How to Invest in the Longterm for VR

Excellent panel on “How to Invest in the Longterm” for VR at the Greenlight Insights’ Virtual Reality Strategy conference, Nov. 2, 2016. Panelists included Toby Zhang of Youku Global Media Fund, Marco DeMiroz of the Virtual Reality Fund and Michael Yang of Comcast Ventures, with Dean Takahashi of VentureBeat moderating.

A video of the first 11 minutes of the panel is here:

https://www.facebook.com/irena.cronin/videos/10154318217742912/

 

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From Sheridan Tatsuno’s wonderful post regarding the conference (https://www.linkedin.com/pulse/vr-business-strategy-2017-outlook-sheridan-tatsuno), here is his section recounting what was said on this panel:

“Moderator Dean Takahashi said $500 million was invested into VR/AR during 2Q 2016, of which VCs invested 65% and strategic investors 20%. Michael Yang said Comcast Ventures leads in VR/AR/MR investments. So far, it has invested into seven VR/AR ventures with Virtual Reality Fund: led in three, two Series A, and Series C.  His advice to investors: “Jump in with both feet or sit on the side.” Marco DeMiroz said Virtual Reality Fund has invested $50 million into fourteen VR/AR ventures now, with plans for six more eventually.  Since there are few VR funds, they work with traditional VC funds for Series B/C.  Toby Zhang of Youku Global Media Fund, a new Frontier Tech Fund for VR/AR/MR. with Youku and Alibaba, said: “The hip phase is over. Valuations are coming down. the bar has risen. We are seeking more than good tech and business models. Rather, how can startups survive slow uptake with a stable business model?

What are the platform prospects? Comcast: Titans are engaged in an investment battle, which will stomp startups.  Middleware OEMs are not promising.  The best place for startups is at the bottom or top of the stack.  Apps and content are popular investments now. Virtual Reality Fund is monitoring Steam, which has a 100 million app download run rate, but mobile app store uptake is not a good forecast.  Multi-platform, agnostic content and shorter development cycles are better strategies. Youku and VR Fund believe that a mobile VR strategy is key.  VR Fund just invested in Web VR and is actively looking for startups focused on content delivery and multi-mode use in browsers.  Youku is also interested.

What are the next content platforms or next Magic Leap? Youku is seek enabling technologies, such as streaming to LED devices, multiple platforms, content tooling, etc., that help creators get to market, and IP management which leverages and licenses content into other markets. VR Fund has a sub portfolio in mobile gaming. Rectangular content experiences need to be reconsidered since they may not translate to spherical experience. VR Fund will invest in 12 ventures at the bottom and top of stack. Recent investments include Sliver, Visionary, Mindshow, Spaces content for theme parks, almost OS, which show immediate monetization. Comcast wants seasoned VR teams and a compelling story for next funding round. He advises startups to get funded now in preparation for the coming market shakeout.

What about valuation? VR Fund thinks multi-round and avoid early over-valuation; startups must deliver on their milestones.  Youku worries that runaway valuations lead to down rounds and advises that startups think long term (5-10 years) in fundraising. What about VR/AR content businesses? Youku sees San Francisco and LA as huge content exporting centers, but costs are rising. Tencent content has doubled in last few years, but it is important to find the right partners in the right markets. Comcast is focused on healthcare content in fitness, diabetes, pregnancy, etc. for behavioral change via healthcare providers.

What is the future of mobile platforms and content? Youku believes all-in-one devices will be big in Asia. Content creators should look at multiple platforms since mobile-high end lines will blur. Mobile will become richer and easier to create.  Truly creative talent is rare in China, so they are seeking ex-Hollywood film/TV/CGI people moving into VR.  In China, Youku is seeking directors going into VR, but they are rare.

How can companies succeed in VR/AR? Comcast says to ask: What is your true north?  Focus on your POV and IP that should be targeted.  VR Fund says amazing experiences and multi-platform strategies are key, such as Alchemy which put Requiem on all platforms over time. Avoid big, long-term epic content. VR is like mobile; move fast, iterate and learn.  Comcast believes startups need a balanced team of tech, creative, and business founders like Felix and Paul.  Full-stack studios could be a third-party business, but need to be kept proprietary.

How do investors see VR vs. AR adoption curves and investments?   VR Fund sees SDK (software developer kits) use bigger in VR than recent AR.  In the future, VR/AR multimode will be big. The AR market is potentially large, but there are few AR SDKs.

What missing in VR platforms?  What is coming?  Youku wants to see volumetric capture and streaming for VR, AR, and MR.  The Holy Grail is watching basketball live during game.  VR Fund believes volumetric and light field are important to create feeling of presence.  They are only investing in enabling technologies, such as tracking, etc. and believe Daydream and Samsung will see big 2017 growth; Best Buy plans Xmas VR sales at average under $50.  Youku believes that smartphone is 2D and 3D capture, not just display; they see music VR/AR video for teams.”