visitors? Yeah, well, I mean, that's the aim of the game is to try and make this a sticky product that you see customers coming back once, twice, three times a year. The moment, you know, our repeatability is about 15%. So we're getting about one in six customers back within a year, which is pretty good. We want to get that higher. The way that we can do that is we operate similar to a cinema. We every year will bring out a couple of new experiences.

31:39The idea is that you've done one experience, but actually you can come back a second, a third, a fourth, a fifth time and do a completely different experience. and it's again a whole new novel kind of uh but it sounds to me you might have to get a bunch of people to go with you if you want to have a good time i mean you know you can come with two people you come with six you come with 14 you know it depends on you can you can pick and choose your group size okay so how many do a lot with dates um funny enough we tried because two people is not our best number because if there's a room of six and you have two people in the room your utilization is one third of the max capacity of that room so we we tried to do a couple of years ago an anti-valentine's day so you know if if you don't have a date come to us with a group of mates pretend you're not it's not valentine's day and you can come and do a group experience and what that meant is everyone who was looking for a date decided that this would be a great opportunity right to do to bring bring your day and uh we suddenly had loads of twos groups of twos coming Well, most days aren't Valentine's Day, I suppose.