The Value In Virtual And Augmented Reality

The Value In Virtual And Augmented Reality

In 2015, the virtual reality (VR) and augmented reality (AR) industry was widely heralded as the next tectonic shift in computing. But it’s also an industry that investors are cautious to enter while everyone’s cards are still face down. It may take years before mass consumer adoption, but in 2016 we still have a huge opportunity to help shape this industry.

The thesis of VR/AR is that, as a new interface, it will take over many parts of existing interfaces, including real life, such as shopping, education and some forms of live entertainment — and, of course, the Internet. But the true magic and innovation is what we’ve only been able to imagine as part of science fiction: traveling back in time, teleporting to a different location and being with people who are no longer with us.

Virtual reality makes all that possible, just not in the way we thought. You can now teleport to Mars or the top of Mt. Everest and be back in time for breakfast, travel back to the Roman Colosseum for a gladiator fight and capture your baby’s first steps for her family to revisit for generations to come. These completely new experiences, which VR and AR unlock (in addition to disrupting and enhancing existing ones), are what truly excite me, and many investors and VR industry folks with whom I’ve spoken.

Are VR and AR real?

The most common question we heard from investors in 2015: Are VR and AR real? If you’ve tried virtual or augmented reality, then most likely your answer is yes. The true market size and opportunity is hard to articulate — you really have to see it for yourself.

Time travel, teleportation and immortality will soon be within our reach.

Explaining the vision for VR without experiencing it is like trying to convey the potential of the Internet in the early 1990s. This is one of the particular nuances of VR/AR. In a heavily interconnected world, the newest technology has only been seen by a few, and has to be delivered on a 1:1 basis.

VR investment areas in 2016

“I have a new VR/AR fund; what should I invest in?” asked a leading technology VC.

I recently referenced an analogy of VR/AR to the Gold Rush. The “gold” (true value) in VR/AR is content: the compelling experiences that are so good consumers are willing to pay for them, along with expensive hardware. With that in mind, there are basically three core areas of investment in 2016 with promising growth potential:

Hardware. What became clear in 2015 is the volume and variety of VR headsets in production, ranging from the basic Google Cardboard (which could number in the tens of millions within 18 months), to Gear VR (which could eventually be giveaways with every mobile phone) and many Chinese competitors, to the high-end Oculus, HTC Vive and PlayStation VR. And on the AR side, of course, there’s Magic Leap, DAQRI and HoloLens, among others.

Given the number of players in the space, it’s likely this will not be a “winner takes all” monopoly. And while the headset market is crowded and largely built out, supporting technologies — like eye-tracking and haptic feedback — remain hot.

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