Virtual reality may be the hot thing in technology today–one of the hot things, anyway–thanks to glitzy products like Facebook-owned Oculus Rift head-mounted display and Google GOOGL +1.81%-backed Magic Leap. But investors will have a long time to wait before they get a payoff.
That’s the conclusion of several venture capitalists who spoke at the Augmented World Expo conference Wednesday in Silicon Valley. And that’s saying something, because these are the VCs who are putting their money into dozens of VR and related augmented reality startups, not those sitting it out for now.
Among the most aggressive is likely to be Boost.vc, a startup accelerator in San Mateo, Calif. Founder and CEO Adam Draper, he of the storied Draper family of VCs, recently made VR one of the firm’s two investment pillars. (The other is Bitcoin, where it has made about 50 investments–they really don’t want a quick return, do they?) “There’s a lot of flow of money happening,” Draper said, similar to Bitcoin a few years ago.
But VR, at least the latest burst of interest in what is a nearly 50-year-old field, has not yet hit the trough of disappointment. “We’re in a virtual reality excitement bubble,” Draper said, but it’s not just hype. “Everything is getting so much better so much faster.”
Rothenberg Ventures in San Francisco started investing in VR about a year and a half ago after investment director Dylan Flinn “fell in love” with the developer version of the Oculus Rift. “We see VR as the next evolution of human-computer interaction, said Flinn, whose firm has invested in AltspaceVR, which is creating a social VR platform, and 3D modeling startup Matterport.
Despite the enthusiasm, to a person the VCs said the payoff on their investments won’t come anytime soon. “Never before has a technology gotten so much attention before actually getting to consumers,” said Alexander Taussig, a partner at Highland Capital, which has investment in motion controller firm Leap Motion, cinematic VR firm Jaunt, and Rethink Robotics. Even Nabeel Hyatt, venture partner at Oculus investor Spark Capital, said that after almost two years of very public testing, Oculus Rift is “still not something my mother would know about if we hadn’t invested. Basically there’s no user base. You have to have a pretty long view on these companies.”
How long? At least two to three years, said Flinn (and that seems somewhat optimistic). One reason is that the hardware doesn’t have mass appeal yet, not least because some of the most prominent products such as those from Oculus and Magic Leap aren’t even released yet. “The No. 1 thing Oculus doesn’t want to do is ship a headset that makes everyone sick,” Taussig said, referring to the nausea common to the use of at least early VR gear.
Another reason: There’s no really compelling content for VR yet, whether that be games, movies, social interaction, or still-to-be-determined experiences. In another panel at the conference, on VR content prospects, it was apparent that even VR studios are still searching for the magic formula. “No one knows how to tell a story in immersive entertainment,” said Ben Miller, director of content development at WEVR, a VR studio in Venice, Calif. “There’s lots of spectacle but I can’t name one great story in VR.”
That’s why the VCs told the large number of VR and AR developers in the audience to focus less on raising money than experimenting. “It’s OK to be a hobbyist,” said Hyatt. “Just go out and build rather than try to sell a VC who only knows what he read in TechCrunch.”
Already, some VR opportunities looked played out–mainly hardware such as head-mounted displays, now that Facebook, Google, Sony , Microsoft MSFT +2.08% and other giants have staked their claims. “It’s very hard for a startup to build an end-to-end display platform,” said Taussig. Added Taussig, “Don’t take money from VCs who aren’t prepared to wait” a few years for results.
But a lot of opportunities remain, such as easier-to-use content creation and data visualization tools and software for eye tracking, gaze input, and voice placement. And on the content side, brands are clearly interested in the marketing possibilities, Miller said.
Not least, Draper has said he wants to create a real-life Iron Man suit. As VCs like to say, it’s good to have a stretch goal.
That’s the conclusion of several venture capitalists who spoke at the Augmented World Expo conference Wednesday in Silicon Valley. And that’s saying something, because these are the VCs […]