When Facebook acquired Oculus Rift in 2014, Mark Zuckerberg said: “Virtual reality was once the dream of science fiction. But the internet was also once a dream, and so were computers and smartphones. The future is coming and we have a chance to build it together.” Since then, Facebook and numerous corporate venturers have increased their commitments to enterprises developing such technologies.
Virtual reality (VR) is widely understood to be any computer-generated 3D simulation with which it is possible to interact in a seemingly real or physical way through special electronic equipment. Augmented reality (AR), on the other hand, is broadly understood to be a technology that superimposes a computer-generated environment on a user’s view of the real world.
Both technologies have a wide range of applications, extending beyond the obvious and expected ones in gaming and entertainment – from education, design and architecture through medical technologies and autonomous vehicles.
The number of corporate-backed rounds raised by VR and AR emerging enterprises has risen over the past three years – from 18 rounds in 2014 to 71 transactions in 2016. The total capital deployed in such rounds almost tripled over that period – from $665m in 2014 to $1.74bn last year.
Companies developing VR technologies have raised more funding rounds than AR businesses or technologies that are applicable to both VR and AR.
The top corporate investors in this field by number of rounds are all big names in the IT sector – semiconductor manufacturers Intel and Qualcomm, along with diversified conglomerate Alphabet and electronics manufacturer Samsung, and there have been many impressive corporate-backed multimillion-dollar rounds raised by VR or AR enterprises.
US-based augmented reality technology developer Magic Leap raised $793.5m in a series C round led by e-commerce firm Alibaba last year. The round also featured internet technology provider Google, Qualcomm, via its Qualcomm Ventures unit, film studio Legendary Entertainment, and media and entertainment company Warner Brothers. Magic Leap has developed augmented reality technology Mixed Reality Lightfield, which superimposes moving light sculptures on real-life settings.
Magic Leap closed a $542m series B round in 2014, backed by Google, which led the round, Qualcomm, Legendary Entertainments and venture capital firms KKR, Vulcan Capital, Kleiner Perkins Caufield & Byers, Andreessen Horowitz and Obvious Ventures.
Telecoms and internet group SoftBank led a $502m series B round for UK-based virtual reality development software provider Improbable this year, valuing the company at over $1bn. Venture capital firms Andreessen Horowitz and Horizons Ventures also participated in the round, along with Singaporean state-owned investment firm Temasek.
Improbable develops SpatialOS, which is a distributed operating system helping developers create huge-scale virtual reality simulations. The system is likely to be used most for massive multiplayer games, but could also have applications in simulating transport infrastructure, telecoms networks or to track the behaviour of fleets of autonomous vehicles.
MindMaze, a Switzerland-based creator of a virtual reality computing platform, secured $100m of funding commitments in a round led by conglomerate Hinduja Group that included undisclosed family offices. Founded in 2012 as a Swiss Federal Institute of Technology spinout, MindMaze has built a platform for the creation of intuitive human-machine interfaces that incorporate virtual reality, computer vision, neuroscience and artificial intelligence. The technology has already been commercialised for the rehabilitation of stroke and brain-injury victims.
A number of funding and accelerator initiatives are targeting virtual and augmented reality technologies. Over the past four years, GCV Analytics has tracked 28. The largest in size and scope was the Virtual Reality Venture Capital Alliance (VRVCA). It was launched last year by smartphone maker HTC in partnership with 27 other VR investors. VRVCA will invest in VR technology and content startups, as well as those working on augmented and mixed reality. The move came as HTC was spinning out its Vive VR headset as subsidiary HTC Vive Tech Corporation. VRVCA partners have $10bn of deployable capital. Alvin Wang Graylin, president of VR at HTC China, is president of the coalition.
The formation of VRVCA came months after HTC Vive announced a $100m accelerator initiative for VR developers, Vive X, operating from offices in Beijing, Taipei and San Francisco, and offering mentoring, expertise and funding.
Telecoms firm Saudi Telecom has formed a $500m corporate venturing fund – managed independently of STC Ventures – to target companies developing artificial intelligence, virtual reality, banking, logistics and digital health technology and services. It aims to invest roughly $100m a year over the next four to five years.
Internet company Baidu launched $200m corporate venturing unit Baidu Ventures to invest in artificial intelligence, and virtual and augmented reality. Baidu Ventures is led by the parent firm’s chairman and chief executive, Robin Li, according to Chinese media reports.
Korea-based consumer electronics producer Samsung launched $150m corporate venturing fund Samsung Next Fund to invest in early-stage advanced software and services startups. Samsung Next Fund will target the seed to series B stages of various technologies, including virtual reality, artificial intelligence and the internet of things.
US-based high-grade cinema operator Imax and its sister company Imax China Holding completed the first phase of a $50m fund that will support virtual reality content developers. Imax VR Content Fund also received backing from several strategic investors, including smartphone and laptop manufacturer Acer, which provided $10m, talent agency Creative Artists Agency, entertainment producer Enlight Media and marketing firm WPP. Imax will use the fund to invest in VR content developers such as gaming publishers, and also plans to support content creation directly in partnership with Hollywood studios and other filmmakers.
