VC and the Metaverse
Just like the wild west, many visionary founders, CEOs, investors, VC, and hedge fund managers are looking to stake a claim in this metaverse platform where virtual social connections, commerce, entertainment, and profit intersect.
By Christopher Canzano
What is the Metaverse? The word “Metaverse” comes from the prefix “meta” (meaning beyond) and “-verse” (from the universe) to describe the concept of a future iteration of the internet. The term was coined by Neal Stephenson in his 1992 novel Snow Crasher. In his book, humans interact as avatars in a 3-D virtual space with elements based on the real world. Subsequent writings such as Ernest Cline’s novel Ready Player One, imagines a fully realized digital world that exists beyond the analog one in which we live. Steven Spielberg directed and produced the film based on Cline’s book to creatively depict this virtual reality simulation and how humanity uses it as an escape from the real world. The concept of the Metaverse has morphed into a larger collection of virtual experiences and intimates at what direction the internet will become.
The momentum toward all things virtual continues. Soon the IoT (“internet of things”) will transform into the MoT (“metaverse of things”) — my own coined phrase to relate the vast current and future technologies dedicated to the expansion of this Metaverse. Video games of Roblox, Minecraft, and Fortnite already have metaverse components in which players can build and operate in their own digital worlds. Augmented reality experiences support metaverse tendencies. VR was a driving force in the development of Facebook’s VR headset, Oculus. Just this year, Korea has launched an initiative for a national metaverse alliance in hopes to create a unified national VR and AR platform. Microsoft, too, has created software enabling a virtual presence using devices such as HoloLens 2. Other virtual environments have been developed. Second Life, which was launched in 2003 by Linden Labs, is a 3-D world created by its users who develop content and experiences and profit by selling millions of virtual items in the marketplace. It aspires to be a metaverse-like project whereby users can interact, play, do business, and otherwise communicate.
The entertainment industry has begun to embrace the Metaverse. In 20113, the K-Pop band Girls’ Generation held one of the first virtual concerts that featured life-sized holograms of band members projected onto the stage. In 2020, Beyond Live was launched as an on-line concert platform that promotes virtual concerts. Rapper Travis Scott collaborated with Fortnite to introduce music to the realm of the metaverse. In fact, Scott’s Astronomical Fortnite performance in April 2020 earned him $20 million. Similarly, Ariana Grande’s Rift Tour which debuted August 2021 through Fortnite enabled users to virtually experience the pop star’s concert from the comfort of their homes. This ambitious virtual concert which drew a record 78 million viewers will earn Ariana Grande tens of millions of dollars and merchandise sales. Other gaming companies, such as Roblox, have seen this potential and have partnered with artists such as Lil Nas X, Royal Blood, Why Don’t We, and Zara Larsson.
The sports and art industry has espoused the metaverse platform in its adoption of non-fungible tokens (NFTs) to allow fans to collect images or videos of their favorite sports star. An NFT is a digital asset that represents a real world object such as videos, art, music, or other items. NFTs are generally one-of-a-kind and have unique identifying codes. Most NFTs are part of the Ethereum blockchain. Blockchain technology is regarded as a natural conduit to the development of the Metaverse because its platform is decentralized. A NFT of a video clip of LeBron James dunking sold in March 2021 for $200,000 on NBA Top Shot, a website that allows users to buy and sell NBA video clips. Mike Winkleman, the artist known as “Beeple” made history when he sold his digital work, having a unique NFT, titled “Everydays: The First 5000 days” through a Christie’s auction for a record $69 million. Links with outside economic systems so people can profit from virtual goods is a metaverse platform.
The Metaverse is in its early stage of development. Gradual developments like blockchain, NFTs, and gaming will ultimately lead to its continued growth. Its potential economic impact is clearly massive. Just like the wild west, many visionary founders, CEOs, investors, VC and hedge fund managers are looking to stake a claim in this metaverse platform where virtual social connections, commerce, entertainment, and profit intersect. Large corporations realize the huge future potential of the Metaverse. Facebook just recently announced that it plans to spend $10 billion on Metaverse capabilities. “The meta metaverse is going to be the successor of the mobile internet. We hope that, by the end of the decade, we can help a billion people use the metaverse and support a digital economy worth hundreds of billions of dollars, “ Zuckerberg said. Other players such as Microsoft, Roblox, Epic, Nvidia, and Minecraft have skin in the game. Roblox just raised $150 million earlier this year to help expand its metaverse capacities. Microsoft closed a $7.5 billion purchase of video game company ZeniMax Media Inc. The design and aspiration to become a dominant player in the metaverse amongst these and other companies is palpable.
VC funding has already made an entrance into the metaverse sphere. The metaverse market totals over $46 billion just last year. Its growth is anticipated to hit a staggering $280 billion by 2025. As one of many examples of VC funding, Jay-Z’s Marcy Venture Partners (MVP) is investing into Iddris Sandu’s incubator, spatial Labs (sLabs). Sandu is a Thiel Fellowship winner who is engaged to develop the metaverse. His company sLabs has partnered with LNQ, a blockchain-enabled platform, to provide artists abilities to expand their presence in both physical and digital media formats. The goal of this partnership is to make the metaverse more accessible and give creators decentralized tools to engage with their target audience. Other VC firms recognize the potential nexus for tech and culture in the metaverse, whether it be music, art, crypto, or entertainment/sports industry-related venues. There is certainly room for creative VC investing into the metaverse world. The concept of the metaverse is difficult to define and its future landscape a challenge to concretely conceptualize. Therefore VC sourcing into metaverse investments will have to rely on guts, vision, and faith in its founders. Past metrics and analyses which previously allowed for successful picks will have to be modified to effectively navigate these unknown but potentially powerfully profitable ventures.
