Funding for VR and AR Drops Precipitously in First Quarter of 2017

VR funding has fallen by 80 percent compared to Q1 2016.

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Startups offering virtual reality and augmented reality products have raised significantly less funding in the first quarter of 2017, according to a report published on Crunchbase. Twenty-six companies raised a total of $200 million this quarter. That sounds fantastic, until you compare it with fundraising results one year ago in Q1 of 2016 when 29 companies drummed up over $1 billion.

Crunchbase also pointed out that Q1 of 2017 saw "the lowest quarterly number of financings and investment total in over a year."

To be fair, the lion's share of funds raised for VR this time last year came from an $800 million burst of financing for VR developer Magic Leap. That round of investment carried four times the weight of any other funding for VR.

Image courtesy of Crunchbase.

The long and short of it is that VR isn't dead yet, but it's not exactly spritely, either. What's the problem? Several factors, the elephant in the room of which is the nascence of virtual reality. Consumer interest is low, leading Facebook to shutter hundreds of Oculus Rift demo stations at Best Buy stores earlier this year. Magic Leap has taken a beating from reports that its super-duper VR tech is much farther away from completion than it let on around the time it received financing.

More affordable headsets such as PlayStation VR and Samsung Gear VR fared better than the considerably pricier Oculus Rift and HTC Vive headsets. Still, the uproar around VR fell from a deafening roar to a deafening silence rather quickly. Facebook attempted to fill that void earlier this week during its F8 conference, where it devoted much of its time to VR-related announcements.

For now, however, both consumers and investors seem to be waiting to see what comes next. That could lead to a catch-22 where consumers clamor for apps and advancements in headset tech that fail to materialize because investors are waiting for interest in the medium to reignite.

Image courtesy of Famitsu magazine.

Long Reads Editor

David L. Craddock writes fiction, nonfiction, and grocery lists. He is the author of the Stay Awhile and Listen series, and the Gairden Chronicles series of fantasy novels for young adults. Outside of writing, he enjoys playing Mario, Zelda, and Dark Souls games, and will be happy to discuss at length the myriad reasons why Dark Souls 2 is the best in the series. Follow him online at davidlcraddock.com and @davidlcraddock.

From The Chatty
  • reply
    April 21, 2017 1:45 PM

    David Craddock posted a new article, Funding for VR and AR Drops Precipitously in First Quarter of 2017

    • reply
      April 21, 2017 2:03 PM

      The hype is calming down. The tech will continue to move forward regardless.

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      April 21, 2017 5:39 PM

      Sounds like it's pretty much flat if you discount the Magic Leap investment.

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        April 22, 2017 4:27 AM

        From the Crunchbase article:

        "What Changed?

        We can’t assert with great confidence that slow VR uptake among early adopters is dampening investor enthusiasm. The space is small enough that fairly random quarterly fluctuations, such as a late-stage company closing a round a couple months later than expected, can move the needle on investment totals. The massive Series C round for Magic Leap last January was also a uniquely large round for the space, and it is not likely it will be repeated. Additionally, it should be noted that 2016 funding for VR was unusually high overall, by both round count and investment totals, dwarfing prior years."

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      April 22, 2017 4:51 AM

      Tech isn't there for what is being paid out. Yes we get a cool innovative way to interact with games and for certain genres that's great, but I still haven't seen anything exciting or taking advantage of the headset.

      Additionally, the goggles have to compete with sweet monitors / 4k TVs visually, and they don't yet.

      So what you are left with is people paying a premium on tech to get a unique interface that isn't really taken advantage of outside of a few specific genres, with diminished visual fidelity and cumbersome wires.

      Improve the screens to be more competitive with other displays, make the thing wireless somehow, all while bringing down the price, and it might stand a chance. I assume the tech will eventually get there, and that will likely be the product to get excited for.

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      April 22, 2017 5:42 AM

      This doesn't surprise me in the least. The market is being flooded with shit headsets.
      https://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Daps&field-keywords=vr+headsets

      Pretty much all of the companies outside of Oculus and Valve struck me as "me too" jump on the bandwagon give me all your money investors. Then you have Microsoft on the AR front, and they have always been incredible flaky when it comes to hardware.

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      April 22, 2017 6:14 AM

      Every day consumers don't care about putting on a headset and shutting out everything just to play a half baked tech demo or the occasional well implemented head tracking feature in an enthusiast simulation. Introduce cost of entry and motion sickness issues for some extra turn offs.

      It won't die, but there is no way it'll ever become enough of a thing where the majority of households will have one. It's going to stay in the realm of hobbyists and professionals forever, and that is cool.

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        April 22, 2017 7:02 AM

        It'll get there, but its still early. I think its the pretty natural progression of computer displays honestly. It's going to have to get less bulky and incredible resolutions, but I think its something that will become normal in 10-15 years.

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          April 22, 2017 12:20 PM

          Why would it? Looking at a monitor is way more comfortable and healthier, because you don't have added weight on your head, and you aren't forced to look at it non-stop. If you're at work, do you want to force your eyes to look at a display for 8 hours straight?

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            April 22, 2017 3:46 PM

            Shack reading comprehension++ is at it again.

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        April 22, 2017 7:39 AM

        Nope, by the time headgear is minimized and its standalone or a phone accessory it will be mainstream. AR will have arrived at this point too.

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