The metaverse has lost its magic for investors as artificial intelligence replaces it as the hottest investing trend. But Sebastien Borget is not intimidated. The Hong Kong-based co-founder and COO of Sandbox is stepping up to prove that the metaverse is not just hype, but the future.
myEven at the height of metaverse mania a year and a half ago, raising capital wasn’t easy for Sandbox, the Web3 game company, says co-founder and COO Sebastien Borget. Borget and co-founder Arthur Madrid used to take nearly a year to close a funding round. The most time-consuming part was convincing investors that the five-year-old company, a subsidiary of Asia’s largest blockchain investor Animoca Brands, could one day build a decentralized metaverse. “Running the Sandbox is like a long marathon of many sprints,” Borget says in a video interview.
Now, raising capital is even more difficult as higher interest rates reduce investor appetite for riskier bets, such as Sandbox’s attempt to build a three-dimensional virtual world where entertainment, social interaction and digital ownership coexist. . The metaverse is no longer a buzzword for investors, as the futuristic but confusing concept has proven time consuming and expensive to bring to life. Instead, many investors have turned to AI, spurred on by OpenAI’s viral chatbot, ChatGPT.
Despite the lack of investor interest, Borget believes the metaverse will still become a multi-billion dollar business as industries from retail to education have already entered the embryonic space. Although the number of Sandbox players is only a fraction of the established games like Fortnitewhich includes some features from the metaverse, Borget expects growth to be in the double digits, partly driven by the rise of AI.
“We’ve been very attached to concretely showing what’s possible in the metaverse as soon as possible,” says Borget. “We have shown that it is not just about games, but about a new format of entertainment that lies between social interaction and gamification.”
“And we are going to show that Sandbox is resilient and does not depend on technology or the crash of the cryptocurrency market,” adds the 38-year-old Frenchman.
Borget believes that ChatGPT and other generative AI tools will help populate the metaverse at a much faster rate by making it easier to design virtual worlds and avatars. Major game maker Activision Blizzard, for example, is already using generative AI to speed up the game design and development process, reported the New York Times. “We are on the verge of a major evolution in the way we build and manage our games,” Allen Adham, Blizzard’s director of design, told employees, according to the report. Times report.
Borget adds that AI can also help make the metaverse a safer space by applying its technology to filter offensive language from in-game conversations.
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The Sandbox has already been experimenting with AI, partnering with companies that design avatars using text messages and create avatar actions from videos of human movements, among others. Borget says the company is looking to partner with, invest in, and potentially acquire AI companies that can help improve its metaverse gameplay, such as software for players to create games and other experiences on their virtual properties.
Unlike Billionaire Mark Zuckerberg’s Metaverse, the Sandbox metaverse is blockchain-based, requires no VR headsets, and is accessible in web browsers. The Sandbox says it runs one of the largest decentralized metaverse platforms by number of owners. Since its launch in 2018, Sandbox amassed around 23,500 virtual owners and over 400 brand partnerships in the first quarter. (Divulgation: Forbes is one of the virtual owners of Sandbox). Companies that have recently collaborated with Sandbox include Korean billionaire Bang Jun-hyuk’s game developer Netmarble and Singaporean billionaire Wong brothers’ fashion house Charles & Keith.
“Rather than being a spectator and simply viewing a brand’s social media assets, Charles & Keith’s virtual land encourages interaction, where users can play and win NFTs,” said Keith Wong, Co-Founder and COO by Charles & Keith, in a written response. “We can also express our campaign concepts with the space incorporated and consequently increase brand awareness by reaching a wider audience through the combination of fashion and technology.”
Investors, however, did not share the same enthusiasm. Capital injected into Web3 startups in the first quarter dropped to $2 billion, the lowest level since 2020, according to funding data provider Crunchbase. That’s less than the $10.8 billion in the first quarter of last year. Meanwhile, funds raised by generative AI startups in the first three months of this year more than doubled over the same period in 2022, reaching a total of $1.7 billion, according to PitchBook data.
For Sandbox, it’s been a year and a half since the company closed its last round of funding. In November 2021, during the funding bubble, it raised $93 million at an undisclosed valuation from investors, including SoftBank’s Vision Fund 2. Borget says he is confident of raising more capital, although he expects it to take longer under current market conditions.
Sandbox also needs to attract more users to its metaverse platform. The game, which is currently in beta mode, had more than 100,000 players in the first quarter. That’s a 72% drop from a 10-week period ending in November, the company’s most recent comparable figures. Both Sandbox game tokens and daily unique active wallet addresses have plunged more than 90% from their peak more than a year ago, according to data providers CoinGecko and DappRadar.
Borget shrugs off the downturn, saying metaverse adoption is still “very active and ongoing.” Daily unique active wallet addresses only show the number of users who log into the Sandbox to make a transaction, but not users who simply play games and join events like virtual concerts, he explains.
The Sandbox said it has sold 70% of its more than 166,000 digital plots. In the first quarter, Sandbox said it made $1 million in sales, as businesses and users snapped up the roughly 460 parcels of land in a sale. More than half of homeowners keep their virtual land for more than a year, Borget adds.
“We have more creators than ever, more users than ever, and more brands than ever. It’s because there’s a real utility behind virtual lands and avatars. People see that they can play, participate and monetize their lands and creations”.
Borget expects double-digit player growth through the remainder of this year and through 2024, as Sandbox fully opens its metaverse gaming platform by the end of Q3. The platform currently limits player access to selected virtual worlds at fixed periods while working to improve the platform.
Meanwhile, the company plans to release the Metaverse game on smartphones next year. The move is set to allow Sandbox to grab a slice of the mobile gaming market which, according to research firm Newzoo, accounted for half of the games industry’s $183 billion overall revenue last year.
Borget’s ambition to build an open metaverse where anyone can become a creator and monetize their own creations is fueled by his own experience. Borget, who describes himself as a geek, felt that there is a high barrier to entry to developing video games because expensive computer hardware and advanced programming skills are required.
So an open source developer, Borget saw an opportunity in 2007, when Apple released its first iPhone and soon after allowed developers to build apps at low cost and publish them on the App Store. Along with Madrid, whom Borget met while working at a media sharing platform, they co-founded Pixowl in 2011 to develop mobile games from a base in San Francisco.
A year later, Pixowl released Sandbox. Then a 2D game, players took on the role of God’s apprentices to build virtual worlds by dragging and dropping pre-made items and drawing on their mobile screen. It quickly became a hit with 40 million total downloads and 1 million monthly active users in 2017. But the boom didn’t last.
“Despite the success, he came out in frustration. Most of the committed creators left over time despite all the social fame and recognition we gave them,” recalls Borget. “We found that the reason was a lack of monetization, a lack of sharing with creators a portion of the revenue they brought to the game.”
A ray of hope came later that year, when Borget and Madrid discovered the CryptoKitties blockchain game. The mechanism of allowing players to own their virtual cats in the form of NFTs and trade directly with other players surprised the couple and prompted them to develop a blockchain version of Sandbox.
His move caught the eye of Animoca Brands, which at the time was also discovering the potential of blockchain technology in gaming thanks to CryptoKitties. In 2018, the Hong Kong-based game maker acquired Pixowl for around $4.9 million and later spun off Sandbox to focus on running the current metaverse gaming platform.
Borget says it will take at least another five years to complete the construction of an open metaverse. Until then, he’ll continue to adopt the same mindset he had when he convinced investors to back his company. “We just have to be patient, continue to build the open metaverse, and be sure that we can build it,” says Borget.