Are VR and alternate reality technologies worth investing into in 2017?

VRReading ATKearney 2017 predictions, one can read that it will be a year when 'augmented reality and VR will proliferate beyond gaming markets'.

At the last Game Developers Conference that took place between February 27 and March 3, 2017 in San Francisco, California, many developers offered some insights into their mixed reality developments, either in the shape of a standalone product or as a showcase app to their existing portfolio of classic mobile, console and PC games.

What was striking during this conference is how little most developers knew beyond the realm of tools offered by games dev kits and platforms such as Unity. Most significantly, discussing WebVR or WebGL surprised many during the show as if it was not that relevant to the market, despite the technology being a strategic engineering milestone to browsers such as Google Chrome, Firefox Mozilla and Facebook. As a footnote, Unity's current roadmap shows the status of WebVR support is 'in-progress, timelines long or uncertain'.

This situation is all the more important to bear in mind when looking at the current state of the industry and the interest it generates with the private investment community. On one side of the story, startups developing VR tools and platforms, including those dedicated to WebVR and WebGL, are receiving most of the attention (and the money). On the other side, it sounds that most VCs are much more cautious about investing in game developers capable of delivering even the most visually stunning VR experiences: in that regards, the words from a prominent VC based in New Hampshire, USA, talk plenty: “stop showing me dragons. Sure, you can make a beautiful dragon in VR. And yes, it’s cool the first time you see it. By the twentieth dragon it gets pretty old. Show me something useful in AR/VR. That’s a lot cooler.”

That is not to say game developers with a VR focus are not worth investing into, to the contrary. Game developers theoretically have a strategic advantage in terms of user experience and designs, including user interface designs. We believe this 'UI/UX' experience and skillset are substantial for designing a VR product successfully. As a symbolical example and with the results that we know, Apple Inc. revolutionized the approach to the manufacturing of mobile phones with the iPhone by disrupting UI/UX standards in the telecommunication industry, an industry that was, prior to the iPhone, driven by thousands of different devices and form factors.

This theoretical advantage is nevertheless minimized if not ignored by the game industry, who prefers to analyze VR development and commercialization challenges with the narrow lens of premium hardware costs to end users. A recent article in Develop (a mainstream website for game industry news) mentions that many in the VR development community 'see price as the biggest blocker when it comes to virtual reality hitting the mainstream'. We do believe this statement to actually be limiting the vision of the VR market, especially when one can get a hold of $20 headsets, though it is true that headsets at this cost necessitate a smartphone to be complete and operational. With this said, most of the commercial zones that offer growth to VR as market, including the US, Europe, the Middle East and South East Asia, show a penetration rate of smartphones very often over 100%: VR, as a mainstream web consumer technology, is already mainstream.

At Prevalent Equity Networks, we believe that the best investment potential in VR currently lie with startup teams and products focused on:

  • Product development using WebVR and WebGL as part of their technology stack.
  • UI / UX designs for the web and/or mobile web including iOS and Android apps.
  • Game developers who have the curriculum and the manpower to diversify into non-gaming projects.
  • Independent developers not yet involved in VR and who have a specific focus in a vertical other than gaming, including command and control of transportation vehicles (unmanned vehicles in particular), e-commerce, manufacturing, CAD applications and healthcare.
  • Platform developers, other than media related, focusing on bringing VR products to the attention / adoption of consumers.
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