How to Make Metaverse a Reality : Insights From a Positive Cash Flow VR Company

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If I had a penny for every person I have met recently who asked me how I achieved positive cash flow as a VR company founder, I would be sitting on a mountain of pennies that could feed me for one full year.  

It is quite astonishing that 30 years after “metaverse” was first coined by Neal Stephenson in 1992, we have yet to see this persistent, synchronous, interoperable virtual world that anyone can access ubiquitously anywhere and anytime. 6 years after the release of Oculus Quest by Facebook (now Meta), we have yet to see people wearing these VR headsets everywhere, as they are carrying smartphones everywhere. 

According to their financial report of Q2 2022, Meta’s Reality Lab was losing over US$2.8 billion. Latest numbers show that they spend 5.5 USD for each 1 USD that they earn from Oculus - this does not sound like a winning formula. Meanwhile other potential competitors such as Google and Apple have yet to release any piece of hardware that could become the metaverse standard as well. Google Glass has been around forever, with no traction. Other famous players such as Pico from China, that just recently got acquired by Byte Dance, also have yet to show positive cash flow on its balance sheets. 

It is no wonder that the general public tends to view the metaverse and mixed reality industry with suspicion and pessimism. I know many VC friends who would just disregard any metaverse pitch deck as something high risk and unproven. It does not help that the metaverse narrative is now being strongly linked with the Web3 narrative, even though these two might not necessarily go hand in hand (a topic that warrants another long blog post). Web3, blockchain, and decentralization have been polluted with so many opportunists, scammers, and shillers, and to this day, 13 years after Bitcoin, the general public still views the whole industry with suspicion. 

At this rate it is going, perhaps the metaverse will remain a gimmick, a buzzword for eternity, if no one else steps up.

Enter STEPVR

This is not me shilling my own company, but I am just laying out the facts for you. The past two years, STEPVR has become cash flow positive, and we opened over 140++ stores in China in just over the past 8 months. By all estimates, we have been very modest and cost efficient, our latest series B round raised only over USD 15 million, which is peanuts compared to what has been happening in the Web3 and other high-tech industries.

Whenever I told people my track record, they asked me how I did it. Was I lying? 

I simply told people that the metaverse is not a passing buzzword, it is here to stay, if we can nail it right. The way I see the metaverse is that it is the next generation internet, but it still follows the same traditional business model, so achieving profits is really not rocket science. We all could learn from history and we need to strike the balance between what can be done or what can be sold with the current technology with what needs to be done to push the industry forward. 

Here’s how we can make the metaverse happens : 

1. Be clear with our philosophy

When I started STEPVR, my philosophy was simple : First, I believe that we need to perfect five senses engagement in the metaverse (visual, auditory, tactile, vestibular, smell), not just visual and auditory senses. Only if we get this right, the metaverse will become as compelling as the physical reality and users will onboard en masse. 

Second, I believe that right now, every industry player in the metaverse must focus hard on cracking the hardware game. We need ubiquitous portals to the metaverse, a piece of hardware that people will use often and everyday, just like the portals to the Oasis in Spielberg’s movie Ready Player One. 

Credit : STEPVR

As such, it is a little bit premature to speculate on the metaverse, and create half-baked games, content and softwares if people are not actually engaging in the metaverse. 

If you see all the Web3 P2E games and JPEG NFT images that are branded as “metaverse” right now, how excited are you to embrace them? The games were poorly done, with clunky technology, not appealing at all save for the ponzi scheme that lures you in for the promise of earning tokens. And don’t get me started on the easily duplicable JPEG images peddled as a “metaverse” asset.

Yes, all these NFT campaigns got the concepts right to give the public an understanding of the value chain of an open and decentralized metaverse, but they all feel like prototypes and gimmicks to me without that WOW factor, that compelling piece of technology that can transport you to a parallel universe where you will choose to stay, enamoured, for a very long time everyday. 

Hence before we can even start to talk about creating interoperability between softwares and providers, we need to deliver the RIGHT terminal to the public. The company who can deliver the metaverse hardware equivalent of an ubiquitous smart phone will win this race. 

Since I founded STEPVR in 2013, my team has been focusing hard to deliver the right products to the market. Initially we were just waiting for the supply chain and the infrastructure technology to catch up as well, such as the display and rendering units. We made clear breakthroughs when we distributed the computing load into a backpack PC so that everything did not weigh down on the headset alone and the user's immersive experience improved significantly. 

In the past two years, we came up with a free-roam VR experience that has become an instant hit in China, as it delivers a very high-quality, immersive, multiplayer game experience. We even introduced a few AI robotic devices into the game that provide haptic feedback to engage users’ sense of touch in the metaverse, besides visual and auditory senses.

Our numbers have stood out - we opened 140 stores within 8 months and 70% of our customers bought loyalty cards to our arcade venues. We are the first VR provider in the world that has delivered an experience that can accommodate over 40 players simultaneously covering 1000 m2 space. The experience truly speaks for itself. 

Credit : STEPVR

Our iMetaStar cameras, which is a face capture rig and bodysuit that can project users into virtual avatars have become a viral hit among social media influencers as well. We partner with top-ranked influencers with a combined followers of 70 million. The best performing ones earn up to 200k USD monthly as virtual avatars. 

Famous virtual idols on Douyin using STEPVR technology. Credit : STEPVR

In May this year, we unveiled GATES01, which is a portal modeled after the movie Ready Player One. Equipped with an omnidirectional treadmill, users can cover great distances in the metaverse within a confined 3m2 space that can fit nicely in homes, fitness centers, gyms, offices, and many other B2C spaces. 

All of our products provide great vestibular sense as users are able to have a perfect sense of spatial awareness and balance in the metaverse while using our gadgets. Our lightweight headsets also dispel motion sickness that usually plagues users of other products such as Oculus and Pico. 

Hence I have stayed true to my philosophy : I am on my way to perfect the five-senses engagement in the metaverse, and I am also on my way to invent the right hardware portal that would scale massively to the general masses.

2. Learn from history

Again, creating a profitable business is not rocket science. Metaverse is a new industry, but it still follows any traditional business model. 

Rule number one in generating profit is that your revenue must be higher than your cost. Hence you have got to be resourceful, be efficient with cost management, without compromising the quality of your product. All of our technology, hardware and software have been developed and perfected in-house, thus we are able to have control over our manufacturing and operating costs. 

Next, I learned a lot from history, namely the PC revolution, that we need time and strategy to introduce and scale these “new internet terminals” to the public. If you remember when we first knew of computers, we did not buy those devices for homes. It was all share and rental models at internet cafes and public work stations. Only after more and more people understood the benefit of owning a computer, did the PC really scale into personal homes. 

Credit : STEPVR

Similarly, at STEPVR, we have encouraged early adoption through rental and sharing. Some of our free-roam VR franchisees rented our technology and we did revenue sharing with them. Similarly with iMetaStar cameras, we had a profit sharing model with our influencers. Some of them rented our devices and some of them paid back in instalments after generating revenue as virtual influencers and live-streamers. 

So far, my hypothesis has been proven correct. I was adamant to achieve positive cash flow in order to show that there is a product-market-fit for the metaverse and that this business model works.

3. Be pioneer

Of course, in order to manifest the metaverse as the next generation internet, we need to move beyond gaming. Innovate, innovate, and innovate, that is the key for us to keep moving forward. Even though I have generated healthy profits, I reinvested everything back to the company, in order to create and perfect hardwares that would gain traction and scale, to tailor software and content specific to different industries, and to hire the best team in the world to help engineer this paradigm change. 

By the end of the day, the metaverse is humanity’s collective dream and it will take each one of us to get there. I can’t sit back on my laurels, nor can I afford to create gimmicky products that do not really bring profit back to the company like Meta’s Oculus. I need to keep innovating, keep reinventing, keep pivoting, until the metaverse will finally become a reality for all of us. 

And the good news is? I don’t think it will take that much longer.