VR and AR continue to attract millions in investment

After years of teasing market-changing augmented reality technology, Magic Leap is finally starting to unveil pieces of its first commercial headset expected to be released in the next few months. The company’s technology has been hyped from almost the beginning, and it garnered more public attention after releasing a 2015 demo video showing the technology at work, although it may have been a simulation. Along the way, the company has racked up billions in funding from large investors like Google and Alibaba giving the company a $6 billion valuation.

Augmented and virtual reality technologies are getting a lot of investor interest these days, and it’s not just coming from the usual tech circles. AT&T is Magic Leap’s latest investor as the telecommunications giant looks to diversify its revenue streams with more content and experiences.

There is evidence that the hype surrounding Magic Leap may be unwarranted, but there’s no question about the immense interest in AR/VR startups right now. The VR industry has already been a specific area of interest for Chinese investors. Hence Alibaba’s interest in Magic Leap.

The hype may not be enough for Magic Leap as it prepares for its first commercial release, though. The company has plenty of competition from startups and tech giants alike. Microsoft’s HoloLens has also generated a lot of excitement, and Microsoft has already been letting people try out its AR headset for a couple years now.

In VR, much of the attention has been on gaming, but this industry can also serve as a cautionary tale of too much hype. Oculus Rift received a significant amount of praise and anticipation before its initial release, eventually leading to an acquisition by Facebook. Perhaps the Oculus acquisition will be justified in the long run, but in the meantime, HTC released its more advanced (and more expensive) Vive headset and Sony released Playstation VR, which is now the best-selling VR headset on the market thanks to its price point and “it just works” functionality when combined with a Playstation 4.

Some VR startups still continue to attract millions in investment. These companies tend to focus on niche areas like Jaunt with cinematic VR and MindMaze with neurorehabilitation.

More recently, AR has been attracting attention than VR because it’s more marketable. Unity Technologies and Niantic, best known for the hit mobile game Pokémon Go, raised hundreds of millions of dollars last year.

Though these companies focus on mobile gaming, AR has also proven enticing in the commercial space. This is the market Microsoft has largely targeted with its HoloLens by touting its ability to show tutorials and demonstrations for workers in real time. Microsoft also worked with partners Acer, Dell, HP, Lenovo and Samsung to create more budget-friendly AR headset options. Within months, though, these headsets were already heavily discounted.

The AR/VR market continues to be an area of intense interest for large tech companies and investors alike in spite a lack of current use cases. Companies want to be prepared for the future of computing, and many of them are betting on AR/VR. Even if they’re wrong, it may be more embarrassing to miss out on the next iPhone (as Intel did with the actual first iPhone).

To attract that money, though, AR/VR startups have to keep dreaming big. For Magic Leap, that has meant generating hype that could be hard to justify. For now, the payoff looks real.

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