Acquired - Raising a Seed Round with Against Gravity CEO Nick Fajt

0:00All right, I feel naked without my headphones. Do you want to wear headphones for you to put on? Welcome to season two episode two of Acquired, the show about technology acquisitions and IPOs. I'm Ben Gilbert, David Rosenthal, and we are your hosts. As we mentioned in December, we're moving to a seasons format where we can do multi-episode themes and mini-series across episodes.

0:40This season's mini series is on startup fundraising. So to date, we've exclusively talked about exits on the show, and we've glossed over plenty of fundraising events as part of these stories, but we've never really dug in. How do these rounds come together? What's the process, and what do different types of fundraising rounds allow a company to do? So our first episode is about the series seed of one of the most prominent VR companies in the market against gravity, the makers of Rec Room.

1:07and we are super, super fortunate to have with us today, the co-founder and CEO of Against Gravity, Nick Fight. Nick is the co-founder and CEO of Against Gravity, as I mentioned. They're the makers of Rec Room, which is the VR social club where you can play active games with people from around the world. Rec Room is available on the HTC Vive, the Oculus Rift, and the PlayStation VR. And before that, Nick was a principal program manager at Microsoft working on HoloLens and Forza Motorsport.

1:35We're excited to have Nick with us. Long time fans and listeners of the show might recognize Requiem from our Oculus episode. And we are excited to dig in further here. That was back when, well, you weren't, you weren't raising your round during that time, but it was shortly thereafter. Yeah, I think it was shortly. Yeah, almost like, you know, almost like a follow up here. All right, listeners.

2:01Now is a great time to talk about a new partner of ours here on Acquired. Lagora, the agentic operating system that is redefining how the world's best legal teams work. Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Lagora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

2:29So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review where you.

2:48drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagores Bed here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work, and this means that the pie can grow even as each individual task takes less time.

3:08And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves when they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries. And crazily, they went from one million to a hundred million in ARR in about 18 months. Truly insane numbers. And that is the real test.

4:00Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at logora.com slash acquired and just tell them that Ben and David sent you. David, you ready to dive in? As always, Ben. All right.

4:26So the history and facts, normally we narrate a lot of this section until the company history for people, but Nick, since we've got you here, would love to just hear what is against gravity and what do you guys do? Sure.

4:38So, against gravity makes rec room, which is a virtual reality social club where people from around the world can meet up in thousands of different rooms. And each room is a different experience. There are rooms for sports games, shooters, adventures to go on with your friends, club houses, escape rooms, comedy clubs, and some of these rooms are made by us, but increasingly more and more are made by the community themselves.

5:06Cool and it's it's my understanding records pretty popular among people with VR rigs, right? Reck Room is is a pretty popular VR app across Steam which is for the Vive Oculus and then yeah PlayStation it is super fun. I'm actually excited one of the saddest parts about moving to San Francisco for me is in our new office, we do not have a VR setup. And our apartment is too small being in San Francisco to have a VR setup. So I have missed all the awesome things that you guys ship seemingly on a weekly basis. But listeners, I know we've talked about it before. If you haven't tried out Recreum.

5:43Go out there and it's very free. It's price tag. It is venture capital subsidized as we are going to talk about now. It's great. It's super fun. Well, David, that's a great transition. Nick, we're covering your seed round on this episode. Catch us up. How has against gravity been capitalized to date? Early on, we did a convertible note with friends and family and actually quite a few.

6:09former co-workers as well. We were really fortunate in that a lot of people wanted to participate and get in on that and we were able to raise almost a million dollars on that convertible note. And that got us quite...

6:21a good way is we were able to get set up with equipment, get our development going, and we were actually able to launch the app and support it for a couple months after launch as well. We were also able to make some key hires, and that really got us out into the public and got us some customers. Shortly after that, Reck Room was doing pretty well in the market, and there was definitely a group of people that were really passionate about it, and so we started chatting with institutional investors.

6:48looking to do a longer round to really extend runway and, you know, get to a point in time where the VR market was significantly larger. And we had a lot of people participate in that. We had several from Seattle, so we had Vulcan, Mavron, and Asiquia. And we had several from outside Seattle. We had First Round, Beta Works, Anorak, the VR Fund. And then in that round as well, Sequoia ended up coming in in a pretty big way and actually joining our board.

7:15We'll force you to go even farther back and talk about leaving Microsoft and starting the company, but I remember when you'd raise that initial million dollars, and then you built and shipped the product. You guys made so much progress on so little money. You got the product shipped, and this was in the relatively early days of VR, where it wasn't totally obvious how to build this stuff. I've always been curious, how did you make so much progress with so little resources in just a few months when you started the company?

7:44have amazing co-founders. So while I was out trying to collect text from friends and family, my co-workers did just amazing work. They were able to pull together from a blank white slate of paper to there's an app that shipped that a good portion of the VR audience was playing. They managed to do that in 90 days. So it went from, you know, blank slate to product and market in 90 days. One of the phrases that we use a lot at that company is Ready Fire Aim, which really describes our development process. A lot of people would view that as not a good thing, but we really embrace it. I think it encapsulates our thought that

8:31You know, it's really hard to aim and hit perfection and it's really hard to hit perfection on the on the first try So what we look for is can we just make tiny improvements through each iteration and and really our focus is on how can we get the iteration speed up? So from the beginning what we were really looking for was you know as soon as this thing compiles Can we can we push it out and then and then can we get feedback on it? Can we get can we get a sense of what people like and what they don't like and and can we address that?

9:01this afternoon. That was really the way that we approached it, and that's the way we've been... developing record for almost the past two years now. It's so funny about something specific to record for user feedback. You're taking me some of the new through the new features on Saturday and people kept coming up to us and you know Nick you don't have any like special thing above your head or anything indicating like I'm the founder but you know people are just coming up to us and telling us things and asking us questions saying oh can I join your party or like how do you do this and a lot of people like just very vocal and very communicative so

9:34I have to imagine from the earliest days, you didn't have to work very hard to get user feedback. The community has been wonderful in telling us what they want both in-rec room and outside of rec room. We have a very active discord that we manage, we have a very active Reddit that we manage, and generally what we're trying to do is when people give us feedback, we're trying to...

9:55react to it in the tightest timeline possible. So when they ask us for something and we think this could meaningfully change the experience, we try to get it in there as quick as possible and let what those users know. Like, hey, thank you for the feedback, thank you for the ideas, your ideas in there now. Go check it out. Yeah, let us know the next thing we should fix. You and all your co-founders were all at Microsoft together, right? How did the team come together and how long were you thinking about it before you left, what catalyzed you guys to make the jump?

10:24So my background at Microsoft, I came to Microsoft right out of college and I spent a couple of years working on a series called Forza Motorsport there, which is a racing game for the Xbox. That was a really awesome experience. I got to see what AAA game development looks like. And then after a couple of those games, I moved to a small incubation team in 2012. And that incubation team ended up growing into the HoloLens team. And that was where I met most of my co-founders. So we had worked at Microsoft on HoloLens for several years, and really what we were doing was building demos for early prototypes of HoloLens, and then we were also working on some of the apps that shipped with the development kit of HoloLens. And for listeners you don't know, which I imagine is not many of you, but for those who don't. HoloLens is Microsoft's augmented reality headset. Yeah, that's correct. So when you joined in 2012,

11:22I mean, years before it shipped, what did it look like then? Because it's pretty sleek, sort of self-contained device now. It looked like the Doc Brown helmet from back to the future. Like it was complete with Delorean. Did you have to push a computer around in a shopping cart? Yeah, so there was like this crazy thing that kind of looked like a bear trap that you would wear on your head. And then there were cables coming off the back that went to a cart that someone would like literally churn around behind you.

11:52that had a bunch of computers on it. I think that was the first time that I saw HoloLens demo, that was my experience. But I mean, it was unlike anything I had ever seen. And honestly, that was an amazing job building video games for a futuristic holographic computer for four years. That's a dream job. It was a great experience. So we spent time working on that. And shortly after the development kit, shipped for HoloLens. It was clear that at least in the near-term HoloLens was going to focus a little bit more on the enterprise application space. There were some really great use cases there, but, you know, we weren't really looking for HoloLens in the game space as much. So it was clear like, you know, my skillset just wasn't really needed in that space anymore. And so I started looking around for what was next. And actually several people who had been in Microsoft and kind of in the game space, I think.

12:46ended up doing the same thing. There are a couple other startups that were formed from X HoloLens folks. So after some time, I was really excited about the AR and VR space, but as far as vision for what was next, I don't think I contributed much beyond. There's a tsunami out on the horizon. We should probably learn to surf. It was really my co-founders that came up with a lot of...

13:12Where where we've we've moved now specifically with rec room and And you know kind of kind of starting out with that we sports of VR. Oh, yeah, this isn't an interesting nuance here. So Nick, we've chatted about this You know against gravity is a very opinionated company and you've thought a lot about a lot of things, and you do things differently than a lot of other companies. And one big one is you have one product, but your company's name is in no way the same as your product. What was your philosophy behind that? It's actually more common in the game space. I think one of the nice things about it is when you have a different product name than your company name, it gives you a little bit more creative license to play around with what that product is.

14:02that product can fail, and you don't fail. Your company doesn't fail. And so what we wanted to do was we wanted to start from scratch, and we had this idea about how development should work, and that's really, like, against gravity. It's that ready-fire aim approach. It's that learned by doing approach. But we wanted to develop a unique identity that we could experiment with a little bit more, and that was a rec room. And that was kind of the Wii Sports of VR. It was the intention when you started always that Reck Room was gonna be, you know, go into the thing or had you thought about this was where you're gonna start and we might go in other directions too. Oh no, we started and we weren't sure if we were gonna do AR or VR or, you know, something else entirely. We were really excited about the possibility of social. We felt like we had been living in the future for a couple of years playing around with HoloLens and it was just so clear to us that there was something really transformative in the way that you could use

15:00these technologies to communicate with other people is really going to change the way those communications were going to work. Largely how we started in VR was we contacted pretty much everybody who made a headset. And we were like, hey, we're a company. You should send us a headset. We don't really know what we're going to build. And Valve, who...

15:22you know, make steam, they got back to us that day and got us a headset. Yeah. That was how we... And you guys launched right around the same time that the Vive launched publicly, right? We launched maybe like three or four months after. Okay. I think I've still let Microsoft win it when it launched and shortly after the HoloLens dev kit launched. We left and then we're looking around for stuff to do.

15:49And something that strikes me, I actually have a hard time describing rec room to people sometimes, and I think, so I just finish reading Ready Player One, and the best way that I can kind of describe it is like, you know, like...

16:01the whole book of Ready Player One, it is a world with many other worlds, and you can kind of move around between them, and you kind of have to experience it because it's not like, oh, this is an app that exists in VR that is single purpose. It's like, here's a universe that's been created some of it by the company, some of it by a bunch of other people, and you can do a bunch of different things in a bunch of these different worlds. When did that start to be the case instead of we are a single purpose thing?

16:28We were really excited about social and we saw this enormous opportunity in front of us for what could be done in social and what could be done in so many different segments. I had been pretty wisely warned by a couple people that it's far more common for startups to die of indigestion from too much opportunity than starvation of too little. And so it was really my co-founders that I think started along this path of Wii Sports for VR because it was a really great place to start for social.

17:03casual games are a really easy thing to pick up and play. There are a great way to break the ice between strangers which is pretty important in VR like the social density is lower so you're not as likely to find one of your you know top five friends in recommend right now so a lot of times you're playing with you know strangers from elsewhere and so you need you need some common ground to kind of form there and then it was also a very modular format it was easy to like drop new things in pull them out change them we always had this idea that we wanted the content in Recrum to be more than just the content that we authored. But we knew that we could build a great base with kind of this concept of Wii Sports and go from there. I think with a lot of ideas, they are both familiar and differentiated and Wii Sports of VR was definitely that. Like, you have a strong sense of...

17:55What that is when you hear it and then when you go and play it Because of the controls and VR and the immersion of VR it felt really different. It felt very differentiated as Ben said and you know, we could talk for hours about how cool record is but really you just you just take our word for it You got to go try it, but I want to get into your the seed round because the story here is really cool So and I think you guys did a couple things a couple really key things differently than a lot of start-ups to them. One, you guys were very almost prescriptive in the amount that you wanted to raise, and the terms you wanted to raise it on, which is not the normal advice that people get. If you Google or talk to folks about how to go raise your seed round, it's like, well, I think we need about this much money, but you're the VCs. You tell us how much we need. That wasn't the approach you guys took. How did you think about it? I think that Ready Fire Aim approach also applied to our fundraising process.

18:51I think a lot of what we were doing was learning by doing while we were raising on our convertible note. We were out chatting with a lot of institutional investors. And honestly, a lot of those early conversations didn't go well. And we learned, we got better and better at making progress, talking about what it was we wanted to do.

19:15And we started getting more interest. So we had been raising on this convertible note for a while, and we started getting interest from larger funds. And the convertible note just wasn't really working for them. Like it wasn't set up to accept some of these other questions. And a lot of listeners are probably familiar with this. But when you're in super early stage startups and seed rounds, you could raise traditional equity, which has happened to record when you start getting to bigger rounds, you kind of need to do. But you can also raise smaller amounts with convertible notes, which is dead that converts into equity. And a nice feature of them is that you can continually add people to it on the same terms as others. You don't need to have a close of the round. So you guys kept going on the convertible note. Yeah, so we were doing a convertible note and...

20:05You know, as you said, we were doing it in kind of a rolling fashion. I mean, over six months, we were collecting, you know, one check at the time. But yeah, as we started moving into more institutional investors, we started needing to have some different terms. So a sequel was one of the first people that believed in us and really took a big dive. And that was who we figured out, like, hey, these are the terms we're going to raise about this much. And we're going to go out with this about evaluation. And that we basically took those numbers down to the valley. And we were like, this is what we're doing. Do you want to end or do you want to end? Yeah. Which is so great. And it worked. Yeah, surprisingly. So you guys, you there were comments. I mean, before you raised $4 million right in that round. And you had your evaluation and what it was. And you went down there.

21:02I told everybody what it was gonna be, right? Yeah. Yeah. Nick, one question, too, for listeners, when you say one check at a time, and you were going around and circling capital, what do those check sizes look like? At the friends and family stage, I mean, it was largely around 25K. There were some that were...

21:19that were higher than that, but yeah, generally was 25K. That was that million dollar. I hesitate to call it a round, but million dollars of convertible notes. Yes, that's correct. What today would be your preceded round. So the other nontraditional thing that you did with your fundraising is you guys didn't have a, well, you had a deck and then you trashed the deck, right? Well, so as I mentioned, we were talking with institutional investors early in those conversations, weren't, weren't going great. And I think largely it was because we were much better at building products than we were at building PowerPoints. Imagine that, investors. Fun PowerPoints, they should be funding products. And so after 90 days, there was a product in market. And what we would do is just say, hey, we don't have a deck. Don't come by the office. We're not giving you a demo. Just go download the app. It's free. And there's always people on there to play with you.

22:15Let us know what you think. I would occasionally hop in, we had a room in the app that I actually had like a pull down projector that had my deck on it. A fundraising room, in the app, that's awesome. Yeah, and so occasionally I would like go in there and show people that. I always got chuckles and I think it actually, it helped people move beyond like, oh, this is more than a game. There are applications for this, you know, well beyond gaming.

22:42But it was a great filter for us for investment partners because it told us, if they wanted to chat with us, one, they had spent time in the app. They knew what was going on in there. They had VR headsets. They had probably played some other stuff as well. And so they had a better sense of the market. We weren't going in there and educating them on here are the VR headsets. We're on this one. I think it just kind of upped the level of knowledge for the people we were talking to generally.

23:10Qualification is something that is so important. And I just think this was brilliant, finding a way to pre-qualify anyone you would talk to if you're just like, no, I'm not sending you a deck. You have to know the landscape, have access to a headset, be willing to try my app. If somebody makes it through that funnel, they're probably going to be pretty interested. And oftentimes they would have really great suggestions for us. Even if they weren't investing, if they spent an hour in the app, they could tell us like, hey, this thing, was broken or I didn't like this or I didn't understand that. And that was, you know, that was helpful feedback early on. I would much rather get the feedback on my product than on my deck. So it's worth pausing here for a minute, just to like, Nick, I know we've said a lot of nice things about you on the show already, but like...

23:5790 days and you guys had a product in market. I don't care how good it is. It was good enough for investors to go and experience or people to go and experience. You had users, especially in VR where it involves three modeling and all this rendering stuff and it's on a new technology stack where there's not a ton of familiar developers. I mean, that's kind of mind blowing. I would say it was all our team.

24:21was really cohesive and unified from the start and they're very, very talented. I can take literally no credit for it because I was, during that period of time, I was out unsuccessfully showing our deck. So it was really, it was really my co-founders and our early hires that were hustling. It takes a lot of bravery to put out a product that doesn't look the way that you want and doesn't operate the way that you want and only has 10% of the features that you want.

24:49But I think my co-founders were really brave in deciding, hey, the right way to build this product roadmap is to get this out in front of people and see what they do with it. It's interesting from a philosophical perspective, because I'm a believer in that too, of get it out, get user feedback, iterate quickly on that, ship off, and I think that's...

25:09That's the mantra and that's the drum people beat these days. I think that's a lot easier in emerging markets where you don't have user expectations set and where users are preconditioned and not be harsh. Oh, absolutely. I think there's, you guys were pretty fortunate there to be in a situation like that where, you know, there's many other industries where if you were to launch a mobile productivity tool or like a Strava competitor or something like that, where the feature set is well understood, it's like, there's so many things that are table stakes that you would just get laughed off the face of the earth before it you could even, you know, really show what your product was. I mean, we always talk about tech themes before we're ready on this show, but this is a really good one, right? Like, it's kind of like if there's not yet a product in market that has product market fit, like Strava or, you know, whatever, in whatever category, you can get away with it. But once there is, you can no longer get away with it. I think one of the nice things about

26:07being in an immersion market, or even being in the trough of disillusionment, it really is a gift for product development. Because user acquisition is free, competition is functionally quite low, quality expectations are very, very low, and so you can build a product in a much more iterative fashion. And honestly, the market is a little bit more efficient.

26:34I would say, like if no one's playing your VR app right now, it's probably not very good. If no one's playing your mobile game right now, there could be a whole host of problems. It could be because you were not spending the problem out on marketing, or you were marketing to the wrong group, or you had the wrong color on your icon tile, or maybe it's because the app store gods didn't smile on you that day. It's such a noisy market, and in many ways, it's very There are a lot of irrational actors in it, and that can distort the market in a way that can give you bad signal about your product. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF that everyone would not, and you're done. But in an AI first world, that doesn't hold up anymore. Yep. Your risk surface changes every week now.

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29:00So back to the fundraising. You had investors that were willing to meet you in record, so you'd qualified them. After that, you do your first meeting with them, you have your first conversation, they try the products. What was the cadence of interactions after that? It really ranged. It could be months. It could be hours. I think if people were really interested, it was fast. I would get another call as I was ubering away from...

29:29their headquarters or something. And then there were a lot of other ones where it was like, all right, hey, well, we'll stay in touch. I think one of the things that I learned and I try and pass this advice on is let's keep in touch is probably no. Anything other than yes is probably no. A hard no is pretty rare actually in the investment space.

29:50kind of want to keep their options open and maybe that entrepreneur will surprise you in a couple months. But yeah, I think it's easy to hear those things and think like, oh, I'm on the right path with 20 firms, right? And realistically, you're not. It was clear to us like who was interested because they would really hustle to get us to the next stage in the next meeting very quickly. And what was like the, you know, even for you guys at a very successful seed round, what was the conversion rate through that funnel from like, do that first in, you know, first solid good interaction or, you know, high fidelity interaction to, yes, I'm actually interested versus the, yeah, let's stay in touch. So there were, there were generally like three stages. So the first was they had most firms had someone who was kind of qualifying.

30:38was doing the kind of first check on you. Oftentimes that would be a principle or an associate or something like that. If you get through that one, then generally you're chatting with one partner. And then if you get through that, then you're chatting with the full partnership. There's the Monday meeting that you're going to. I would say our clearance rate was, we were getting through maybe half to a third of the principles associates.

31:08then maybe like 20% of the partners. And then by the time we got to the partnership meeting, generally those went well. But I mean, that's a huge drop off there. It was pretty, there was a bunch of people that were just like, VR, no, you're doing anything that sounds like games, no. Again, we got better at telling the story of what we wanted to do. We were kind of like, you know, really we have aims beyond games, but we think this is a great place to start and we think there's a lot to be learned here.

31:37But it was a little too much for some people. There's a well-trodden path of, hey, here's our wedge and then we're gonna expand into this big vision. And by doing this wedge, you'll put us in a good strategic place to achieve this big vision. But there's definitely the potential to not connect those dots enough where you could say, like, oh, we're gonna do Wii Sports, then we'll be everything in VR. Then we'll be this whole world where anybody can interact socially doing anything. And it's like, you need to self-select into being a believer, I think, to help cross that chasm. I think also while this was happening, the story was one being improved verbally, and then it was also being improved by my co-founders literally day over day. So we would meet in Rack Room, and then they would see more evidence that, you know, knowing this is expanding over time, and actually there's quite a few things that people, even in the early days, we were seeing people use it for

32:34virtual meetings they would hop into one of the rooms and like use we had a whiteboard in one of the rooms and people would like use it for virtual whiteboarding sessions which is awesome because it's public right yeah so people is this would be the equivalent of just like walking into a Starbucks and having a you know business meeting yeah yeah I mean in the early days it was public now you can have your own private rooms and private instances and everything but in the early days yeah people are using it for all manner of things that we never we never expected people were given talks in there and like it was it was pretty wild yeah

33:03That's awesome. As you were interacting with people on the investor side, like, what impressed you? How were you qualifying them thinking about who you ultimately ended up wanting to work with? I would say the thing that was impressing me the most was, you know, we were like living and breathing VR. We were in there all the time. Occasionally, we would run into investors where they were just dropshipping in, they spent five to 10 minutes listening to my spiel.

33:33and then they would have something, they would have some new perspective that I had never thought of. They would be like, have you thought of this? And it would totally open up this new path that I had never considered from being six inches away from it. And it was those sort of insights that were really impressive, where they had spent so much time with so many other companies that they could just see these fast lanes.

33:57And I think those were the things that impressed me the most. Are there any of those that you implemented that you can think of? Some of the early ones from Sequoia were really focused around how can you help enable more of the creativity that you see in the community. We were seeing a lot of creativity early on, and they were pretty excited about like, all right, well, how do you close the loop on this? How do you get them creating? How do other people know what they've created? How are you?

34:27ranking, discovering all of this stuff. And I think it went from us thinking about it as like, oh, well, this is an emergent property of the app to, oh, well, maybe this is the retweet. The thing that we should be building around, yeah. So I think there were a lot of very influential discussions that we had early on and just about how to approach these things, kind of things.

34:50You guys have been, you just launched the ability for people to create their own sort of large-scale objects and worlds for a long time. You guys were the only people that could really have a large amount of...

35:03sort of world creation for other people to interact within. I mean, how long have a journey has that been? And can you talk about like today a little bit, what does it look like for users to be able to have their own creativity inside a rec room? Yeah, so we started by building out a series of our own rooms. And each of those rooms has an environment, and it has a series of objects with behaviors and logic in them. A couple of months ago, we started experimenting with what we called the sandbox machine, which means you could go to any room that we'd built. And you could spawn any object out of the sandbox machine. So if you wanted to play tag with the bow and arrows on the disc golf course, like you could set that up. But it was all very temporal, like it didn't really last, didn't really stick around.

35:51So recently we've allowed people to name these rooms, save them, add logic, and the ability for these objects to respawn in certain spots, set room limits, set who can edit things. And we've also really beefed up something we call the Maker Pen. And that's basically a creation tool that lets you draw any object that we don't already have. So if you need a snowman, you can draw a snowman if you want to.

36:19draw a car, you can draw a car. If you want to draw a giant castle, you can do that all with the maker pen. And so the combination of those tools really unlocked a lot of creativity. And that's currently what we're looking at now. It's like, how do we keep enabling people to do more of what they want to do? So as you're getting towards the end of the process, you've met lots of folks and people are coming in and And then you meet Sequoia towards the end, and they get excited. They call you back right away, instead of the old glater. How did the process wrap up with them? And what were the key milestones to do that? I met them towards the end of my process. And actually, when I was talking to other people about Sequoia, everyone just had these amazingly positive things to say. They have a tremendous reputation.

37:10And so I was kind of nervous and intimidated to go in there and talk. And they were amazing. They were so friendly and humble and engaged and really knowledgeable about the product and the space. And so after those meetings, it was...

37:30I was, I was sold. I really wanted to work with them. And so, so as soon as we, you know, we heard back, it was like, all right, great. This is, yeah, this is happening. Let's do this. How long did it take from your kind of first interactions with them to being finished or to them saying they wanted to work with you guys? It was pretty fast. I think we, I think we did maybe two weeks at the most, maybe less. I think we did, we did one call. And then I flew down there.

37:59And then I flew back to Seattle and I think very shortly after getting off the plane. I left my bag in the car and then flew back. The next meeting. Did you actually leave your bag in the car? Yeah, I think it was literally the next day for another one. In raising around this, what does diligence look like? What did in those two weeks, what company information did Sequoia need from you? Maybe you personally, what kind of research was done? I think we were generally very open with with them, they wanted some data around analytics. What do user behaviors look like here? What do your cohorts look like? We were providing that kind of data. But honestly, there was very little data to go on for them. The product had not been out in the market for a very long period of time, and the company itself was very, very young. I think most of the evidence was in the product already. It was just like, wow, this had been built pretty quickly. This team seems pretty scrappy.

39:02And we were not spending very much money. So I think it was clear that we had like some levels of capital efficiency going on. You go from being a scrappy startup, you launched a product in 90 days, it was clear it was something was starting to work. And now you have a lot more millions in your bank account. Did anything change in the company? Did it impact your philosophy about shipping quickly? And how did you think about then deploying those resources? We tried to change as little as possible.

39:32We were like, look, this formula is working. So what this round has bought us is time. We can keep doing this formula for a longer period of time. Like in terms of what changed, it was very, very, very little. Were they on board with that? Like, yeah, yeah, I think they, I mean, this was part of our pitch when we were going out and talking about what we were doing. You know, most companies have the chart that's like up and to the right. And we were like, look, this is going to take a while. Like we're in the preseason of VR.

40:02We don't think the regular season's even starting for another two years. Here's what we want to do. Forget about the playoffs. I mean, in a lot of ways, you'll get the investors that you ask for. And if you're honest about what your strategy is when you're fundraising, people will self-select. I just want to highlight that. That is such a good point. Tom talked about that. Tom Alberg on the Amazon IPO about how Jeff Bezos, that's one of his favorite things. You get the investors you ask for.

40:29living it myself and then to it is so true. The best thing you can do for the long term health of your business and relationship with your partners is ask for you, be clear about what you are and ask for what you want.

40:43Yeah, I think a lot of people kind of freak out to about this notion of delayed gratification that there's some dirty secret. For example, VR headsets may not ship as many as we're all hoping and praying that will happen, and this is thinking a few years ago. Having a sober head about that and being like, yeah, we think there's a chance of that. Here's our plan, if and when that happens. In fact, even if it does do gangbusters, we recognize the price points are really high. Right now, it's connected to these big gigantic, tethered computers.

41:13that people basically need to have gaming rigs. Yeah, like being super upfront and just recognizing, hey, we're going to be incredibly well positioned when the wave does hit. I think that not only creates a great relationship between the investor and the entrepreneur, but it also lets you sleep easy at night because you've made the right promise to the world and to yourself and to your team that we're well equipped to handle this.

41:41we're super realistic about the way that it's gonna go. Yeah, I mean, keep in mind, we had started working on HoloLens in 2012, and it took four years for, you know, us to get the dev kit out the door. So we, like, we were very early. And, and I think was, when was Oculus founded 2012? No, I think afterwards, I had been working on HoloLens for a while, and then the Oculus Kickstarter happened. Wow. Like, it, wow.

42:09Yeah, HoloLens was in development for quite a long time, because it had been worked on before I got there. What actually total sidebar here, we'll get back to the story, but it came out of a connect, right? Yeah, actually most of the people, Alex Kippman's, Alex Kippman, the man's a genius. Alex is really a one of a kind mind. That guy is really, really, really smart.

42:37I think he just thinks about consumers like hardware in a very different way than anyone else. So I'm anxious to see what, you know, what he's got cooking with us. Windows MR, yeah. Yeah. Okay, so a big thing that changed when you raised the round is you had an official board now and Sequoia was on it. What was that like going from all you guys? You were focused on raising money. The rest of your team was focused on building and shipping the product and iterating. But now you have a board and you're a real company and you have to manage investors. How's that transition been? Again, I think we were trying to keep as much of what was working working. So for us, very little of the actual product development changed. We still try and get updates out to Rackroom every two weeks. So we want meaningful updates that go out every two weeks that it's not just a bug fix.

43:32update. It's like real features that users would notice and care about. I would say what the board has provided is when you're in that really tight iteration loop, you can occasionally get caught up in the details. And the board is there to remind you, like, are we making progress towards this long-term multi-year vision that we've laid out? Are there any things that we are ignoring now and are investing in? I mean, I think when you raise money largely what you're doing is you're you're getting permission to work on a higher value longer term problem. And I think the board is there to make sure that like progress is being made towards that. That's such a good framing because you do, you just get so caught up in the minutia, you're thinking about like, what are we doing in the next two weeks and what are we doing in the two weeks after that? And, you know, the pitch deck or lack thereof that you made six months ago is just not at the forefront of your mind.

44:31Yeah, I think it's a great formula for creating longer-term goals and holding yourself accountable towards those. I'm reminded, of course, again, of Bezos and Amazon's whole thing. I really, the more I think about this, I think is a key part of their competitive advantage is that they're willing to invest over five to seven-year timeframes and work and iterate towards a project that might not bear economic returns for that period of time. And really that is a lot about what raising money as a startup, especially in a new market like you guys, you know, is about. Oh, yeah, for sure. You mentioned, you know, that you basically went with this. We want to raise $4 million at this valuation. How'd you guys come to four? Was it a thing you wanted to accomplish and it was going to take $4 million to get you there or a certain amount of time that you wanted to operate? How'd you figure it out? So we had built a bunch of

45:28Financial projections that kind of showed okay with these different hiring ramps Here's about how much money we're spending I think really what we were looking for was we felt like there was gonna be this inflection point in the market For VR and we felt like it was gonna come once we saw a headset Which is kind of like an all-in-one so no cables no PC kind of the capabilities of the vibe or the Oculus, so six degrees of freedom tracking. We felt like this was, you know, this was a couple of years out, but we wanted to be building towards that and have the right product for when that hit the market. And so a lot of our plans were built around that. It was like, all right, how far can we stretch to make it towards that? I think we're still probably like, you know, 12 to 18 months out from that headset, but

46:19For us, we were really looking towards like, all right, how can we further our goal so that we have the right product when that inflection point comes? You don't have to answer this, but who do you think it's going to be? The one that I've seen that's closest right now is the Oculus Santa Cruz. So they've shown it, I believe it, their last Oculus Connect, and it's a six degrees of freedom. It's not tethered to a PC or anything. It doesn't have any external cameras. It looks amazing.

46:48There's no release date announced yet, so I think that's what we're anxiously waiting for. We're keeping an eye out for when Oculus has more to share on that, but we're really excited for anything that has that kind of shape to it. I think there's just so much complexity in the VR space right now. It's not easy to set up. It's not in every person's product yet, but I think once you can take it out of the box and it just works, and you don't need to check and see if it's compatible with your computer.

47:17I think that's a big game changer. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part. Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like the risks.

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48:56So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. All right, Nick. So one question that we had is, is basically, did you consider alternate fundraising scenarios? What if you had raised less? What would against gravity be today if, if sort of the round came together differently? One of the things that we did decide pretty early on after that 90 days was we had a product and, we didn't have much money and we decided to release that product for free. So it was not generating any revenue. Which also, we should note, that wasn't like a super obvious decision. I mean, if this were like the mobile app store, of course you'd release it for free, but many VR experiences were paid at that point in time. And most were paid and actually that was part of our acquisition strategy was we thought most VR content was single player, pretty expensive and relatively short in terms of

49:54you know, how much time you could spend in there, and we were like, recommend certainly has its flaws, but you could spend as much time as you want, because the content is really other people, and we're gonna make it free, and that's gonna be the way that we get a to hold in the market. So that was our thinking upfront. I think if we had not raised funding, we would be focusing on...

50:16I would say running known frameworks of monetization inside of RecRim. So we wouldn't be focusing on longer term problems where learning is really, it's unclear what the best practices are. I think because we've raised money, we're able to focus on things like how do you focus on abuse prevention and VR? How do you focus on moderation tools? That is an open ended problem. It will be an open ended problem for years to come. I think if you look at any social app on any platform, it's a huge portion of their investment. And we're able to focus on that in a very big way. And that makes a big difference. I think we're also able to focus on things like user-generated content. How do you enable people to express themselves and their ideas and make those things come to life and share them with other people? We're able to focus on those problems which aren't revenue-generating because we have breathing room with the round. I think if we didn't, we would

51:14we'd be making and selling hats, right? Like, you know, it's, they're much less interesting features and they're much less open-ended. On that, I don't think I've ever asked you. In some ways, like the world you guys were coming from with, you know, Forza and some ways, Microsoft's thinking about HoloLens, like, I could imagine it would have been easier attempting to be like, Yep, we're gonna box this software and sell it for 60 bucks a pop. Like, did that ever cost your minds? Or was part of this vision from the get-go being like, no, this is gonna be free, this is gonna be social. We're gonna do this differently. We definitely had conversations early on about, like, should we make this 1999? Like, what does it look like if it's 1999? I think we were really inspired by the development of something like

52:06like minecraft. I think minecraft really grew up in public and it earned its complexity by interacting with its community. It didn't come out day one and say like, oh, here's everything you can do with mine. I mean, it slowly got more and more complex over time as people learned the systems. And as its community taught other community members the systems, like minecraft.

52:29doesn't have many tutorials. It's because there's millions of tutorials you can find online from other players teaching each other. And I think what we believed was in order to get that kind of development cycle going in an early market with very few people, it had to be free and putting it behind a paywall was just going to make that flywheel spin slower. So it was a risk, but it was a calculated risk.

52:55in order to build the product that we want, in order to get the feedback that we want, in order to build the community that we want, it has to be free. The point about the fact that other people are the content, and you guys don't have to engage in level building at a frantic pace in order to stay one step ahead of the community so that they'll have something to do. We still do that. We've got a new one.

53:23It's a new pirate quest coming soon. So you can like swash buckle with a couple of your friends. Yeah, it's gonna be great. Yeah, we really enjoy it. But we're also, you know, we love seeing the creativity of the community. They come up with so many ideas that we would have never even thought of.

53:39I mean, it's really, I guess it's an internet theme. It's a thing that you couldn't really do without everybody being connected to each other all the time. It's like, you know, if you were playing Golden Eye on N64 alone, there's one exact experience that you can have every time. No matter how many times you go through it, things gonna be exactly the same every time, but...

53:57in a world like Recrum or let's say on a platform like Facebook every time I load up the news feed or every time I go to the the same level or world in Recrum, it's going to be a unique experience because there's all this different content so you can keep going through the same trotted ground over and over and over again and have different unique experiences that have sort of longer engagement cycles and higher attention than you would otherwise. There's also this amazing ability for Expression. I think there are so many people that have these amazing ideas and a lot of times the tech tool set is just kind of outside of their reach. And I think if you look at things like Unity or Blender, they've opened up creativity for a lot of folks, but it's still not everyone. Not everyone can create 3D content. Not everyone can build a game. And so what we're aiming for with Rec Room is

54:48like literally anyone can come in and build something meaningful that expresses their personality. Yeah, you were telling us before we started about the frozen castle. Oh, yeah. Somebody built a replica of the castle from Frozen, including like costumes from the movie that you can, you know, stick onto your avatar. Yeah, we've seen amazing stuff like that. We've seen comedy clubs, we've seen two rec room users who met in RecRoom decided to get married in the real world and they actually had their wedding reception in RecRoom.

55:26They invited like 40 of their closest VR friends. They made a VR bouquet for the bride. They made a wedding cake and they, you know, they actually had a ceremony with vows exchange and everything. Yeah, everybody wore wedding crashes. Everybody wore their fanciest avatar clothing. Yeah, it was, I mean, it was amazing to see like that. That was never something that we would have...

55:52expected at the start and I think those sort of emergent activities are the things that like really inspire us to keep adding stuff. It's so funny when when Facebook was just starting when when I was in college I had a good friend still very good friend that I met at a summer program I did during college and He went to school in Boston and my wife Jenny and I went to school in New Jersey and then the next year Jenny was studying abroad with one of her friends from Princeton in Paris and my buddy was Facebook friends with Jenny and this was all of his still like colleges only and He posted on Jenny's wall saw a picture Jenny had posted of her

56:33roommate in Paris and said something like, Hey, you know, thanks in advance, Jenny. I know you don't know me very well for introducing me to your blonde friend. And then they got married a couple of years later. And that was like, that was like, for me, that moment of like, man, this platform is like, and this has already happened in record. That's so cool. Yeah. Yeah. I think, I think one of the other things that really got us excited about about record because I mean, the internet has ushered in.

57:01several social platforms. There was something just so different about social in VR. If you look at social on the web, it's actually largely asynchronous. It's largely text based or photo based. And so with VR, it's all real time. And you get these subtle cues like people's heads held. You see their hand gestures. And it really feels like you're in the same room with somebody who maybe is on the other side of the world. We've heard from several people that They have some fear about social interactions in the real world, but having the ability to practice in VR almost helps them reduce their social anxiety. There's tons of people in the world who I think their well-being is not being satiated by the social software that's out there. I think in many ways we're more connected to more people now, but I think in many ways people feel more alone due to some social software. And I think what we want with the record is

57:59really to foster some sense of well-being. We really want this to be a place that you enjoy spending time and you look back a month from now and you think that was really time well spent. I'm really happy that I went in there and spent two hours hanging out with people. Do you get the reference there that you just made?

58:17No, literally Mark Zuckerberg's word words this last week was we want time on Facebook to be time well spent We have always yeah, we have always focused on that I think Often we regret the time that we spend on Twitter or Instagram or something like that But I think very rarely do we regret the time that we spend with our friends you know, at a restaurant. And that's what we're trying to build in VR. We're trying to build that feeling where it's like, this is real social interaction. It's not a facsimile of it. It's like, we're really here together. Look, I know we've doted on, you know, on record in this whole episode, but like, that is what it felt like this weekend. We were hanging out and time was flying. And, you know, it wasn't because the specific activity we were doing was cool. It's because like, we were sort of just hanging out together.

59:11And like, of course, doing those quests was also cool. I mean, any time you're hanging out together and you have, you know, bows and arrows and swords and paintball guns, not bad times.

59:23probably gonna be time else meant. That's true. All right, so before we move on to tech themes officially for the episode, Nick, I just wanted to sort of get your take on the VR market today versus, you know, what a lot of probably overly inflated expectations were a year or two ago. And also, how has the dominant platform that people are using sort of shifted from your expectations or has it matched? Sure. So I think right now there are probably around four to perhaps five million high-end VR headsets. And these are things that give you kind of the facsimile of hand motion, and you kind of get the sense of walking. They're often referred to as six-dough headsets, or six degrees of freedom headsets. Yeah, I think depending on which marketing report you read, it might have been, hey, everybody in there, brother has...

1:00:17three Oculus in their home. I think there were some very optimistic reports out there, but I think including somebody like Goldman Sachs and like, yeah, yeah. Well, I mean, I think they just published a new one, like earlier this week that where I think they're predicting, you know, 30 to 60 million by 2020. I think the tricky thing is like these things grow.

1:00:39exponentially, they don't grow linearly, so when you miss, it feels painful in the early years. For us, specifically, we were like, man, this is just gonna take 10 years. It's just gonna take a long time before this is a mainstream thing. We're in the PDA phase of mobile phones. The iPhone moment hasn't happened yet.

1:01:04the blackberry moment probably hasn't happened yet. So I think we're still waiting for those moments, but we can see them on the horizon. And I think there are so much that you can learn as a software developer now. There is a critical mass of users that go in there every day, and they're very vocal about what they want to do and what they expect the software to do, and you can be learning from that right now. And so that's really where we focus. As far as where the dominant platform is versus my expectations, I think the one that's really run away with it that surprised a lot of people including myself is PlayStation VR is currently the highest selling of those high-end headsets. I think the reason is it's the cheapest and it's the easiest. There's something very simple about it. If I have a PlayStation VR and I just take it out of the box, it's going to plug into my PlayStation and it's going to work. And I think that simplicity is missing in other segments of the market. Right now people are working on it, but I think it's shown that consumers

1:02:02are reacting to the ease of use, the reacting to the lower price point. I think it bodes well for anyone who's betting big on, hey, if we can make this easier and cheaper, more people are gonna do it. I think there's another camp in VR that's like, it needs to be way more immersive with more pixels, a wider field of view, haptic bodysuits. Ready player ones sooner rather than later. Hey, I look forward to all of those things. I reckon we'll happily take advantage of each and every one of those. But I don't know that those are the barriers to you know, another 10 million, 50 million people experiencing this. Tech themes? Tech themes. Let's do it. Finally arrived. You know, Nick, you had mentioned that these things happen exponentially and not linearly. And I think I'm stealing David's theme here from our notes, but technology waves and the difficulty to predict them. The fact that they grow exponentially, it looks like, until an inflection point, it's just not going to be a thing.

1:03:00And then suddenly, all of a sudden, it's going insane. And this is the new technology paradigm that everybody is using. And of course, we have the sort of Gartner hype cycle where you get this over-inflated expectations, then the crash, but there actually is real long-term value building. But if we look back at computing paradigms from the PC to the internet to mobile, the things we've talked about on the show, the trillion dollar waves, Still unclear what the next trillion dollar wave is going to be and there have been like three things that I could have sworn by that it's just not that obvious until you're actually in that vertical screaming pace going skyward that that is indeed the thing and that's the wave that you're on and the three things to get specific were machine learning cryptocurrency and VR like each of them

1:03:53for moments of time and some currently now feel like there's no doubt in my mind it's the next internet or the next mobile and we just don't know yet. It's hard for me to let Nick react, but I would take the other side of that coin though too which is like if you're actually gonna build something meaningful in these waves they're coming, you need stamina more than anything else, right? I mean when was Coinbase founded?

1:04:212012, 2013. I think I saw it by in 2013. Yeah. So probably 2012. Yeah. And we're now in 2018. And it's like a pretty established company then. Like it was yeah. Yeah. Yeah. And it just takes, you know, that's why I think your fundraising journey is so interesting, right? Like because that potential is there. And it is growing exponentially. And that means it's going to grow very slowly for a long period of time. And you guys need the stamina to go through that.

1:04:51Yeah, I think the way we look at it and I kind of mentioned this earlier is being able to build product in that Trow is also like it can be really helpful. You know, your competition is limited. Your user acquisition is very low. And you really can't have a direct voice to customers, which you can't have at a different scale. I think we went into this one with eyes wide open that it was like, look, this is just gonna take a long time and if you're not looking for something that's going to take, you know, 10 years, like this might not be the market for you. There are plenty of markets where you don't need to wait that long. They have different dynamics and they have different challenges, but I think this one, yeah, stamina matters more than others. That brings up my next tech theme, which is, I hadn't...

1:05:43Written it down until you brought it up on the show, but you get the investors you asked for. It's just, we talked about it earlier. I'll just underscore it again. You need to be very thoughtful about what your company trajectory is going to look like, what you want it to look like, what reality is probably going to dictate it's going to look like, and then find the right folks to be investors and partners along the way that share that same vision in the world because you can have a lot of conflict if you don't.

1:06:12I got one more before we'll ask Nick if he has any but mine's really domain depth of founders I think that Nick the fact that you and your founders your fellow co-founders got a product out in three months that was something you were willing to show investors and could have users actually using in a new paradigm like unless you had been experimenting with this stuff for the last several years and some of the only people on the earth that understood how this paradigm could actually work I don't think you would have that incredible speed to market. And you can disagree with me on that, but I think some of the best companies are formed when somebody takes a deep dive on something and thinks deeply about it for a while and tries all the angles and then it becomes a thing and they start a business in that area. I think any startup is really about learning. I think you're really trying to optimize for who can learn the fastest and who can compound

1:07:10what they're learning fastest. And if your knowledge is growing in a compounding rate, then like a small advantage at the beginning can make a meaningful difference. But that's still how we go into work every day now with RecRum is like, what can we learn today? What don't we know? What assumptions do we have that are, you know, we haven't tested or this other data point?

1:07:32from some other product is proving incorrect. I think that's the way that you have to approach things in these early markets. There's so much learning. There's so much that we take for granted now in the mobile space, or the web space where people are just like, yeah, this is just how you do it. This is just how you lay out a website. Put a hamburger button there. Yeah, this is just how you run an ad campaign, but somebody had to go through all the pain of figuring that out the first time. My gosh, it's like when Alfred was talking about the user acquisition through the advertisements and TSA. It's like, now that's a regular thing, and we think if that is an ad unit, someone had to try and pioneer and figure out if that was cost effective. Yeah, or even in mobile, how many years did it take before free-to-play became mature, and people realized that how mobile games were going to work probably arguably to the detriment of humanity. But yeah, it takes a long time to figure these things out.

1:08:30I mean, there were so many there were so many assumptions that we made early that were that were wrong and I'm much happier that we like course corrected a little bit every week than we had a massive course correction two years later and I think that would have happened if we You know had had developed rec room in secret for two years and then try to launch it in its perfect form We would have just built the wrong thing. Yeah, that's actually I'm gonna sneak another one in here. I'm so glad this came up on our our first ever you know fundraising episode on acquired like This is like such a classic mistake that I've seen so many founders make and then investors make it two time and time again. You get sucked into this like, oh, we're going to go build something in the lab. We're going to go cook in the lab to joke about Dr. Dre. I guess he can do it.

1:09:18It doesn't work. It just doesn't work because you're not getting exactly to your point, Nick. In an early stage startup, especially in a new market, your lifeblood is your user feedback. And when you're in the lab, you're not getting that. I can say that I don't know if it never works. I can just say it would not have worked for us. Like our original idea, there was much of it that was correct, but there was much of it that would have let us down the wrong paths. And so I think that market interaction is what what course corrected us over time. I think we were humbled a little bit here and a little bit there. Carbouts? Carbouts. I mean, I... Oh wait, actually, did you have any tech things that you wanted? No, I think you guys nailed it. Nice job. Thanks. What's your grade for this episode now?

1:10:06Yeah, I think we'll skip that part. Yeah. Most like said, it just doesn't fit this. We're learning. We're learning. We're making changes. We're learning. That's right. Our carpets are not like supposed to be about the episodes, but this is just like the last book that I finished and we already mentioned it. But like, if you haven't read Ready Player One and you think this episode is in the ballpark of interesting, you should totally go read it. It is like super, you could, you can blow through it pretty quick. It's super, super readable. It's really fun. It's like I think that a lot, it's written in 2011 or 2012 and a lot of the things that people are talking about today with not only VR but the direction the world is going from a political perspective and from like a global warming. There's just a lot of things that people are talking about that are major issues of our day that were sort of themes of the book five, six years ago.

1:10:59the movies coming out in like a month or so. Yeah, I can't. I think it's coming out in March. Yeah. I can't decide if I actually want to see it or not. I can't wait to see it. Did you see Ender's game? I don't know. Ender's game is a little problematic, but yeah. Anyway, really, really cool book. And I'm actually very curious. Nick, do you like to like in Reck Room to a Ready Player One like world or do you like intentionally stay away from stuff like that?

1:11:27There are a number of sort of canonical novels in the VR space. I think that's one. Snow crash is another one. We don't normally reference them. But I think it would be hard for you to find any VR entrepreneur that hasn't been influenced by those books. I mean, I've read it. I loved it. And I think it's definitely influenced some of our thinking as has.

1:11:56as has no crash. So I think there's plenty of people that are inspired by, you know, the ideas in that book. My car about is appropriate for today. It was recommended to me by Nick. And it's another Neil Stevenson book. And it's another Neil Stevenson book. That's right. So the book Seven Eaves. Such a good book. Such a good book. It was well, okay. So here's the thing about this book. Everybody should read this book. It is like.

1:12:22It is, I don't even, like, the whole construct is just like, the setup is something that, like, really makes you think, really, really makes you think, and it's very cool. But I have to say, like, it is a hard book. It is, quote-unquote, hard sci-fi, and it means hard in every sense of the word. Like, it is not a short book. Not short.

1:12:42Extremely technical. Long, 20, 30 page passages about the technical aspects of surviving in outer space when humanity is reduced to a couple hundred people, which isn't really giving anything away in the book. Anyway, very, very worthwhile read recommended me to me by Nick. So, thank you. Nick and President Obama. Oh, and President Obama. Wow. His reading list. And I have no idea how the guy found the time, but I love 70s. It's a great book. It's like three great books. Yeah. Actually, I think it would have been better if it had been a trilogy. Instead of one book. But I can see why you wanted to get it all out on one. Speaking of stamina, that book, that book does- David, I can assure you Hollywood will make the movie a trilogy. I mean, they might have to do a trilogy just for the first part of the book. I would love to watch a movie of that. I would actually be really interesting. Yeah.

1:13:39All right, so for mine, I'm gonna go with the video game. I'm gonna go with Zelda Breath of the Wild. It's been out for a while. I recently got a switch and recently finished it. And I bought the switch for that game. I had just heard from so many people that it was amazing and actually the reason I wanted to...

1:14:02to list it as a car about was, I think you often hear this phrase that like there's only two strategies in business, bundling and unbundling. I think it's been used like white a lot. And I think in many ways it's very accurate, but I think it reduces what you're bundling to a commodity. And I think if you look in the video space, and you look at Hulu and Netflix, a lot of what they're doing is, you know, bundling and unbundling the same sets of content. I basically bought a $400 video game. I bought the Switch for Zelda and I think it goes to show that there are some content that transcends that bundling and unbundling strategy where people will do borderline irrational things to go and find this content. And I think bundling and unbundling, it's really like

1:14:55taking advantage of an arbitrage opportunity. But I think as more people go after that, the arbitrage opportunities disappear. And so you're going to see the value of this tentpole content really being more and more important for distribution platforms. And I was reminded of that after playing that game. It is magnificent. It is amazing. It's funny. I'm considering doing the same thing, buying a switch for it. It was absolutely worth it. So I think during the launch period of the switch, Breath of the Wild was, I think the first in history game that had effectively a 100% attach rate to the console. Meaning that, I mean, I'm sure there were a few people who didn't, but just basically 99.99% of people who bought a Switch during the launch window also bought Breath of the Wild. Well, the last time that I can remember anything like that was, I do remember hearing that the original Halo had had...

1:15:48There were at times where there had been more copies of Halo sold than Xboxes. And I had heard that it was similar with the Switch was there were more copies of Zelda sold than Switches at certain points. I actually got Zelda before I got the switch. Like, Zelda. Nick is the reason for this strategy. It was really depressing for like a week. I could just stare at the game. Oh, that's the worst. It's like when your phone case comes before your new phone. Yeah. Okay. So what, uh, you know, we're extended carve out section here. Uh, listeners feel free to, you know, jump off if you want. Go register review. I'm stealing Ben's line. But, uh, okay. So, so what's your take on the switch in general and, uh, also do you primarily play in TV mode or, or handheld mode?

1:16:30When I first saw the announce, I was like, this is ridiculous. I don't know why anybody would want to do this. This looks really weird. When I first saw ads for it, I did not think it was going to be successful. But I'm really falling in love with it as a console. It's really great. I spend about 50% of it in handheld and then 50% docked to the screen.

1:16:57It's amazing if you find yourself on a plane a lot as well. Like if you're traveling a lot. If you're fundraising. It's a great device. Yeah, I think if you think about like the Clayton Christians and innovators dilemma where occasionally people will go past what is needed for consumers, I think there's definitely some of that going on in the gaming space. I think we might have gone past what...

1:17:23consumers need in the CPU GPU. I think what really people are looking for is meaningful experiences, not necessarily more and more realistic graphics. And I think Nintendo has capitalized on that in a good way. It's not as powerful as the PS4, it's not as powerful as the Xbox, but it provides a very different value proposition. Well, I gotta get one. There we go. I mean, I got...

1:17:49Apple music at one point just to listen to Taylor Swift, so it seems like I need to get the switch just to play this game. Well, on that note, Nick, where can our listeners find you on the internet? Oh, man. I have a pretty limited presence outside of VR, so I'm in Recrum at Nick. And that's it. That's the only way. Your cover right now. No, no, that's the only way you can get to Nick. If you really want to talk to Nick, then that's the filter. Yeah, there you go. That's the filter.

1:18:20All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale. Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now.

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1:19:10So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. As far as calls to action for us, we would love a review on iTunes. I even wrote calls to action in the script. I don't think I was supposed to say that. We have a Slack acquired.fm where I think we hit 1150. We're talking about all this stuff.

1:19:35and sometimes we're dropping hints as to who the next episode will be on, so join us for some little foreshadowing. Alright, thanks everyone, thanks Nick. Thanks for having me. We'll see you next time.