Tim Merel, founder and MD at international tech advisors, Digi-Capital, examines the most recent round of VR and AR investments, and looks forward to the sector's growth potential.
AR/VR dealmakers invested over $800 million dollars in Q2 2017, after a quieter first quarter, rounding out over $2 billion invested across 27 AR/VR sectors in the last 12 months.
While investment hasn’t hit the record peak of Q1 2016 (when $1.2 billion was invested in the quarter and $2.4 billion in the previous 12 months), the second quarter of this year was an investment record for a quarter when Magic Leap wasn’t sucking in giant amounts of cash.
Volume Vs Value
The now familiar pattern for AR/VR investment saw the highest volume of investments from pre-seed through Series A, with chunky later stage deals accounting for most of the dollar value in the quarter (Improbable over $500 million, Unity $400 million – reported as half investment and half secondary share sale by employees).
However, Facebook’s Camera Effects Platform and Apple ARKit for iOS (and potentially AR optimised iPhone 8 later this year) look set to recalibrate investor sentiment on the sector as a whole. That shift in thinking might take a little while to filter through to the mobile AR developer ecosystem as it spins up to speed, so watch this space.
Core Tech
One pattern remains constant for AR/VR Dealmakers, with half of all investment continuing to pour into core tech companies. The four other big investment sectors were video, games, peripherals and smartglasses, which together with tech account for just under 90% of all AR/VR investment.
Around $1 of every $10 was divided between solutions/services, education, social, advertising/marketing, navigation, location based, and eCommerce. The rest was spread across the smaller investment sectors of art/design, entertainment, business, lifestyle, music, enterprise/B2B, utilities, news, medical, sports, photo and distribution. Again, as the impact of Facebook and Apple filters through the mobile AR startup ecosystem, an explosion of new app types could lead to a rebalancing between investment sectors.
You can see the above full graphic here.
The Visionaries Of Tomorrow
With Digi-Capital forecasting over a billion users and $60 billion revenue for mobile AR in five years time, the revolution started by Apple, Facebook, Google and others is set to change how the world sees the world. For AR/VR Dealmakers and their portfolio companies, picking the right opportunity with the right timing today could make them the geniuses and visionaries of tomorrow.
You can find more information in Digi-Capital’s new 167-page Augmented/Virtual Reality Report Q3 2017 and 700 transaction 2011 to 2017 Deals Database here.
