Investments and M&As Are Necessary for Unlocking More Capable AR/VR Devices, Content, and Immersive Experiences

It has been a year since Magic Leap announced more than US$2 billion in funding from multiple investors, including Google, J.P.Morgan, and Alibaba, and one of the most significant funding rounds ever seen in the Augmented Reality (AR)/Virtual Reality (VR) market. It has also been a year since Apple acquired Akonia Holographics, a startup specializing in making lenses for AR glasses, reigniting rumors about an upcoming AR device from Apple. Despite the early stage of the market, the bankruptcy, and the collapse of some important and promising providers in the AR market (such as Blippar, Meta, and ODG) earlier this year, investments and Mergers and Acquisitions (M&A) continued in 2019. Big players like Qualcomm Ventures, J.P.Morgan, PTC, Kopin, Samsung Ventures, NTT DOCOMO Ventures, HTC VIVE, and other Venture Capital (VC) firms remain optimistic and recognize the huge potential and value of AR/VR solutions. Recent significant funding activity in the AR market happened with PlayShifu, an educational AR game provider based in Bangalore, India. The company raised US$7 million (Series A) from Chiratae, Inventus Capital, and the Bharat Innovation Fund to further develop engaging, immersive, and educational AR experiences for children, expanding the company’s retail presence in more than 30 countries by 2020 and seeing steady adoption in classrooms. Another recent example is RealWear, which raised US$80 million (Series B) from Teradyne, Bose Ventures, Qualcomm Ventures, Kopin, and J.P.Morgan.

Funding plays a catalytic role in further developing the AR/VR ecosystem in order to meet market needs and assist in the massive adoption of AR/VR solutions across consumers and enterprise verticals. In addition, thanks to the financial support from acquisitions, a considerable number of innovative AR/VR startups managed to bring their ideas to life and reshape the AR/VR landscape by significantly contributing to the enhanced quality and capabilities of AR/VR solutions.

AR will have a significant impact on the educational system, so companies like PlayShifu are well positioned to capitalize. AR tools that combine learning with fun and real-time interaction help learners gain a better understanding of educational content and, at the same time, assist educators with overcoming important issues, such as lack of motivation and knowledge retention. Most humans learn best visually and AR/VR obviously has immense potential in that regard.

In the case of RealWear, the target market is different, but the importance of investments is the same. The company plans to leverage funding to continue market expansion and further develop its platform in a time of uncertainty, but also amid strong growth forecasts. The company noticed significant growth during the last year and has shipped units to 1,300 industrial business customers globally since 2017. The demand for AR solutions in the industrial space will likely see a significant increase in the coming years, as more and more businesses are preparing for the digital transformation and steadily moving from trial phases to scale deployments.

HTC is an investment leader on the VR front, with the company aiming to assist and support VR startup companies around the world via its VIVE X accelerator program. Education, mentorship, and funding are included. The program has supported more than 100 companies since its establishment in 2016 across use cases and verticals. Training simulators, location-based applications, visualization tools, and more have seen investments from companies that include Visby, Modal, and MyndVR. These initiatives will play a crucial role in the growth, development, and diversity of content in the AR/VR ecosystem.

Investments, partnerships, and acquisitions are necessary in order to increase growth in the AR/VR ecosystem and to overcome challenges and inefficiencies. There are plenty of promising opportunities for collaboration in the market, such as partnerships between hardware providers and companies that specialize in optics, eye tracking, gesture recognition, Artificial Intelligence (AI), and Simultaneous Location and Mapping (SLAM) algorithms, which are very important for improving the technical capabilities of headsets and user experiences. Any sort of large-scale adoption is increasingly difficult as more technical barriers are put in place. AR/VR use around complex applications and tasks often provides the most value, but that is also the most difficult to produce. Funding initiatives and grants for developers and software companies (such as Magic Leap’s Independent Creator Program) help on the software side by solving the challenge of a lack of content.

In addition, another upcoming trend that will dominate during the coming years is 5G and the resulting partnerships between hardware providers and network operators. 5G is going to reshape the AR/VR landscape by alleviating local processing requirements through edge computing and delivering more immersive experiences in a wider coverage area. At the same time, 5G has enough obstacles to overcome on its own, such as infrastructure costs and rollouts, so the realistic impact of 5G on AR/VR remains to be seen. Even so, the expected benefits of 5G for numerous use cases will remain a talking point for investments and partnerships.

A considerable number of startups are looking for funding in order to further develop their products/solutions, meet upcoming demand, and expand their footprints worldwide, making AR/VR solutions accessible to any user and any enterprise. The Return on Investment (ROI) is strong across the board, especially for AR/VR enterprise solutions that are aggressively growing and adopted by many businesses that prioritize efficiency and agility. Regarding the consumer area, investments in consumer smart glasses still involve uncertainty, mainly due to the cost of the devices, the quality of the experience, and the lack of content. However, consumer mobile AR applications are very promising and are dramatically growing, with AR outdoor/internal navigation, fashion, retail, and remote customer assistance use cases already proving popular and valuable, capturing the interest of many consumers and businesses.