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Metaverse — The Digital Manifest

The way we speak about the Metaverse at the moment is a reminiscence of how people used to speak about the world wide web in the previous century. It would not be wrong though to say that the first seeds of this dynamically evolving platform were planted in the early 1960s with a slew of sci-fi books, movies, and TV shows but none did that more than the video games. The gaming industry captured the imagination of millions and created an allure to experience alternate dimensions and participate in imaginary quests of a fictionalized fantasy land.

We have all engaged in one form or the other in the metaverse and spent countless hours exploring it. We have been actively interacting in the metaverse through different platforms — social media (Meta (previously known as Facebook), Instagram, Tiktok), online gaming (Axie Infinity, Decentraland, Sandbox, Minecraft, Fortnite), web-conferencing for work, working remotely (Slack, Discord, Zoom, Microsoft Teams, Asana, Toggl, and Serene). See — Metaverse — A Virtual Ecosystem beyond place and physical evidence

The biggest challenge however is to simply wrap our heads around everything that Metaverse is and can be. The potential of what it can be is truly limitless with different industries, companies, creators, and common folk experimenting and pushing the limits of this immersive, all-compassing, limitless network of virtual worlds we now fondly know as the METAVERSE.

In this article, we will dive deeper into the Metaverse ecosystem and attempt to explore the sector’s investment landscape.

Peeling it Back — The Multiple Layers of Metaverse

Metaverse is a complete ecosystem with different elements coming together, working in tandem to create a digital economy. Source — Jon Radoff, under CC By license.
Metaverse is a complete ecosystem with different elements coming together, working in tandem to create a digital economy. Source — Jon Radoff, under CC By license.

Jon Radoff, in his article — The Metaverse Value-Chain has broken down the Metaverse into 7 different layers: experience, discovery, creator economy, spatial computing, decentralization, human interface, and infrastructure.

1) Experience- Dematerialization of physical space, distance, and objects.

2) Discovery- Introducing people to different experiences through inbound and outbound discovery systems and community-driven content.

3) Creator Economy- All of the technology that creators use on a daily basis to craft the experiences that people enjoy.

4) Spatial Computing- Technology that enables us to enter into & manipulate 3D and virtual spaces using AR/VR technology and various IoT devices.

5) Decentralization- Web 3.0, blockchain technology, Defi even cloud technology are real-world applications of a decentralized technology, where options are maximized, systems are interoperable, and a scalable ecosystem of different online capabilities is accessible to all.

6) Human Interface- Smartphones, smartwatches, voice-activated virtual assistants, VR Headsets, and other innumerable IoT devices that allow us to experience, interact, create and visualize.

7) Infrastructure- Technology that enables the devices, connects them to networks, servers, clouds, and delivers content.

Emergence of the Metaverse

The gaming industry was definitely the first that brought the magic of a ‘virtual experience’ to the masses. This is the primary reason why even today most people commonly associate the metaverse with gaming. The metaverse, however, has evolved into a much bigger idea encompassing different sectors and functions, by simply changing the way people interact with the internet.

Recognizing the rapid digital shift of consumers and the fast-paced adoption of the Metaverse, market leaders from other sectors and tech-based companies are wasting no time and are currently in a race to create their own MINI-VERSE within the larger Metaverse. A feat that is already aced by gaming companies as many popular games have a well-established network and communities in the Metaverse.

The industry has begun to reap the benefits of developing distinct virtual ecosystems — Activision Blizzard, the developers of World of Warcraft earned more than $8 billion through the sale of virtual items in their game in the form of DLC or in-game purchases.

US and China are the top markets for Metaverse globally

According to the Reportlinker.com report “Global Metaverse Industry", the global market for Metaverse was estimated at $107.1B in the year 2020 and is projected to reach $758.6B by 2026, growing at a CAGR of 37.1%.

The Metaverse market in the United States is estimated at US$58.5 Billion in the year 2021. The country currently accounts for a 41.2% share of the global market.

China, the world`s second-largest economy, is forecasted to reach an estimated market size of US$103.1 Billion by the year 2026 trailing a CAGR of 38.1%. Among the other noteworthy geographic markets are Japan and Canada, each forecast to grow at 31.3% and 29.6% respectively.

Within Europe, Germany is forecasted to grow at approximately 36.8% CAGR while the Rest of the European market will reach US$59.5 Billion by the end of 2026.

Investment Trends in the Metaverse

Metaverse companies have seen a wider acceptance from investors in the last 5 years

Forbes traces back the emergence of the Metaverse to Neil Stevenson’s 1982 novel, Snow Crash where the term ‘Metaverse’ was used for the first time to describe a virtual place where characters could go to escape a dreary totalitarian reality.

It was actually in 2014 that the foundation stones for the Metaverse we know today were laid down. Companies like Microsoft, Google, Facebook(now known as Meta), Sony, Samsung, in addition to all major league Game Developers focussed their attention on the creation of ‘an immersive technology’ or technology that can be experienced, hence derived the interest of these tech giants into — AR/VR tech and 3D modeling.

Metaverse was ripe for new technology investors and by 2017, the industry was getting noticed. When the pandemic forced a global lockdown in 2020, the user-base for metaverse-based technology grow exponentially in a short time and US$ 317M funds were raised in 2021 in just 12 deals.

Metaverse companies are still in the nascent investment stage

Most of the companies developing new media technology are in the early stages of fundraising. Source — Tracxn

More than 75% of the funds raised by the companies in this sector have been in the extremely early stages — Seed and Series A, with only 12% of the companies have raised beyond Series B. The segment is still in a nascent stage and is yet to gain the majority of investors' interest as it's still early, untested, and more importantly a complex ecosystem with various dependencies and variable factors to be considered.

Regional laws and policies are also a major deterrent in this sector as many countries and their governments are yet to fully understand the scope of the industry to attempt to regulate it.

US and South Korea are the top destinations for companies developing New Media Tech

Over the years, the United States of America has emerged as the top destination for companies creating New Media Technology. The technology infrastructure, the abundance of opportunity, investors, and a community of developers and enthusiasts that nurture talent and encourage innovation, all these factors have propelled the US to be the flagbearer of Metaverse companies.

Companies like — Meta, Nvidia, EPIC Games, Unity Technologies, Microsoft, Apple, Roblox Corporation, Amazon, and Snapchat, headquartered in the US are some of the most active companies developing technology for the metaverse.

Early this year, South Korea unveiled its plan of a long-term road map to foster its metaverse industry, with the aim of becoming the world’s fifth-largest market in the next five years.

Under the plan, South Korea will foster at least 220 metaverse companies with sales volumes of more than 5 billion won ($4.2 million) and create a “metaverse academy” this year to nurture 40,000 local experts by 2026.

‘Decentraland’ created by Argentinians Ari Meilich and Esteban Ordano, put the South American nation in the race with other leading countries.

Notable Investors active in the Metaverse

Conclusion

We at Rocket Capital believe Metaverse has just begun flexing and while different industries across the world are still experimenting with this New Media Technology, the opportunity to do the unthinkable is huge. If you are excited about this new media technology and want to share your experience, please reach out to us at mark@rocket.capital and akarsh@rocket.capital.

In the next article, we will explore the growing popularity of live streaming and the effect it has had on creating Web 3.0.

About Rocket Capital

Rocket Capital is a VC fund focusing on New Media Technology start-ups globally. We invest in pre-Series A, Series A & Series B companies and help founders scale in Asia.

Latest investment news from Rocket Capital — Admix raises $25M Series B to scale up in-game ads, and prep for metaverse gaming0In our next article, we will explore the reason behind the growing popularity of Live Streaming and to study its impact on Web 3.0.

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Rocket Capital is a VC fund investing in New Media Technology start-ups globally. We invest in pre-Series A, Series A & B companies and help founders scale in Asia.

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