Building the Future of AR Gaming

Intro – 00:00:01:
Welcome to Startup Success, the podcast for startup founders and investors. Here, you’ll find stories of success from others in the trenches as they work to scale some of the fastest-growing startups in the world, stories that will help you in your own journey. Startup Success starts now.

Kate Adams – 00:00:19:
Welcome to Startup Success. Today we have a guest host in-studio who brought some very special guests. I’m going to introduce our host for today. Steve Lord is the Managing Director of Burkland’s FinTech and Crypto Practice, and it’s always a treat to have him hosting an episode of Startup Success. Thanks, Steve.

Steve Lord – 00:00:41:
Thanks, Kate. I’m really glad to be here and super excited today to have with me Natalie and Jake from Jadu. Welcome aboard, guys, and thanks again for joining us.

Natalie Testa – 00:00:49:
Thank you, we’re happy to be here.

Steve Lord – 00:00:53:
What I’d love to do is, we’re going to talk about a bunch of different things, but what I’d love to do is sort of kick off a little bit about Jadu and what you guys do. We’ll get into more details in a little bit, but if you could just give a quick little history of the company and what you guys do.

Jake Sally – 00:01:06:
Yeah, sure. So Jadu is an independent augmented reality studio. We’ve been working in the AR space for the better part of seven years. Our CEO and CTO met in college and have been building AR experiences ever since. This started off working with the Microsoft HoloLens evolving into the Magic Leap headset, HoloLens 2. Natalie and I are coming from a background where we were working on Verizon’s augmented reality ad business, as well as a number of other AR experiences. So we have been blending the physical and digital worlds for an extended period of time. The most recent iteration has been after our Seed and Series A raised, we’ve really decided to go out at full tilt to deliver consumer-facing augmented reality experiences for mobile. A lot of the work that we were doing with AR headsets that used to be constrained to these $3,000+ devices has finally trickled down and is reaching mobile devices in really, really powerful ways. So it’s been pretty awesome. We’re gearing up right now for a summer launch of our first consumer-facing product, which is going to be the Jadu app, where you’re able to compete in multiplayer AR combat. Think of this kind of like a Mortal Kombat or a Street Fighter in AR. So you and I can be in different places, but we can actually have a shared AR experience with our avatars for a fight.

Steve Lord –00:02:24:
And on my phone, right?

Jake Sally – 00:02:26:
And this is all on mobile. Yeah, no headsets. We do love them, but they are, they’re not perfect yet.

Steve Lord –00:02:31:
They are not for everybody. Yeah, awesome. Thank you very much. And when you look at the evolution of the company, right, when you think of the startup world that you’ve been in, and where you’ve come from, are there like two or three top things that you would go back and tell your younger self, what sort of lay ahead and things you might want to warn them about or do differently or, and this goes to both of you guys, because I know you’ve had different experiences. And you know, the gist of the question, right? Like, what would you go back and tell that person five years ago that you know now as a startup?

Jake Sally – 00:03:05:
Let me go first and then I definitely want you to jump in. I think from my side of it. If you’re not used to working in a startup. You’re coming from usually a bigger company that has like these long-term roadmaps that are generally stuck to pretty religiously. And I think the number one thing I would tell my younger self is just being very comfortable being uncomfortable. And so much of it is the pivot. And I think for startups, it’s really the mentality of evolve or die. And when you get comfortable with this mindset, it makes it a lot easier to both run the business and kind of take things as they come. And for us operating previously and in a large part in the web-free space as well as kind of consistently in the augmented reality space. Pivoting is the name of the game. The technology is changing every single year. So you have to, again, you just have to be very comfortable with that level of chaos in your life if you’re going to weather the storm.

Natalie Testa– 00:04:01:
Yeah, to kind of piggyback off, that’s been the biggest lesson I’ve learned too, is Jake and I always joke, we’re three legs of the chair, him, me, and our CEO. And I’m the conservative one, Jake kind of sits in the middle and Asad’s very much like break things, let’s build, he’s the visionary. And we really think that we’re a good balance on that because I can ground us when we need that. And also these guys can teach me that not everything is going to be bad. Because like when I’m a conservative thinker, I’m always like, oh my God, there’s a leopard around the corner that’s going to eat the company and it’s going to be terrible. And they’re always just like, no. And these Jake and I always text a lot and I was texting him this morning how much I’m so thankful for how wonderful a job Jake and Asad did raising your Series A last year because there was a leopard around the corner. We didn’t know that we would probably be one of the last companies to raise such a large Series A before everything broke down and they had the foresight to do that. And then it’s on me to balance how we make that money work through the rest of the year. But the biggest lesson has been comfortable with being uncomfortable, Freudian slip, right? And I didn’t see myself understanding that a year and a half ago and really rolling around in it. We kind of make a joke that we really roll around in the mud of the uncomfortable feelings and like and checking everything out and really seeing if it’s going to work. It’s been such a learning curve for me. And then also just surrounding myself with being comfortable with surrounding myself with people who know a lot about things and taking their advice and putting it into work. Like Steve, you know, like you’re the reason we were FDIC insured and you made sure to remind me that no bank is too big to fail. And we hadn’t had that lesson in like, what is it, 15 years or 13 years? And here we are. Everyone’s like diving into it, but we were safe because we had Steve and thank God for Steve.

Steve Lord –00:06:35:
So, I mean, in both of your cases, what I’m hearing you guys say is that part of the sanity that you can maintain in a startup environment is being comfortable with being uncomfortable, and it’s okay, right? And that you’re not going to fall off a cliff, that there is iterations of breaking things and seeing what works and what doesn’t work. And that leads to incredible things, right? But sometimes, as you said, if you’re coming from a place of conservatism or risk-averse approaches, it’s a very hard area to get your head around. So when you’re talking to founders out there, is that one of your lessons learned is – relax, like, it’s okay. Feel comfortable being uncomfortable, or try to?

Jake Sally – 00:07:19:
Yeah, I think that’s definitely a huge piece of it. I’d say the other part I’m usually when we’re commiserating with other needs for companies is this idea that you’re never going to have all the information you want and that a big piece that is being comfortable being uncomfortable, because you won’t have all the information and your job is really to make the best decision you can with the information at the time you have because time is your greatest resource.

Steve Lord –00:07:48:
And then let the cards fall where they may, right? Maybe you have enough and you can make the right call. Sometimes you’re going to have to go back and add in what you subsequently learned. CFO land has a lot of that kind of information gap as well and you do your best. So riffing on that a little bit or taking that another step forward, you mentioned the pivot or a pivot, a transition. Like when I met you guys first, it was a heavily crypto-oriented Web3 sort of focus or at least it felt that way from the outside in. Now you’re at best crypto adjacent. You’re really primarily AR, right? What did that feel like? How did you guys navigate that? How did that go over with customers, the investors, people that were coming at Jadu primarily from the crypto angle, the NFT angle over to now, which is less of that sort of feeling. And then I have a followup after that.

Jake Sally – 00:08:46:
Yeah, so on that side of it, I mean, it’s interesting because I think a lot of these companies that have come out of the Web3 Renaissance that’s happened over the last couple of years, they have been fundamentally at their core blockchain or bust. And for us, we really came at it from, we had already built an augmented reality app that was consumer-facing. What we were interested in was really this evolution of people putting their digital identity into a 3D Avatar that you could own. And so when we stepped into this space, we really saw blockchain and everything associated with it on the NFT side, as this was a perfect additional layer to add on top of the AR that we were building, we were super upfront with everyone. I think that’s why a lot of people were interested in us as it is more than just an NFT company. It really is a consumer app that’s being released. And so as we’ve kind of gone through this arc of the last two years, I think what’s been great is we’ve been able to build up a community that yes, they’re interested in the NFT side, but a lot of people more than anything they’ve been most interested in Next-Generation AR gaming. And so as we’ve gone through the evolution and gotten to this current iteration where we’re seeing a lot of downward pressure from everyone from the App Store to numerous other governments, people are, I think, have a lot of security in terms of what our trajectory looks like because it hasn’t changed, which is we are building an AR game. And so our responsibility is always, make sure that the folks that have come along for the ride that have joined us from the NFT side of things feel like they are there, they are part of that. And I think we really think of – we have no customers, we only have community.

Jake Sally – 00:10:28:
Community of players. And I think that too is like, we want these people that are rallying around the Jadu flag, we want them to participate rather than kind of step back. Like when you’re operating the XR space, usually it’s this idea there’s a gradient from a passive observer, which is what you do when you watch a TV show to an active participant, which is what you do when you’re usually in a video game where you’re a character, you have agency. We want our community to participate and have that agency.

Steve Lord –00:10:59:
And then so taking that another step further when you look at AR and you look at what you guys have built for a while a year and a half ago two years ago Metaverse, Metaverse, Metaverse Web3, AR, VR everybody was kind of other than the folks that were in the business building products. Everybody lumped a lot of that stuff together. Now NFTs crypto everything kind of crashed out and now you’re hearing the metaverse is empty Mark Zuckerberg’s over there all by himself. There’s nobody around nobody’s doing it when you look at the iteration of this, when you create that game or you create that agency that you just described. How does Jadu think about translating that into a business? There’s monetization strategies and I’m not asking you guys to talk about things you can’t talk about, but there is this sort of build it and they will come at least that’s the way I feel about it right now and where are the pathways for companies like Jadu to turn that into scalable long term business value?

Jake Sally – 00:11:59:
First of all, there are no companies like Jadu. (laughter)

Steve Lord –00:12:02:
Okay. Companies trying to be what Jadu has become. How about that?

Jake Sally – 00:12:06:
Yeah. So I think the false hypothesis that a lot of folks have made that are trying to get, that have been looking at the idea of the metaverse paradigm is that, exactly what you talked about, which is if you build it, they will come. And I think the challenge to date has been building a space, building like a park and a digital park and saying, hey, do whatever you want to do here. It’s really problematic because people have an experience, generalize things like this before. If you play a game. There’s always a goal. There’s an objective. There is a specific thing.

Steve Lord –00:12:43:
There’s a mission.

Jake Sally – 00:12:45:
Exactly. Or there are the tools for you to really be as creative as you want to be. Our approach has really been rather than go after like, let’s make a metaverse. There is no Jadu verse, right? We wanted to actually start with the reverse, which is starting super, super focused, which is when someone comes to Jadu, they know exactly what they’re doing. They’re getting into an augmented reality, avatar combat game. They’re going to be fighting someone else in their room or in their physical space, and then you start to add layers on top of that, that build it back into this kind of like larger world. We think things like Fortnite are like the best example of this, right? They started very, very specific Battle Royale. They actually started with a game before that, but the iteration that matters for everyone is Battle Royale. And as they built that out and it’s been successful and they’ve really dialed it. Now they start to add things like concerts or I had produced Martin Luther King educational experience that was in Fortnite for a while. And like that, I think is a much better way to do it, which is start small and build concentric circles out rather than building the outer edge and then trying to build back inward. Especially now, games are easier. It’s easy to make pretty spaces. Unreal Engine, Unity, other engines, it’s very easy in like a day or two, especially now with AI is like, you can make something that looks pretty that someone can walk around in. Maybe jump, crouch, run around in. But to actually do something meaningful, that’s the hard part. And so we’re really trying to stay focused with that and take a first principles approach for augmented reality gaming, which to date hasn’t really existed either. So there’s kind of a couple big, big steps that have to be taken before you kind of build out these larger worlds.

Steve Lord –00:14:30:
Just as a follow-up there. Do you think the avenues for revenue generation and business value building, are they the same here, or no? Because I wonder like, I’m business-wise, a believer that there’s really nothing new under the sun at the end of the day. You have to sell a product or a service or some sort of value that can be considered equal or greater than what people are willing to pay you for it. That’s a business, right? Do you find the same avenues or grooves will exist in this new augmented reality space that Jake was describing, or is there some new paradigm there that you’re seeing or predicting will appear?

Natalie Testa – 00:15:17:
That’s what’s so exciting about this is because Jake and I get into philosophical discussions about this of like, do we have to stick to like these normal business models or can we create the new business model? And that’s the beauty of our three-legged chair where I’m like sticking over here being like, “no, we should stick with what we know and keep it simple, stupid.” Whereas they’re like, “no, we’re in augmented reality. No one knows what’s going on over here. We could totally create something that no one’s thought of.” We’re in the bull phase and trying to explore options that could be really interesting in this space because we are dragging people into a new frontier of gaming, there has to be different ways that we could utilize this new medium. And yeah, we’re going to build on basic principles, but we would be missing a great opportunity if we can’t even try to utilize our new space that we’re creating. This is not the metaverse. What we’re creating is actually kind of a whole new frontier outside of the metaverse.

Jake Sally – 00:16:17:
I think when there’s these technological innovations that happen that have a baseline impact on the types of games you can make, the best companies also use that as a moment to make a business innovation in terms of how they deliver it. And to your point, it may probably all boil down still to goods and services, but I think we think a lot about this idea of like, well, okay, the advent of the internet and connecting people for games. That’s where you start to introduce free-to-play. And what started happening previously is you would buy a disk, you would doubt, you would connect it to your computer device, be able to play. People started pirating everything and it became impossible for these companies, these big game companies to track who had a real death, who had a fake one, who was cracking codes and different things. And out of that spawned a very innovative team that was like, “Look, we’re just going to give the game away for free and free-to-play as born.” And now the idea of cosmetics and this whole paradigm shift in terms of how the business functions, the good goes from being the game itself to goods within the game. And I think when we look at augmented reality, we’re always curious about this idea of the good has gone from the game itself to things within the game, what happens when you start connecting the game with reality? Is there some element of reality that starts to bleed back into that? What does that do to the business?

Steve Lord –00:16:45:
And the experience, right? Because it changes the value of the overall experience.

Natalie Testa – 00:17:49:
Well, and also we’re getting people out of their homes too, which is kind of a new opportunity as well, because everyone’s sitting at home playing video games. Ours connects the two, which is just a whole new opportunity in general.

Steve Lord –00:18:03:
Opens up a bunch of different avenues, right? Yeah. And Jake, you mentioned AI earlier, just to loop that in, that seems to be all of a sudden this like amazingly cool, popular thing that’s been around longer than most people realize. How does that play a role in what you guys are doing?

Jake Sally – 00:18:18:
Right now, we’re using it a lot in the content creation pipeline for the concepting phase. So our world building lead uses Midjourney a lot in terms of when we’re looking at what do the avatars and fighters in our world, what are the cosmetics that they’re wearing, all of that. We’ve really been able to cut down that pipeline from days to weeks to hours, and that’s been really, really fantastic. In terms of using something like ChatGPT or building in Unity and these different things, our perspective at the moment anyway, is we’ve seen a lot of novel cool technologies that look really good on paper, look great in the tweet. Might do a really cool tech demo, but getting them to be production-ready is usually a longer timeline. So we’re not holding our breath, but we are always trying them out.

Steve Lord –00:19:08:
You mentioned also something I think is interesting is, and I can speak to this being an old guy, like the production time or the gestation time maybe is the right way to put it, to build these technological projects has really gotten slashed, right? And the cost as well has gotten tremendous. I mean, I remember at first company that I was running, we had to pay $4,000 a month for 1.54 gigabyte into and out of the building for telecommunication. I mean, the cost and the process time has collapsed, right? Do you guys see that continuing at the same rate? Are we at a plateau now with Moore’s law and all these other things? How do you benefit from it? Is the next generation of a gaming platform going to be able to build even faster and even cheaper?

Natalie Testa – 00:19:59:
Oh, this reminds me of what Hans would say at Verizon when he was trying to pitch 5G and he was just like, without 1G you wouldn’t have this, without 2G you wouldn’t have that, et cetera. And he was 5G was like, what was making the mediums for AR even possible? So yeah, I think we’re just, we’re seeing the innovation collapse quickly into how we accelerate technology. So I don’t think it’s going to slow down. I don’t think it’s even possible to plateau anymore because things are changing every day within the day, it’s scary. Like you can’t even like Midjourney and all the AI can do hands now and that wasn’t something they could do months ago. And how quickly they’re going to be able to pick up on the other things that they’re missing is getting collapsed into weeks.

Steve Lord –00:20:47:
Which is cool, right? Because it loops us back to what we talked about at the beginning of this session, which is be comfortable being uncomfortable, move quickly, break things. Cause you won’t have the luxury to spend a year building a thing. Someone else is going to build it before you, right? That’s also compressing, I feel.

Jake Sally – 00:21:05:
Yeah. I was reading the Unity 2023 Games Report recently and one of the big pieces, one of the biggest trends they were talking about was this idea that the timeline to build games, especially mobile games, which was previously multiple years is now collapsing into less than a year is kind of like where it’s starting to average out to. I think the saving grace for a lot of video game creation is like, if you want to make kind of like a mindless, like push the button, flappy birds, Temple Run type game, that industry’s, I think that’s over.

Steve Lord –00:21:40:
Yeah.

Jake Sally – 00:20:41:
Because it is easy to develop.

Steve Lord –00:20:43:
Angry Birds has had its day in the sun.

Jake Sally – 00:21:46:
I think they may have had their day in the sun and it was a beautiful day in the sun but I think it’s good it puts pressure on them to innovate and what’s really nice is, yeah, and it’s similar to the metaverse. You can make a really pretty looking game. And the question becomes what do you want the impact of that to be on the consumer? If you want, I’m going to say click button and extract value from them. Like that can definitely exist. But if you want to push for something, I think a little bit more ambitious, that is something that still requires a lot of thought. I think there’s a reason why games like Naughty Dog, The Last of Us and why they kill is because it makes you feel something. It is deeper than the average game. And there’s a level of artistry in terms of the cinematics, the motion capture, all of these pieces kind of come together.

Steve Lord –00:21:40:
Even the music, right? The soundtracks have become a thing.

Jake Sally – 00:22:44:
That soundtrack, it haunts me. My wife and I live in a small apartment. We bump that an unreasonable amount of time.

Steve Lord –00:22:56:
That’s awesome. Last thing I wanted to ask you guys, and it’s a bit of a harder, more deeper question. We may not have really time to address it fully, but you mentioned impact. How does Jadu think about impact? And how do you guys think startups in general should think about impact? When you approach both the people you’re hiring, the people who will use your game, your products, what is the game teaching people, telling people, how do you guys think of that? And how should startups in general think about impact?

Natalie Testa – 00:23:27:
When Asad, our CEO, interviewed me for the position a year and a half ago, gosh, it’s been almost, it has been a year and a half, he was pitching this idea. At that point I was at Blizzard and I was just like one of the biggest companies in the world for games. And I was just like, well, I mean, I could go over to the startup. Jake was one of my friends at the time. And that’s something as just a side note is just, I’m so lucky to work with my friend because I don’t think we could do as good of a job for our company if we were not able to have the in-depth conversations we have and be able to rely on each other for trust. So like internally impact, our relationship I think is actually a very key to our success. But going back to what Asad said is he was like, I want to make sure we don’t get trapped inside. I want to make sure that we experience the world. As that was very important to him as a child is like he used to play games outside with his friends and he doesn’t want to see that go away. And I’m with him. My husband is very much into all the tech and loves everything that’s happening. For me, I’m very weary of it because I don’t want to get trapped and I don’t want to lose our sense of exploration and adventuring. So weirdly that was probably the selling point for me besides obviously Jake and all the wonderful things. But I wanted to work on something that would get people outside and playing and experiencing joy. Whereas I feel like the internet can suck us all in and make us feel like everything’s a death spiral and there’s no fun in the world anymore. So it’s very important for me as far as that impact. And then the impact for me as well, like as a startup, we’ve worked at a small company before where the leadership just didn’t seem to care. And Jake and I were both under their thumb on that one. And it was a thankfully, honestly, it was like a mob of like great people. We were the mafia family. Like we all take good care of each other but the leadership was like this weird layer that kept us like separated. And it was so important for me to come and make sure this is a good place to work because I think having happy employees can make something even better.

Steve Lord –00:25:43:
Even more special, sure.

Natalie Testa – 00:25:44:
Yeah, and it’s so important to me to see that we try all sorts of things to make sure that they’re happy. And we’re thinking of ways to add to their joy as they work because we are a startup, we are making a game, there are crunch times. But we want to always think of them as humans and not lose respect for them or the thought of that. So that’s very important for me as like an operations finance person is that I don’t think we’ll actually make the money we want to if we just drill our employees into the ground. And you see that with a lot of small game companies.

Jake Sally – 00:26:19:
Yeah, impact’s a really interesting one because I think also there’s for a big company you have the luxury of time so that impact can be on like a pretty long arc before you see it pay off. A lot of times projects get killed like I just saw Disney’s metaverse team got sunset. Yeah, didn’t even have a chance. And for us, that impact has to be very, very immediate, pretty much all the time. We’re really looking at it on a weekly, at most monthly basis of if the team is really delivering on this idea of product velocity. Or is the product growing at an exponential speed? If yes, we’re doing a great job. And we measure that against is the burn rate that we’re putting towards it, maintaining or accelerating that velocity. And I think for Jadu in particular, we’re a very design heavy team. We take a lot of pride in the way things look and the way things feel, how quickly everything loads. And we try and think of it. Yes, it is day-to-day it is work, but it is more than anything. It supposed to be craft, that should suppose you something that you are continually improving, you’re not showing up and punching the clock. The people we have working is like, we have some of the best augments, reality UI implementers in the world. Like we want everyone to be operating at that level, regardless of position, whether it’s an operational position or if it’s a development position.

Steve Lord –00:27:53:
Got it. Great. And I assume just one last little quick thing, because I know we got to wrap up, that you would suggest other startups think of the same way.

Jake Sally – 00:28:03:
Yeah, time’s your greatest ally. I think whatever you think you can do in a month, do it in two weeks. We push real aggressive, but it’s allowed us to turn the ship very quickly. The current build of the AR game is like, this is like really a three month sprint. Where we went from. We had tested kind of like the core game loop to shipping a multiplayer MVP of it. Getting the validation we needed and now we can kind of rip into full production. And that I think people, especially if you’re coming from a bigger company, which we came from Natalie and I both came from bigger companies. So I think there’s a tendency to lean back a little bit or want all the additional information, do that extra week of planning. And I think the biggest piece of advice always is whatever time you think it’s going to take, cut it in half. Even if it feels kind of delusional, do it. And worst case, you don’t hit it. Best case, you saved a lot of time. People surprise you. I think especially in startups. People are there cause they –

Steve Lord –00:29:09:
And especially to Natalie’s point, if you’re taking care of the team and they’re creative as opposed to just worker bees, it might really surprise you what they can come up with.

Jake Sally – 00:29:19:
Totally, yeah.

Natalie Testa – 00:29:20:
I want to just add something to the startup. In addition to all that, something that we’ve learned is that you can also grow too fast, and then you might need to skim back. And making sure everyone is a critical part of the team, and making sure that everyone is impactful is very important to both the company and to them, because I think that’s part of the reason we’re seeing all the tech companies starting to lay people off, and they’re like, oh, this is the year of efficiency. But there is something to that, though, because you do have people who are on these big teams, and they don’t feel like they’re actually contributing anything, and it’s not even their fault. So Lean is very, even though we are in an economic, weird headwind space right now, there is something to that. And making sure everyone feels like they can contribute and they have a hand in it, that gives them joy and excitement on the project they’re working, and I think that will win 10 times out of 10.

Steve Lord –00:30:16:
Right, and they’re invested in it, right? They’re commissioned, yeah.

Natalie Testa – 00:30:18:
Exactly.

Steve Lord –00:30:21:
Guys, thanks so much for joining us. I’ve really enjoyed hearing from you guys and learning from what you’ve put into Jadu and where you’ve come from and where you’re headed. This has been another edition of Startup Success.

Outro – 00:30:32:
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