Mixed Reality (AR/VR) is back in 2018 — Investment is poised to flourish
Investor Perspective: The Mixed Reality Landscape
By: Don Stein, Managing Director, Candela Partners LLC. (@VRinvestments)
We just witnessed a record-high $3B invested into Mixed Reality in 2017, and half of this came in Q4. Mixed Reality is poised to flourish as an investment category in 2018 as the public markets fluctuate with volatility, Crypto struggles to find underlying value, and VC’s look for the next valuable asset class. Small communities of insiders are collaborating all around the world working to build this future — starting companies, funding startups, and taking LP positions. Money is beginning to flow.
“While the buzz surrounding the AR/VR space has tapered off, the sheer amount of cash getting pumped into the industry is continuing to surge.” (Digi-Cap, January 2018].
It’s an exciting time to be a Mixed Reality investor going into 2018. We’re at the inception of a computing platform shift that will change the world by altering how and where we interact with digital information in profound ways.
While many investors are focused on Crypto, Cannabis, Fintech, Marketplaces and other trends, there is a closely- knit group of early-stage investors funding the Mixed Reality revolution around the world. Those of us funding the future of this Mixed Reality believe it will transform the world, and we are willing to put our money where our mouth is. Each of the last three previous platform shifts gave birth to unique investment opportunities for insiders with access to capital, which then in turn gave birth to some of the world’s most iconic companies, and outlier capital returns. What’s interesting is that all of the best investors from the previous platform shifts follow the same formula: Timing + Insider Access.
During the PC revolution we saw Apple and Microsoft emerge, Apple sold 33% of their company for only $250K to an insider named Mike Markkula. This stake in today’s market would be valued at roughly $280B.
We saw history repeat itself during the Web revolution when Amazon, Google and Facebook all emerged as iconic winners. Once again, an insider investor like Peter Thiel was able to purchase 33% of Facebook for only $500K. This same ownership stake in today’s market would cost you roughly $180B.
And once again, we saw this during the Mobile revolution where Uber and Instagram reigned supreme. Uber raised their first round of capital at a reported $4M valuation, it’s worth $60B today.
You’d think there would be a plethora of funds sprouting up similar to how Crypto saw over 110 new funds in 2017 ready to compete with each other. [This could mean the small number of investors suggests that the tech / companies may not be ready for prime time]. Or, it could mean this is an opportunity only visible to the trained eye. I feel we’ve just hit our influx point thanks to Apple/Google/Amazon/FB/SNAP/Tencent. And we share these feelings with a small amount of specialty funds collaborating together under the mindset, ‘high tide floats all boats.’ For example, Don Stein from Candela Partners (me), Jacob Mullins from Shasta Ventures, Peter Rojas of Betaworks Ventures, and Niko Bonatsos of General Catalyst host ‘Mixed Reality office hours’ nearly every month in SF in order to gather with entrepreneurs for a full day to privately offer connections, and funding. We’ve also seen an amazing movement from the WXR Fund, a venture fund backing women-led Mixed Reality startups to ensure this industry has a diverse range of mindsets and leaders, unlike the previous revolution within Silicon Valley. The early stage investor community is growing, and currently populated by insiders who are full of conviction.
This small group of insiders, investors, and entrepreneurs are more encouraged than ever before because all within a 3 month period of Q4 2017 we saw noticeable growth in the number of Startups with traction, M&A Acquisitions, and supporting dollars from Fortune 500 customers.
The reason we saw a tsunami wave of investment and growth in the industry is because the platform companies like Apple, Google, Facebook, Snap, Tencent, and Amazon all released AR platforms/tool with potential outreach to billions of consumers as a stratagem to compete for market share.
Our team at Candela Partners counted $3B invested in 2017, and 30+ M&A’s of Mixed Reality companies in the United States, showing there are early rumblings of potential for outlier returns as the market grows.
Notable 2017 Financing in Mixed Reality: Improbable raised $500M+, Magic Leap $500M+, Unity $400M+, Niantic $200M+, MapBox $160M+
Acquisitions: Real Estate: CBRE purchases Floored, a startup building immersive tours of homes to reduce the effort from buyers, and save brokers massive amounts of time. Household: Williams-Sonoma purchased Outward, a startup bringing proprietary and transformative technology to an antiquated furniture industry. Social: SNAP INC purchased Zenly for $350M, an effort to merge the map/camera with your daily social experience. (Full list of Acquisitions: AR / VR)
This year exhibited a clear up tick in consumer activity, and success stories. Nearly every major tech company has a stake in the success of mixed reality. They’re investing billions and releasing product updates consistently. AirBNB, SNAP, FB, Amazon, Apple, Google, Tencent, Netflix, NBA, etc.
Public companies are spending money as customers, and purchasing startups out of fear for potential disruption. Later stage investors are betting billions on this tech as the next platform revolution based around spatial computing, and a small community of early stage investors are working together to help get companies from 0 to 1. Family offices are backing strategic investments, and early stage fund managers. In summary, the Mixed Reality industry houses the most powerful computing device we’ve seen to date, AR/VR headsets, and billions of dollars are following this opportunity.
~Don Stein, Managing Director, Candela Partners LLC
Footnote: If you’d like to learn more about the Mixed Reality industry from an investors’ perspective, or if you’d like to gain access to Mixed Reality investment opportunities alongside a group of dedicated investors building this mixed reality industry, please contact Don@candelapartners.co — And a special thanks to my fund partners Larry Braitman and Mark Linao as well for editing, and supporting mixed reality.