State of AR & VR

THE STATE OF AUGMENTED & VIRTUAL REALITY Analyzing AR/VR investment trends in the first half of 2016 #ARVR

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ABOUT THE PRESENTER Nicholas Pappageorge Tech Industry Analyst, CB Insights Focuses on Internet of Things, AR/VR, Space, Drones, and Industrial IoT Published research and data analysis has been featured in Forbes, Fortune, Bloomberg, Wired, Quartz, Re/Code, and Business Insider, among other major media outlets @NpappaG Previously held research role at 3D printing company MakerBot Industries Graduate of Hamilton College [email protected] #ARVR www.cbinsights.com 6

IN THE NEXT 20-25 MINUTES, WE’LL COVER… 1 Private market activity in AR and VR 2 What we know about Magic Leap 3 Corporations competing in AR/VR 4 Where startups see opportunity 5 Enterprise and industrial use cases #ARVR www.cbinsights.com 7

STATE OF AR/VR: MACRO TRENDS IN THE GLOBAL LANDSCAPE #ARVR www.cbinsights.com 8

Since 2012, AR/VR companies raised: $3.3 BILLION across 375 DEALS #ARVR www.cbinsights.com 9

INVESTMENT INTO PRIVATE AR/VR COMPANIES SET FOR RECORD YEAR At the current run rate, both deals and dollars into AR/VR companies are set to reach record levels in 2016. Top Deals Since 2012 Magic Leap $794M // Series C Magic Leap $542 // Series B MindMaze $100M // Series A NextVR $80M // Series C Source: CB Insights. #ARVR www.cbinsights.com 10

Q2’16 SEES DEALS AND DOLLARS FALLING After a massive Magic Leap deal, Q2’16 hardly compared (even to quarters before the mega-round). Top Deals Q2’16 Meta $50M // Series B OTOY $37M // Series D The Virtual Reality Company Magic Leap $23M // Series C $794M Lumus Magic Leap Series C $542M $15M // Series B Series B Within $13M // Series A Source: CB Insights #ARVR www.cbinsights.com 11

AR/VR IS STILL DOMINATED BY EARLY STAGE DEALS Since 2012, early stage rounds (seed and Series A) have accounted for 69%-83% of deals to the space. Source: CB Insights #ARVR www.cbinsights.com 12

GEOGRAPHY: U.S. LEADS, CHINA AND UK TRAIL The United States saw the bulk of deals, followed by China and the UK. Canada and France saw 4% and 3% of deals, respectively. Source: CB Insights, percentages are rounded up. #ARVR www.cbinsights.com 13

MOST ACTIVE INVESTORS Interestingly, 4 of the top 8 AR/VR investors are corporate venture arms. Rothenberg Ventures tops lists, and also has a VR-specific accelerator. Presence Capital and GV tied for second most active. Source: CB Insights, ranked by number of unique companies invested. #ARVR www.cbinsights.com 14

INVESTOR ECOSYSTEM Accelerators Vertical specific VCs Generalist VCs Corporate VCs Note: select investors not ranked or exhaustive. #ARVR www.cbinsights.com 15

INVESTOR ECOSYSTEM CONTINUED Virtual Reality Venture Capital Alliance 38 investors, Headed by President of VR at Vive Source: VRVCA, TechCrunch #ARVR www.cbinsights.com 16

WHAT IS AR / VR (AS WE DEFINE IT?)  Augmented reality (AR): A hybrid reality tech that combines the real world with a rendered one. Magic Leap‘s headset, still in development, is an example in the category. (Mixed- reality, a merging of real and virtual worlds, is used somewhat interchangeably and bucketed here)  Virtual reality (VR): a virtual world that is completely rendered. Examples here would include Jaunt, which enables cinematic VR.  Both/Other: technologies that enable both AR and VR. An example is Eyefluence, which offers eye-tracking technology that can be applied to both virtual and augmented reality systems. #ARVR www.cbinsights.com 17

“Over the next 10 years, the form factor's just going to keep on getting smaller and smaller, and eventually we're going to have what looks like normal-looking glasses that can do both virtual and augmented reality… As a matter of fact, when we get to this world, a lot of things that we think about as physical objects today, like a TV for displaying an image, will actually just be $1 apps in an AR app store.” Mark Zuckerberg CEO Facebook Source: The Verge Image Source: Facebook #ARVR www.cbinsights.com 18

AR VS. VR: DEALS FELL Q2’16 VR deals have been trailing downward in recent quarters. In Q2’16 there were 23, whereas before in Q4’15 VR deals hit a peak at 37. AR and Both/Other deals have remained relatively flat. Source: CB Insights #ARVR www.cbinsights.com 19

AR VS. VR: BOTH ON TRACK FOR DEAL GROWTH VR comprises the bulk of deals currently, though all types are slated for year-over-year growth in 2016. Source: CB Insights #ARVR www.cbinsights.com 20

ASIDE FROM Q1’16, MOST RECENT QUARTERS DOMINATED BY VR FUNDING Virtual reality startups saw more funding than AR startups in 4 of the past 6 quarters. The massive influx of investment Q1’16 can mostly be attributed to Magic Leap. Magic Leap $794M Series C Source: CB Insights #ARVR www.cbinsights.com 21

AR VS. VR: REMOVING FROM MAGIC LEAP YEARS, VRTAKES MOST Dollar-wise, AR is has taken an enormous share, nearly all of which went to Magic Leap. Magic Leap Magic Leap $794M $542M Series C Series B Source: CB Insights #ARVR www.cbinsights.com 22

WHAT DO WE KNOW ABOUT MAGIC LEAP? #ARVR www.cbinsights.com 23

WELL…NOT A TON Source: CB Inisghts #ARVR www.cbinsights.com 24

THEY’RE HIRING Help wanted: “Principal Healthcare Systems Engineer” Source: CB Insights #ARVR www.cbinsights.com 25

THEY HAVE A WIDE WEB OF INVESTORS, INCLUDING MANY IN MEDIA Business Social Graph Source: CB Insights Business Social Graph #ARVR www.cbinsights.com 26

USE CASE #1 Median early-stage fintech deals ere $4.6M in Q2’16, hitting a 5-quarter high and 53% increase over Q1’16. Source: CB Insights #ARVR www.cbinsights.com 27

USE CASE #1 Median early-stage fintech deals ere $4.6M in Q2’16, hitting a 5-quarter high and 53% increase over Q1’16. Source: CB Insights #ARVR www.cbinsights.com 28

GRAEME DEVINE, CHIEF CREATIVE OFFICER & VP OF GAMES, APPS, AND EXPERIENCES AT MAGIC LEAP “[Devine] also describes successful products as things that pass the five mile rule: Things that you would go back for at home if you forgot them, but only realized five miles away. Smartphones he says, often pass this rule; Apple Watches do not. Magic Leap wants us to never feel like we should be separated from our augmented reality headsets.” Source: CB Insights, Inverse #ARVR www.cbinsights.com 29

THE CORPORATES SMELL OPPORTUNITY #ARVR www.cbinsights.com 30

FACEBOOK-OCULUS KICKED OFF THE CONVERSATION Oculus - FB Acquisition March 2014 Source: CB Insights Trends #ARVR www.cbinsights.com 31

MEDIA CORPORATES JUMPED IN Source: CB Insights #ARVR www.cbinsights.com 32

M&AHAS SEEN AN UPTICK Source: CB Insights #ARVR www.cbinsights.com 33

PATENT SNAPPED UP BY PUBLIC AND PRIVATE COMPANIES Microsoft has filed the most AR/VR patents in the past 6 years, applying for a total of 611. But Magic Leap made big moves last year, filing 164 patents in just 2015 alone. Source: Envision IP #ARVR www.cbinsights.com 34

MAJOR COMPANIES MAKING HIGH-ENDHEADSETS SHIPPING HEADSETS ANNOUNCED PLANS WHO KNOWS? (BUT PROBABLY UP TO SOMETHING) #ARVR www.cbinsights.com 35

• Facebook acquired Oculus for $2B • After developer versions, Oculus began shipping the consumer-grade Oculus Rift in late March • Partnered with Samsung for Gear VR, powered by Samsung Galaxy smartphones as display • Overall vision could be to create a metaverse (virtual world) Source: The Economist, Digital Trends, Vanity Fair @cbinsights #arvr #ARVR

TECH NO LONGER HOLDS A MONOPOLY ON SELF-DRIVING DEVELOPMENT • Other high-end headset available today (along with Rift) • Headset employs laser sensors to traverse 15' x 15' space (a much larger area than others), giving a more room-scale sort of gameplay • Strategic partnership with gaming house Valve may give it edge in content and hardware development (Valve also developing its own hardware) • Recent survey found developers prefer working on the Vive platform, beating out Oculus Source: ExtremeTech,TechRadar, Wall Street Journal Source:CB Insights Trends @cbinsights #arvr 37 #ARVR

• Hololens headset became available to developers (for $3000) in March, consumer release TBD • Targets enterprise applications, has commercial partnership with Volvo (seeing applications in product development and for selling cars) • Partnered with Autodesk for facilitating industrial design • Partnered with Intel on Project Alloy, Intel’s mixed-reality headset Source: UploadVR, Wall Street Journal, IB Times @cbinsights #arvr #ARVR

• CEO Tim Cook: "AR can be really great. We have been and continue to invest a lot in this. We are high on AR for the long run, we think there's great things for customers and a great commercial opportunity. So we're investing.“ • Acquisitions suggest mobile-focused AR: bought facial recognition company Faceshift and smartphone AR company Metaio, and Flyby Media, which provided the image- recognition in Google's tablet-based mixed- reality initiative Project Tango • Apple is also said to be prototyping VR headsets • Recently hired a leading VR researcher. Sources: Apple Insider, UploadVR, Wall Street Journal, Financial Times @cbinsights #arvr #ARVR

• Releasing PlayStation VR, high-end gaming headset that will compete with likes of Vive and Rift • Lower price-point ($399 atop $299 PS4 console) • Huge gaming footprint, the best selling major video game console (40M PS4s sold) • Beefing up specs on PlayStation 4 Source: The Verge, Wall Street Journal, Engadget @cbinsights #arvr #ARVR

• Recently unveiled Project Alloy, untethered VR headset with built-in gesture control for merged reality experience • Does not require high-end gaming PC • Partnered with Microsoft for Windows Holographic OS and Project Alloy’s hardware • Intel is open-sourcing its Alloy hardware so that “anyone can combine the Project Alloy hardware with Windows Holographic platform.“ • Acquired Movidius (9/6/2016), a computer vision company with many AR applications ImageSource:TheVerge Source: Wall Street Journal, VentureBeat, TechCrunch @cbinsights #arvr #ARVR

MAJOR TECH COMPANIES IN MOBILE AR/VR RELEASED ANNOUNCED PLANS WHO KNOWS? (BUT PROBABLY UP TO SOMETHING) #ARVR www.cbinsights.com 42

• Pioneering Google Glass project was ultimately unloved by consumers • Moved into low-end mobile VR with Cardboard • Reported in May that 5M Cardboards were in hands of consumers (distributed widely via partnership with NY Times); Cardboard App has hit 50M downloads in Play store • Auto • Soon announcing plans for mobile VR platform Daydream • Investor in well-funded AR startup Magic Leap • In addition to its low-end mobile VR initiative (and retooling Android OS to handle VR), Google is reportedly working on a standalone headset that would not require a tether to a Source: Wall Street Journal, TechCrunch, Fortune, Wall Street Journal PC or game console @cbinsights @c#binarsvighr ts #autotech 43 #ARVR

• Partnered with Oculus shortly after FB acquisition in deal that granted them early access to Oculus’ software platform • Gave away Gear VR headsets with Galaxy preorders • Poised to be among the most-owned mobile VR headsets. In May, reported more than 1M had used the Gear VR Source: UploadVR, Wall Street Journal, IB Times @cbinsights #arvr #ARVR

THE STARTUP ECOSYSTEM #ARVR www.cbinsights.com 45

ONE VISION OF AR/VR INVESTMENT The majority of AR/VR’s use case in 2025 may still be for gaming and entertainment, but enterprise use cases still could represent nearly half of the market. Source: Goldman Sachs #ARVR www.cbinsights.com 46

DEALS ALREADY LEAN TO BUILDING BLOCKS & INDUSTRIAL APPS CB Insights data breakdown on deals says 55% is already going to infrastructure tools (building blocks like dev tools, gaming engines, gesture & motion tracking) along with Commercial/Industrial use cases. Source: Mark Linao, Technicolor Ventures, includes all AR/VR deals through Feb 2016 #ARVR www.cbinsights.com 47

USE CASE #1 - GAMING Driving most of the category currently, gaming headsets are currently hitting the mainstream with the fall release of PlayStationVR. The Vive and the Rift are mainly being adopted by gamers. Niantic Survios CCP Games Total raised: $25M Total raised: $4.25M Total raised: $50M Mobile AR games studio (most VR-based gaming content Icleand-based VR gaming famous for PokemonGotitle). maker and immersive studio focused on massively hardware/software developer. multiplayer games. Usens Resolution Games AltspaceVR Total raised: $25.6M Total raised: $6M Total raised: $15.5M Mobile-based positional VR game studio. Social-focused VR platform tracking for AR and VR gaming that enables gaming and experiences. communication between users. #ARVR www.cbinsights.com 48

USE CASE #2 - RETAIL VR and AR technologies could transform retail from both the supplier and the consumer. Examples here could be visualizing furniture in a home, or virtualizing walkthroughs of shopping floor plans. Augment InContextSolutions Total raised: $1.8M Total raised: $19.9M Mobile AR-based enterprise VR shopping and retail platform for marketing and solutions for store simulations. sales. VividWorks SpaceView Total raised: $1.6M Total raised: $19.9M Mobile and tablet-based AR Mobile AR sales enablement tool for designers and platform. manufacturers to help Image Source: Barco customers visualize interiors. #ARVR www.cbinsights.com 49

USE CASE #3 –LIVE EVENTS Live event streaming enabled by VR will make for a more immersive watching experience. NextVR Jaunt Total raised: $110.5M Total raised: $100.5M VR-based content capture and Content platform focused on broadcast platform. “cinematic VR” experiences. Voke LiveLike Total raised: $24.45M Total raised: $5.1M Image Source: NextVR Live event VR platform. VR platform for sports broadcasters. #ARVR www.cbinsights.com 50

MOST WELL-FUNDED AR/VR STARTUPS Magic Leap tops the list by a longshot, but VR motion capture and content platforms are among the most well-funded. Company Disclosed Description Funding $1.4B Stealth AR headset maker $118.5M Swiss AR and VR motion capture developer $110.5 Live events experiences in VR $100.5 Cinematic VR content platform $99M Mobile AR visual search app Source: CB Insights #ARVR www.cbinsights.com 51

WHERE AR/VR GROWS WITHIN INDUSTRY AND ENTERPRISE #ARVR www.cbinsights.com 52

INDUSTRIAL USE CASE #1 - 3D DESIGN AR and VR will enable faster and more collaborative industrial design, and allow different departments and clients to visualize sketches. Autodesk, which is gearing its design engine for AR/VR capabilities, is working with clients like Volvo for design process and for consumer visualization. Image Source: Daqri #ARVR www.cbinsights.com 53

USE CASE #2 - FIELD SERVICE & DOCUMENTATION Being able to see workflows, take video to connect with experts, and review compliance documents or technical drawings—all while hands- free—will be a big value to industry. Meta Atheer Total raised: $73.3M Total raised: $20.5M Enterprise collaboration- Enterprise-focused smart focused AR headset developer eyeware. Daqri Lumus Total raised: $15M Total raised: $15M Helmet-embedded industrial Enterprise-focused smart AR headset. eyeware. Image Source: Microsoft Hololens #ARVR www.cbinsights.com 54

USE CASE #3 - MEDICINE TRAINING AND THERAPY AR and VR could revolutionize the visualizing of medical imaging, help with surgical simulations, and be used directly for therapy (such as virtual exposure to alleviate phobias). Surgical Theater Psious Total raised: $4.25M Total raised: $1.2M VR-based surgical simulation Exposure therapy for patients and education. suffering from phobias. Mindmaze Innovative Imaging Total raised: $118.5M Technologies (dba Reacts) Gesture/motion tracking for Total raised: $4M major gaming applications, as Medicine-focused video well as immersive VR for early collaboration platform. motor rehab post-stroke. Source: Surgical Theater #ARVR www.cbinsights.com 55

WELL-FUNDED COMPANIES IN ENTERPRISE / INDUSTRIAL AR Company Disclosed Description Funding $73.3M AR headset maker for enterprise $20.5M Enterprise-focused smart eyeware $15M Enterprise-focused smart eyeware $15M Helmet-embedded AR headset $2M Tablet and glasses-based AR solutions Source: CB Insights #ARVR www.cbinsights.com 56

@NpappaG QUESTIONS? [email protected] #ARVR www.cbinsights.com 57

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