What I’m Feeling in Tech Part 2: VR and AR

Nathaniel Krasnoff
Jan 17, 2017 · 11 min read

Hi! Feel free to leave comments. I’m fairly reachable so if you’d like to connect please reach out as I’d love to hear your ideas- ideas@wildcat.vc :).


Last week I started writing up some views on what I’ve seen so far, and my thoughts on technology moving forward. As we know CES wasn’t as good as years past as it’s starting to blur all it’s colors to be that mushy amorphous brown that no one likes trying to appease everyone but really it just grosses everyone out. No one likes you amorphous brown! As such, I’ve added in my own color and some, hopefully, original thoughts to make this a more enjoyable experience for you.

Virtual Reality:

People have been excited about VR since the early go arounds like 25 years ago, and that wave ended up leaving us with a bunch of antiquated porn devices because we couldn’t get main stream adoption. Now that we’ve closed a lot of the physical technology barriers (latency, eye tracking, etc), we are at the cusp of actually unleashing this tech on the world, but it’s yet to be determined if it will be sticky enough this go around either.

VR in it’s current form is gaining more and more popularity starting with Head Mounted Displays (HMD)’s. We know the capstone HMD’s, Vive and Oculus, have had at best a lackluster sales to date but the pricing would naturally suggest this as it’s $800 for a headset and $3,000 for the computer to run the thing. There just aren’t enough prosumers out there that need this THAT badly.

Since sales of these guys are still under 800,000 total units combined last I checked it makes a real case for enterprises to start buying them. Use cases could range from VR arcades, to education for hands on coursework like med school or even trade schools. For these applications to be viable there are two things that would have to happen, the first is the proliferation of the devices and the second is that there would have to be more content built on top of them.

If the enterprises are buying them and commissioning work, that eliminates the first barrier, and the second has been filled in by copious amounts of games, application studios, and content creators that have spun up over the last two years. I’m very bullish on enterprises involvement in VR considering that right now there are very few really good examples in the market today to my knowledge- please let me know if there are any as I’m all ears. Additionally, I would challenge you to think about what major technological breakthrough in the last three decades started out directly with in the consumer world without starting in enterprise. Both Oculus and Vive attempted to go the other way and Samsung Gear has done the same enabling mobile VR. Again, I ask that if you have any thoughts around this please share them as I would love to hear them.

I think a killer enterprise use case here is corporate training considering we spend over over $70 billion on it every year in the US alone. Walking our way back to 2015 to look at some stats, the “U.S. training expenditures… took an upward trajectory, soaring 14.2 percent to $70.6 billion. Spending on outside products and services skyrocketed 29 percent from $6.1 billion to $8 billion, while other training expenditures (i.e., travel, facilities, equipment) more than doubled to $28.7 billion.” Imagine establishing a solution that could more effectively demonstrate services and real world scenarios, and you wouldn’t have to shell out nearly as much for travel. In this world cap-ex would drop and you could even create micro and/or mobile training centers where the office is located- see example of flight attendants.

If the two big HMD players can make it out to the other side great as hardware prices come down and computing power ramps up more power to them. In my opinion, maybe it’s time for a new platform that’s truly enterprise grade to come in and dominate that market. I think that in relation to the quality and cost of Vive and Oculus they are not robust enough for enterprise. Think about this for a second, what kind of system would make a Boeing or their peers be comfortable enough to supplement or replace a multi-million dollar simulator? My feelings are that a $4,000 VR system with a lot of room for improvement just doesn’t make the cut.

Oculus’ billion dollar acquisition 2 years ago set the tone for this current iteration of the VR market. More startups go into the space chasing the potential acquisition creating more supply and consumers feel compelled to pay attention, if not only temporarily, to see what all the fuss is about. If the product can meet, or god forbid even exceed, the demand then the nascent market can take off. Unfortunately, Oculus and Vive have taken too long to get their HMD’s into a mass market form and OEM’s that have started to smell blood are tackling this problem for themselves: Qualcomm, Intel, Lenovo are all making HMD’s which makes startups like Fove almost redundant overnight.

Best first date ever…

Another belief I have is that VR is inherently designed to be isolating, and I feel strongly that embedding a social element into VR is going to be increasingly more important. Arcades are a good use case here as they are ripe for disruption considering the space has been in disrepair for the last few years now. I’m in defense of VR arcades because I know that, for myself, I don’t need to own a $4,000 system but I’d definitely pay a few bucks to play Sonic or Crash Bandicoot (two of my childhood favorites) in VR. Here at Davos I got to hangout at the Facebook Popup and tried Climb (picture , and I have to say I was very impressed and would happily pay to play that for a few minutes.

Look how happy I am after playing that for <5 min- pure shock and awe

Watch the video here!

The real test is the Google launch with Daydream. There were over 1.2 billion, yah BILLION, android phones sold last year internationally. Although that number is growing YOY it’s decreasing in growth which makes sense because that’s a lot of volume. My hypothesis here is that as more and more phone makers license the daydream tech and branding, it’ll eat up a larger and larger portion of Androids sold YOY until it too starts to level out, which equates to a massive number of VR enabled mobile devices. Google smartly went after a billion users with their launch, but being an ad company with a tinkering problem, let’s hope they can deliver.

I was chatting with a senior VR team that is much smarter than I while attending a party in Real World Suite in the Palms, thanks Upload for the invite and follow me on Snapchat, the conclusion from our chat was that VR is the darkest timeline.

Thank you “Community for this #RIP

Frankly smartphones are the best and worst thing that ever happened to us because they are literally a black hole. Next time you’re waiting for the train or at the airport look around. See how many people are eyes down staring at their phone barely blinking and not talking to anyone. When I look around in these instances I feel like I can sometimes almost make out little specs of humanity and individuality draining from these people’s faces. Finding a solution that reverses this effect is VR’s biggest challenge because we are now going to be strapping that black hole to our faces. This is a major problem plaguing everyone working in the field. I wish all of you practitioners luck! Also, call me ;).

Augmented Reality

Having previously come from a company working somewhere along the AR spectrum I’m particularly sensitive to this space. I think that this is, in the words of our president elect, a HUGE opportunity, with the potential to be much more bigly than VR. Today’s darling ODG, was just that. It was super fun to see their product after learning about their efforts way back in early 2015. For a while I thought they would never raise because of their deal with Microsoft and the like, but as a VC that was admittedly pretty complacent of me, and I would have loved to be in it. I’m not too upset though, as we don’t invest in hardware, allegedly, and having been in the space I know how hard that product is to build. It’s still fun to dream about though given my hardware background…

I have to say that I’m a big fan of this second generation of face computers. I’m glad we’ve recovered from Google Glass blowing up that market category. While products like Hololens, and Meta aren’t sexy looking, using them is fun and a novelty. We know there is a long way to go to get the hand and eye tracking to a point where we can really manipulate the things we want, in a form factor that is useable- see MagicLeap- but it’s coming around the corner (well, maybe not MagicLeap’s but that’s another story). Personally, I can’t wait for this kind of tech to replace the cell phone I’m writing this post on. Pulling the screen out of your hands and integrating into your surroundings seems like such a lovely value proposition. I can’t wait for technology to give people the ability to take back to their lives, and when that happens it will be empowering.

To reiterate, I like these early players in this new wave of AR because they are ugly enough that only their mother could love them. The good news about this is people won’t wear them unless they have a reason. This gives rise to the potential for enterprise apps for AR because employees will have to wear them if their boss makes them, Muah Ha Ha. This is probably going to happen soon because people are spending hundreds billions of dollars on problems this could solve (corporate training, field maintenance, surgeries, coaching, etc.). We already use this kind of technology in our advanced fighter pilot helmets which go for a cool $400,000 a pop, but normal people don’t need all those features and redundancies so when the price drops and the hardware becomes commoditized, I can’t wait to see what comes out of that. An example that I’m personally a fan of is called Daqri which combines a hard hat with an AR display. I’ve heard their name get thrown around the rumor mill a couple of times now recently, but I’m wishing them all the best because it’s a super cool product.

Proto-AR:

I honestly made this category up, but I’ll be damned if we call every Heads up Display Augmented Reality. Think of these as ‘smart’ glasses that aren’t doing anything inherently interactive in AR. Most are using Kopin for their displays similar to Recon Instruments or Sony’s flat glass optical stack, where the fancy OLED displays are being left to more involved, and expensive, AR products. These lightweight glasses typically have specific applications designed for a targeted audience: elite triathletes, skiers, etc. I’ve tried the Recon instrument ski display and I actually really love it. The reason they got bought by Intel for $175 million though wasn’t the drab clear display, it was the battery saving IR reader that could detect when you were looking at it.

Mobile AR

This is what I’m most excited about in the space and I think it even has the potential to be the biggest individual category within VR and AR. Pokémon Go taught us something really important this summer with the power of mobile AR games (see this post from August after it started to tail off), and Snap, arguably the best Augmented Reality company in the world (in my opinion), with their upcoming $30 billion + IPO shows us a lot about the power of lightweight AR. Looking more deeply into what that $30 billion buys you, Looksery is a killer use case which was bought by Snap for $150 million. These guys are something else if you’ve never seen it how they add those filters. The fact that they are able to apply filters in real time time is magic to me. I almost wished Vox hadn’t explained Looksery’s trick, but in this instance it’s almost more impressive knowing how they actually do it.

This is me before my second cup of coffee as interpreted by my Snapchat filters

I’m not sure why there aren’t more products coming out leveraging this tech for enterprise, but the potential energy is here someone just has to start rolling the boulder downhill. The Wall Street Journal fortuitously highlighted the need for this just days ago if you’re curious what I mean and Baidu just announced that they are building in AR into their search. I think when Snap’s IPO creates hundreds of young bucks with $25 million running around LA we’ll start seeing more solid examples. As such, I wish they would just drop the hammer already so I can see some more cool tech!


Again, because I’m long winded and would rather you read the posts I’ll save AI for the next round, but I’ll give you a teaser. People are crazy bullish on AI and Machine Learning and the new favorite son in the space is deep learning and neural nets- no need to look farther than Udacity as they’ve just added a deep learning course. On AI, as much as we may not want to hear it, the best applications of this technology will displace as many jobs as possible because it will extend into more verticals solving harder and more complex problems. The good news about this is that it will force people to reevaluate what we care about teaching the next generation and sets up an argument for universal basic income.

All feedback is good feedback.

N


P.S.

In the time since writing my pretty mean spirited comment on drones in Part 1, two drone companies have shuttered. Googles project Titan and Lily. Google will make it out just fine with their TWO other drone projects so who cares about that, but Lily’s bums me out. They had a killer $34 million preorder campaign and a massive follow up round. I’m sincerely sorry that these guys are going out and it’s always a shame when a cool product closes its doors. I know those guys and the founders and their team couldn’t be any nicer- the product was pretty sweet too. I was on a baseball field in Potrero with them where I got to demo it so I’m sad that they couldn’t bring their flying camera to market. As with a lot of these situations, including my own failures with my previous startups, I feel bad for the employees that are now on the market, and, of course, I feel the worst for the customers :(. Lily seems to be doing right by them by refunding all the preorders. For those of you following along, that means they only spent their additional institutional funding, which is the responsible thing to do, and by doing that they will hopefully avoid a class action lawsuit and Chapter 7 in the process. Here’s looking forward to seeing Antoine and Henry’s next startup.

P.P.S.

Since I wrote my last blurb more news has surfaced and, as you may or may not have seen, the District Attorney has filed a lawsuit against Lily. If you make it to the end of the article, Tech Crunch explains that they could be facing $300 million dollars in fines! Sending positive vibes to everyone affected.

For the Lily customers- possible alternatives on the market are Hover Cam for $500 and DJI’s Mavic for around $1000.

Here’s an article expressing frustration around Lily’s preorder campaign from way back in May 2015 #neverpreorder.

As I said last week, the only thing I know for sure is that hardware is hard.

Nathaniel Krasnoff

Written by

Budding Venture Capitalist, Lifelong Learner, Traveler, Eater….

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