What makes a great AR/VR CEO?

I did my best to aggregate advice from some of the top CEO's in our industry, hopefully this helps you today by putting you into the right founder mindset.

My thoughts after meeting the top AR/VR CEOs:

Over the past decade, I’ve been a bit of an archaeologist for AR/VR CEO’s. I’ve met so many of them, worked with so many, and have watched so many of them from a front row seat as they embarked on their journey. Working as an investor, an adviser, a friend, and even a CEO myself, I’ve developed a strong understanding of what it takes to succeed in AR/VR startups.

I’ve been involved in the virtual reality industry since my senior year of college, and that was 10 years ago. I worked in the Reality Labs division of Meta last year, I scouted XR startups for General Catalyst while in San Francisco, and I raised $5M for my VR startup as CEO in London. I’ve been on the corporate, investor, and founder side of the table. I’ve seen hundreds of startups come and go, and that feels like only a fraction of the investors who have since quit believing in the industry. But I’ve also seen the incredible meteoric rise of some founders, first hand.

I never expected this convo to turn into $200M:

I remember meeting Nick Fajt for the first time in 2016 within months of him having left Microsoft. He told me he was starting a new company called “Rec Room”, and he thought it could become pretty important one day. During that next Friday - I play tested their game with ~100 other beta testers, Well, he was right. Over the following years I watched him go from $0 in funding to over $200M from some of the top investors on the planet (Sequoia Capital, etc…). I remember vividly when their company had to make the incredibly controversial decision to expand their product line from only working on VR headsets to also working on Xbox. To some of the VR purists, this was the worst thing any VR founder could do. But Nick understood one thing which many founders did not – and that was the idea of adapting. He was a great enough business person to recognize the importance of following this hunch and taking a risk. He knew in order to raise big VC capital he needed to find a larger install base, and so that’s exactly what they did on Xbox. Nobody in 2024 is doubting that decision, but at the time it was monumentally important that Nick made the right call quickly and with absolute conviction. The founding team of Rec Room came from a background of deep domain knowledge, as do many of the great AR/VR founders. But with a deep understanding of this industry, also comes the necessary requirement of having extreme patience.

Bootstrapping is just as impressive:

I first heard about a company called Virtual Speech back in ~2017, not because their founder Sophie Thompson was raising VC, but because she wasn’t. Their product and traction was doing the talking. She understood the market was going to grow slowly, and so she focused her time on delivering value for customers. Instead of wasting time away chasing investor dollars for an unsustainable underlying business. Fast forward to today and she hasn’t diluted her company ownership, she’s done all this with nearly $0 raised, and has a stable team of 15+ employees that she built solely on revenue. She’s built a career that just about everyone would dream of: control, autonomy, ownership.

Steve Jobs started in a garage, VRChat started in an attic:

As if seeing Nick and Sophie build incredible businesses wasn’t enough, there’s one founder I met years while we were both working out of the top floor of an office space in what some would consider the attic. That company was VRChat. I was an unknowing 22 year old at the time when I first met their founder, Graham Gaylor. He was working out of the upstairs section of an accelerator in downtown San Francisco, it was essentially an glorified rooftop attic. They had a team of 3, a half-baked product, and little more than a dream. At the time, I didn’t think the market was ready for what they were building, but he understood starting with a small market is what ultimately builds the bridge to a large one. And that’s just what happened, he went from that dingy attic to eventually raising $90M+ and building out a team of pioneers.

Founder backgrounds are each unique in their own way:

Graham came from a background where his resume had little more than internships on it, Nick came from a background of leading teams within big tech, and Sophie had never worked the same job for more than 6 months prior to starting her business.. over half a decade ago. Yet the three of them all found incredible success within the AR/VR industry, how? Because they’re great storytellers with an unparalleled ability to ruthlessly execute.

With all of my lessons in hand, and some help from some friends in the industry, here are my tips that I hope help you to become uber successful on your journey.

The Top Habits of AR/VR CEOs:

Ryan Engle @ GolfPlus:

“The willingness to try ideas that have a low probability of success and continuously prioritize R&D concepts. There are no established UI/UX guidelines in XR and it's up to us to find what works and play around with new ideas. That has to be paired with a good understanding of the business and monetization so we can afford to test ideas without putting the business at risk.”

In other words, he prioritizes affordable iteration. When you’re fumbling through the woods at night without a flashlight, you don’t just start sprinting in one random direction. No. That is how you end up running flat into a tree. Instead, you shuffle your feet and hold out your hands, aimlessly hoping you grab onto some shrubbery so that you can continue to navigate slowly but surely through the darkness. That’s directly comparable for what it’s like when building a startup in AR/VR. Because there are so many unknowns in the woods of AR/VR, it’s important to keep a small team and a small budget until you’ve found an opening in the woods.

“The smaller the team the better when you're starting up. There will generally be a lot of pivoting and course correction, which is significantly harder to pull off as a large team. We focused on finding a couple great engineers, a player experience / QA person and a great designer. It's important that the early people have equity in the business and are fully bought in on the vision / mission. There are plenty of dark times in startup land, so it's critical to have a team that supports one another and is generally optimistic and passionate,” said Ryan on the topic.

You can see from the path of progression of Golf Plus that they started small, and let their product naturally unfold. When you’re lost in the woods, you should rely on your compass or the North Star. Well, in startups, your North Star is REVENUE. Without commercial traction, you will lose focus on the health of the business and eventually lose focus on what you’re trying to accomplish long term. Ryan successfully did this, and so I’ll let him explain:

“Without a healthy business it's easy to get pulled in different directions, or spend a lot of time trying to raise vs building the intended product. In our case we used each major product iteration as a stepping stone to get to the bigger idea, rather than starting with the grand vision. We launched Pro Putt which allowed us to get putting physics right, and attract a more casual audience. Then we rebranded to Topgolf with Pro Putt, which allowed us to work on full swing physics and more social interaction. And we finally rebranded as GOLF+, which is a full course golf experience, and we partnered with the PGA to get their seal of approval and acknowledgment from golfers. They wouldn't have partnered with us from the start, because we had no real traction, but after Topgolf with Pro Putt was successful and we had solid reviews, the conversations were easier and often inbound. We're still a fraction of the way to the grand vision, but each step moves us closer and we learn a lot from every iteration.”

Ryan did NOT start with the end vision, instead, he found the most fundamental basic building block of that final vision, and relentlessly focused on getting that niche use-case correct. He did it right, but with sooooo many founders out there I see them do the exact opposite. They start by trying to boil the ocean, they end up spending years building what they believe is the ultimate vision, but during that time they forget that user engagement is the only thing that can actually sustain a company and they end up flaming out prior to completing their grand vision. Or, and this can be even worse, they do build out their castle in the sky vision only to realize nobody actually wanted it.

1. Stage 1: Putting only allowed them to get the physics physics right
2. Stage 2: Adding the golf swing on a TopGolf Driving Range allowed them to work on full-swing mechanics
3. Stage 3: Adding gorgeous and immersive Golf Courses only now did they begin to work on building out entire golf courses inside of virtual reality

You need to build a product just as you’d cross a river, step on one stone at a time to get across. Do not try to just jump the entire river from a standing start.As Ryan matured as a CEO, he converted his North Star into tangible metrics that he could measure and therefore hold his team accountable for. The significance of measuring your progress with real user metrics cannot be underestimated. Ryan told me:

“we're on the consumer side and we primarily focus on DAU, WAU and MAU. Our D7 and D28 retention numbers are primary KPIs. And we measure "shots hit" in game to understand engagement. We also track our position within Top Selling and Most Popular to understand how we're doing relative to the VR market as a whole. These top level KPIs have stayed consistent as we've grown, but at different times we might prioritize other KPIs, like reviews, email collection, Discord growth, etc.”

You can see that they aren’t operating purely by ‘feel,’ rather their high caliber team is drawing on data to help their company align towards success.

CEO Advice from Spatial Collective Members:

I run The Spatial Collective, which is a private group of 100+ of the best AR/VR CEO’s in the industry. I asked our CEO's for their opinions and so I wanted to share with you their answers.

Sophie @ Virtual Speech:

“You can learn something from everyone you meet. Know when to say 'no' so you can say 'yes' to the things that matter most. eg. focus on your core market and don't get too distracted by shiny objects that don't add value for your customers. Marketing is under rated - you can have the best product in the world but if no one knows about it, you'll sink.”

Ryan Damm @ Stealth Startup:

“I only have early stage experience, but what worked for me on the early side for product was focusing relentlessly on the features that mattered to customers (spend a lot of time talking to them!). But also: be aware of which customers are not in the space that will be once your product is available; for us, that meant prioritizing a combination of features that current XR users wanted, combined with features that 2D filmmakers would eventually want as they transition to XR. On the investment side, you gotta have a big funnel for investment leads, but with a big asterisk: every lead that is not someone interested in or knowledgeable about the XR space is a waste of your time. Don't fill the top of your funnel with time-wasting leads; go after those individuals and firms that have looked into the space and have a thesis. It's expensive to educate investors, and never (in my experience) results in a transition. Finally, team structure -- make sure you've got someone with experience shipping finished software products, otherwise you end up in feature creep hell, or research-forever mode. That person need not be your CTO, but someone needs to be focused on deadlines and deliverables, and that person should be empowered to make decisions about what gets built and what gets deferred to the next release / cycle. Similarly, one person needs to be responsible for fundraising, and that's almost always the CEO at the early stage. And you need someone laser-focused on sales or partnerships or however you make revenue. If that's the CEO, you need to alternate between explicit fundraising and explicit sales / growth. Because it's really, really hard to context-switch between fundraising and selling to customers; they need different collateral, different pitches, and different attitudes. In my experience, anyway.”

Patrick @ Dark Arts Software:

“If you've got a killer idea, put the team in place to make it happen and wants to, and then support them to make it happen. Recognize that you can't do it all, and it's up to you to make the company go and grow.”

Luke @ GravityJack (our funniest member):

“I have sold every startup early until Gravity Jack (which has been a long time coming) LOL. So I am not the most qualified to answer. I do run our organization flat with no egos or self importance for anyone. Once we do the late stage for Gravity Jack ask me again. :)”

A lot of our members talk about the importance of having a great team around you, so naturally my next question revolved around trying to understand how those early hires can help you become the best CEO possible.

The CEOs VR/AR Hiring Mindset:

Kyle Doran from The Net VR:

"Offer experience for development, tons of student devs just need experience.” It’s good for your business, good for their resume, and great for the product.

Building a high performing team isn’t all about paying large salaries, a lot of the time it’s about finding the most talented people who are hungry to prove themselves. In the below quote, Kyle reiterates the advice that I always give to founders, which is to look for unpolished gems. At my last startup, we had multiple interns who were just out of college and they CRUSHED it for us. They bring fresh energy to the team, and dynamic ideas which experience might blind us from seeing.

Howard McCabe of Dream Syndicate XR

"Find people with similar goals and work ethics. People who live for the tech/art.”

From our funniest friend Luke again, I felt this was an incredible answer he provided.

“I hire strange... I might hire a coder that has never coded but has a degree in physics and mathematics. I like to be the least intelligent in the room and listen to all feedback. You learn to work as an organism and the CEO provides the vision.”

Luke understands the importance of trust, and magic. You can’t foresee the future, so your best bet is to break the norm and see what happens. As Jimmy Ding told me, “sit down and actually talk to each other on their abilities and needs. They might not 100% align with your expectations, but at least you have a good idea to begin with. Then, trust them and let them do the magic.”

Out of all the responses, Ryan Damm's is the one that I personally follow most closely when building a company – and at the heart of that strategy is networking. I love this mindset, and hey, maybe that’s why I invested $50K into Ryan's last startup business back in 2016!

“Talk at conferences! Spend an unhealthy amount of time on LinkedIn. Go to meetups. Ask your professional network. Then sell them, hard, on the big vision: not how valuable the company could be, but on how impactful the product/service could be. Sell them on a future that you're making.”

Ultimately, hiring a great team is personal to the CEO. It comes down to chemistry, a mixture of familiar and strange, and a ridiculous amount of time spent bonding with one another.

Summary:

(1) Characteristics of a great CEO:

Patience, Vision, ruthless execution, deep domain knowledge

(2) Methods of growing from early stage to late stage:

Iteration, calculated risk taking, measuring twice and cutting once.

(3) Hiring the right surrounding team:

It’s personal, pick the people who not only can do the job but also are people you want to do the work alongside of.

Need Fundraise/Mentorship for your Startup?

If you made it this far, and if you read the entire article, then you are the type of CEO I want to work with.

1. Fundraise Consulting - XR Founders: If you need AR/VR fundraise support please submit your email here and I'll reach out with details on how I work with founders to help their fundraise.
2. Private Keynotes - Membership Opportunity: Consider joining The Spatial Collective for $350 and coming to the private conversations we are hosting only for members. We're doing a 2 hour workshop next week led by myself around AR/VR business development, then we have a private advising conversation with Inga from ShapesXR where she can share advice on how she raised $8M and built a top XR startup, we also have a private conversation with Zach Mulligan who will coach us on organic marketing and how he gained 400K+ followers for his business, as well as a top notch investment conversation with Niko Bonatsos who is the Managing Director of General Catalyst ($15B AUM). This is the top community for AR/VR founders to access the insider network that is needed for success.
3. Public Keynote - Invite: You can also RSVP to join our upcoming keynote for AR/VR CEOs. We'll be bringing in a Partner from Lightspeed Ventures who will share their fund's perspective on XR investing.

Hoping this was helpful for you,

-Don Stein