How Can Investors Think About VR Startups in 2016?
Imagine a world where this 5-year-old child will grow up.
When she is in grade school she will take virtual field trips to an African safari allowing her to learn through immersion.
When she is in middle school she will shrink down to the size of a red blood cell. Exploring about her blood stream from a microscopic perspective.
When she is in highschool she will take digital driving courses for a State recommended amount of hours before she is deemed safe enough to operate a road vehicle.
When she is in college she will have the ability to learn from a world renown professor and there will always be a digital seat that is open in the front of the class.
When she gets her first job her employer will be able to digitally simulate an entire day at the office, and can then run this data through behavior software to identify if she would be a good value-add to the company.
And so on…
As we read about this child’s growth from ‘5 year old’ to ‘employed adult’ it leaves us to wonder if she has gained super powers? Not quite. The common enabler in all of these scenarios is Virtual Realty. VR technology will slowly alter our human behaviors in dramatic ways. Not just gaming, all areas of everyday life will be improved.
- Healthcare
- Education
- Enterprise
- Productivity
- Training
- Many other areas of our world will improve as VR gains traction.
The timeline for VR mass adoption is debatable, but the beautiful aspect of this debate is that VR is working in 2016. VR is clearly a high enough quality to impress anyone who tries a room-scale VR experience. Therefore the next step is figuring out how to orchestrate mass adoption across a favorable timeline.
Timeline of Mass Adoption:
Let’s compare VR in 2016 to the adoption of Color TV’s in the 1950’s. Below is an excerpt from a great article about the history of color television:
This is fairly similar to VR in 2016. 2016 will be the year when one (or just a few) of your friends own a headset, and just like children in the neighborhood used to walk over to see their friends new Color TV set, people will travel to their friends home to try the Oculus, Playstation VR, or Vive headset. These early adopters who demo VR to their friend groups will spark a second wave of early adopters.
Each day that passes in 2016 brings us closer to when VR will find a flagship piece of content, or a flagship use case. To solve the content issue, VR needs to figure out what use case or content will be considered the “books to iPad” or “Halo to Xbox.” Not an experience that is just ‘cool!’ or ‘fun!’ but truly something that draws a user back again because they need it for a specific purpose. Just as Microsoft Excel made my buy a Windows computer, or as Halo made me purchase my first Xbox. VR will take off once a crucial use case or piece of content paves a smooth path for rational early adopting consumers to purchase.
VR Technology Progressing at Extremely Fast Paces
We are already beginning to see huge progress from VR technology over a very small period of time. In 2013, Oculus DK1 was limited similar to how the Gear VR is limited today. You simply had ‘sit down and look around VR’. Which tracked your head direction, but not positional tracking. Then by Oculus DK2 we had ‘sitting down lean around’ capabilities and as that progressed eventually ‘standing VR’. Vive has taken ‘standing VR’ to the next level, enabling ‘walking around VR.” This is also referred to as ‘room scale vr’ and is the ultimate level of immersion. Since 2012 when Oculus Kickstarter was released, VR changed from simple inputs at your desk, to inputs using motion captured hand controllers in a full room scale environment. The speed of progression is impressive.
VC Funding is Becoming Focused on VR
VC’s around Silicon Valley are starting to take notice about the impact VR will have on investing.
Virtual Reality technology is working today and is at a high enough quality for mass adoption. However, the industry faces a chicken and egg problem: Currently there are not yet enough pieces of quality content to justify the average consumer purchasing a headset, but there is also not enough potential headsets sold yet for content creators to justify large production budgets. There are huge money making opportunites for companeis if they can figure out a way to overcome this first chicken and egg problem.
The second chicken and egg problem we face is that hardware manufacturers need to hit certain economies of scale in order for the hardware to be considered affordable by average consumers. But ironically consumers need to purchase the hardware first before the manufacturers will be able to justify producing hardware at these economies of scale. So we are stuck relying heavily on the early adopters to take the grunt of the initial costs for VR consumers.
Overall, The major problem in VR is no longer tech development. I believe in 2016 the largest challenge facing Virtual Reality is figuring out how create more VR focused investors, more pioneering VR content, and more frictionless VR distribution channels.
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My thesis is constantly changing, please email me (Don@virtualrealityinvestment.com) if you would like to talk, I always love to hear feedback that can change my perspective on VR and the adoption timeline of this cool tech.
