It’s Time to Build

TLDR: I finally have found a location-based VR business model that works consistently across markets. I am putting myself back in the operator business. 

For the last 10 years, I have been rooting for the location-based VR industry, mainly from the sidelines. Sure, at times, I’ve been in the trenches with my clients. I planned and set up the Zero Latency VR trade show booth at IAAPA, pretty much by myself, in 5 weeks. I negotiated the distribution agreement between Hologate and Creative Works. I sold Dave and Buster’s on an exclusive 150-location roll-out of Vader Immortal: Lightsaber Dojo. I’ve helped more than 25 companies bring VR products to market, and countless operators make better decisions on deploying VR into their business. 

VR has had its well-documented bumps in the road. There has yet to be a business model where I could say, hand on heart, “If you do this, you will be successful.” For a decade, I’ve been searching high and low for a standalone business model that would be predictably replicable and sustainable. Along the way, some have come close.

I’ve been a fan of Zero Latency since I first saw it at IAAPA in 2015. The first Zero Latency game I played in Melbourne, Australia, was a 45-minute EPIC adventure that covered 4000 square feet. I walked about half a mile battling zombies across an entire city landscape. But they allowed the amusement operator community to convince them that a 45-minute game would never work (despite it already working quite well in Melbourne.) Their next game was 12 minutes long, which might have been OK for SEGA at Joyolis in Tokyo but was too short for the standalone locations they were developing. After much experimentation, they soon settled in at 30-minute games and are leading the market as an anchor attraction for VR arcades and family entertainment centers with their new, more compact, affordable Quantum Arena. If you’re in the FEC business, you must consider adding Zero Latency to your attraction mix. 

I was excited about The Park Playground in Belgium. They were among the first to understand that people want an experience, not a tech demo. Their locations were bright and decorated with blonde wood and plants, attracting a large proportion of female customers. They incorporated single-player, multiplayer free roam, and social group experiences into an hour-long experience. They developed target customer personas for each game in their library and ran cost-effective paid digital campaigns. However, they never nailed the F&B portion, and their ownership, the largest media company in Belgium, didn’t ultimately understand how to run an entrepreneurial startup. They wound up with 3 (or 4) CEOs in as many years and lost the vision and direction of the early team that I believe, had it been sustained, would have led to success. 

Sandbox VR is interesting, but the franchise's upfront cost of around a million dollars is challenging. Some are making money, and they are expanding quickly around the globe. They use Vicon passive tracking systems, which are expensive, complex, prone to tracking glitches, and slow down throughput due to all the wearables. I am confident they’ll be rolling out the new Markerless Motion Capture system later this year, which will be worth watching. 

Esports Virtual Arena (EVA) in France is doing fascinating things with VR esports. They’ve opened dozens of locations across France with a primary focus on competitive player vs player games. It’s like stepping into a Call of Duty game with your friends. They build dual 5,000-square-foot arenas for 5v5 action. They have an excellent retention loop to keep players engaged, taken from the Fortnite playbook. They offer membership programs to build recurring revenue and have some zombie co-op experiences to broaden their appeal to less competitive-minded players. But I know what works in France doesn’t necessarily work in America. My friend, Salem Thyne, opened an EVA franchise in Dallas and has since been trying to figure out how to make the formula work there. He’s convinced (as am I) that competitive PvP games appeal to a tiny psychographic market, too small to dedicate an entire LBE business. Numerous other LBE esports businesses will attest to that reality. 

Among the dozens of companies and their various business models, none have compiled a complete business system that almost anyone could invest in successfully. Sure, many arcades make money, but most require the owner to manage the arcade on-site. This often turns out to be a full-time job with middle management pay. Most arcades don’t generate enough top-line revenue or high enough margins to pay an owner meaningful money after covering rent, staff, licensing fees, and marketing, not to mention the depreciation of equipment that should be refreshed at least every 2-3 years. That would require an arcade to generate around US$1 million annually in revenue. 

There are a few key challenges that, up until recently, had not been solved. 

1. Throughput: Since 2016, most free-roam systems have supported, at most, 8 or 10 simultaneous users. But about two years ago, I started tracking a new free-roam VR trend: massive scale (10K square feet) experiential storytelling experiences for 100 people at a time. 

2. Labor Cost: Most VR games are session-based, meaning groups of people enter and exit together. Employees brief guests, help them put on gear, monitor the play, and then reverse the process. Over and over again. The storytelling experiences have a constant flow of people in and out with no briefings. Just put on a headset and go.

3. Experience: Most VR experiences are games. And while the internet is full of statistics about how almost everyone is a “gamer,” most of them play casual mobile games. Just because you play Wordle doesn’t mean you want to strap on a headset and try to survive a virtual zombie apocalypse. Gaming has kept location-based VR from going mainstream. Stories appeal to everyone.

In late 2021, just after the pandemic, I saw companies starting to address these challenges. None of them came from the gaming industry. They all came from immersive storytelling, which has a much bigger addressable market. First was Felix and Paul, in partnership with PHI Studios in Montreal. They launched The Infinite in late 2021, a virtual reality spacewalk experience covering 12,000 square feet. The VR experience was a component of the entire attraction; about 25-30 people would rotate through at once. The following year, a French company called Emissive (recently renamed Excurio) launched Horizons of Khufu, a 10K square foot, 45-minute tour of the Egyptian pyramids for 100 people at a time. Both of these “exhibits” toured around the world successfully. 

With 100 people an hour paying $30-40 per ticket, the top-line revenue capacity of a free-roam VR attraction finally hit the threshold I was waiting for. But 10,000 square foot retail spaces were expensive. Furthermore, Felix and Paul were using Quest headsets, which are notoriously finicky when tracking in large spaces. Excurio was using backpack PCs, which, while offering a better visual experience, were expensive, unreliable, and required a lot of employees. We needed a more space-efficient model that leveraged state-of-the-art standalone headsets like the HTC VIVE Focus. 

In late 2023, I discovered another company that solved these two challenges. Univrse claimed to be running experiences for 100 people in spaces of about 3500 square feet, which was about ⅓ of what the industry standard had been. And they were running on VIVE Focus 3. I headed to Barcelona to check it out myself. I toured several of their installations, including this one at Camp Nou, home of the Barcelona Football Club. I also visited ancient Egypt, where archaeologists were uncovering the mysteries of King Tut, and a virtual version of the Tomorrowland Music Festival. 

Since 2024, I have been trying to convince companies I work with that they should enter this space now. But for understandable reasons, they’ve been skeptical. I get it; I have been skeptical as well. And there have been some notable high-profile failures since 2016, like The VOID and Dreamscape Immersive. Even wildly successful early attractions like Hologate seem to have jumped the shark with FEC operators. 

In January of this year, a friend offered me a unique opportunity. They were involved in building a new immersive district in Las Vegas and asked if I could make a recommendation for the best up-and-coming VR experience and who might be a good operator. After a few minutes of deliberation, my partner Kylie and I raised our hands. It’s time to build. 

Right now, the opportunities in free-roam VR remind me of the very early days when I built Laser Storm, the first successful laser tag company. Within four years of launch, we expanded to more than 200 locations in over 30 countries, landing us at #251 on the Inc. 500. I expect the same kind of rapid growth in this venture. The economics are similar, but the market appeal is much broader. 

We will build this startup in the public eye to encourage others to get involved. Here are three ways we can work together:

1. If you’re interested in investing, we are raising a small strategic “friends and family” round for the first site.

2. If you are developing content in this space, or have locations, reach out. I can connect you to the ecosystem.

3. If you have capital and want to operate, I have one opening left in my mentoring program for this year.

Just reply to this email and let me know what you’re interested in. And make sure to stay subscribed to LinkedIn and YouTube to stay informed and updated on this project. 

Stay immersed,

Bob

PS. Over the years, I have developed a rubric for evaluating LBVR businesses. It includes hardware, software, content, operation models, and marketability ranking systems. You can check it out for yourself on the VR Collective website. It can provide a starting point for creating your own evaluation system. If you think I missed something important, let me know, and I will add it in. 

[Note: ChatGPT wrote the javascript code for the rubric webpage. I did not write a single line of it myself. It took me about an hour to get it the way I wanted it. If you’re not using AI, you’re already behind your competitors. Get on it.) 

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