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VIDEO & SOCIAL VIRTUAL REALITY PLATFORMS
Columbia Business School Venture Fellows
April 2016
VIDEO & SOCIAL VIRTUAL REALITY PLATFORMS
Columbia Business School Venture FellowsCorey Schwitz
AR/VR FUNDING BY CATEGORY
CategoryFunding
($M)
Hardware 1,211.0
Infrastructure & Tools 425.3
Commercial & Industrial 391.0
Content 232.2
Social 16.9
Discovery & Distribution 16.8
Investment stage and category data from CB Insights
THE STATE OF VIRTUAL REALITY & VENTURE CAPITAL
• 73% of deals were early stage(Seed or Series A)
• Gaming accounted for 80% of funding in “Content” category
Most active investors
• 2016: Release of Oculus Rift, HTC Vive, Playstation VR• Estimated sales of 2.5M VR headsets (Deloitte)
• VR/AR market projected to reach $150B in revenue by 2020 (Digi-Capital)
• Social and discovery/distribution apps have largely been ignored in first wave of VC financing as the hardware and initial content of the VR ecosystem have been built.
The companies that will scale quickly and create long-term value will focus on distribution over content creation,
building a meaningfully connected user base that actively contributes and adds to the community.
These platforms can differentiate from Web 2.0 counterparts by creating ecosystems that necessitate
complete immersion and presence, not just 360° video in a headset.
The companies that will scale quickly and create long-term value will focus on distribution over content creation,
building a meaningfully connected user base that actively contributes and adds to the community.
These platforms can differentiate from Web 2.0 counterparts by creating ecosystems that necessitate
complete immersion and presence, not just 360° video in a headset.
Photo/Video - 12/100Social - 14/100
Analysis of Top 100 Free iPhone Apps* CONSUMER ENTERTAINMENT LANDSCAPE: MOBILE
*March 2016 data
14 have significant Social and Video overlap (6 of which owned by Facebook)
Music - 14/100 Games - 39/100
• Includes apps run by 4 cos with multi-billion dollar valuations
• 4 of Top 5 in App Store• Netflix and Hulu only apps not reliant
on user-generated content (UGC)
• Nearly 5-yr domination by Pandora, Spotify, and SoundCloud
(Apple Music as well. but not in App Store)
• For obvious reasons, not a target for VR
• Industry leaders: Zynga, Gameloft, Rovio, EA, King, Supercell
• Frequent and extreme fluctuations in mobile game downloads
• Only 4 w/ primary focus on video consumption
Video and social apps have tremendous staying power and account for approx. 30% of time spent on smartphones.
Content Creation Tools
Content Creators
Video Distribution/Social Platforms
End-user Hardware
CAMERAS
VIDEO STITCHING
ANIMATIONSOFTWARE OUTPUTGAME STUDIOS
ANIMATION & FILM STUDIOS
VR VIDEO & SOCIAL VALUE CHAIN
• Requires rapid iteration, advanced supply chain, and heavy pricing competition.• Headsets dominated by major industry players.• Wearable inputs threatened by motion capture sensors (Leap Motion, HTC Vive “room scale,” Intel RealSense, Nimble VR)
INPUT
• Social platforms mostly device-agnostic• Several video platforms creating their own content (i.e. Vrse, Jaunt)• Oculus Video and Samsung Milk VR come preloaded on headsets
• Thus far limited motion-capture tech being incorporated in game experiences •3 most watched videos in Samsung Milk VR app for 2015: The Martian VR Experience, The Dive (sharks), Mtn. Dew VR (snowboarding)
• VR SDKs available through Oculus, Google Cardboard, Sixense and others• Cameras priced competitively with ranges $400 to $60K
SOCIAL
VIDEO
Social
• Historical track record shows aggregation, promotion, and delivery of media properties consistently more profitable than content creation (Columbia Business School: Knee, Greenwald, Seave)
• Competitive advantage of increased scale through network effects• Benefit of device-agnostic approach versus device-specific platforms created by hardware providers
(i.e. Oculus Social, Oculus Video, Samsung's Milk VR)
Distribution platforms have an opportunity to scale more quickly than any category and be the most defensible companies in the industry over the long-term.
Content Creation Tools
Content Creators
Video Distribution/Social Platforms
End-user Hardware
SOCIAL
VIDEO
VR VIDEO & SOCIAL VALUE CHAIN
Social
The companies that will scale quickly and create long-term value will focus on distribution over content creation,
building a meaningfully connected user base that actively contributes and adds to the community.
These platforms can differentiate from Web 2.0 counterparts by creating ecosystems that necessitate
complete immersion and presence, not just 360° video in a headset.
THE “ANONYMOUS” APP BOOM & FIZZLE
“Growth Score” in charts is an algorithm determined by Mattermark, accounting for a company’s website visitors, mobile downloads, social media metrics, employees, and publicly announced funding, along with how these numbers are changing over time.
YIKYAK
SECRETWHISPER• In Mar. 2016 down to under 3K iPhone downloads per
week after peak of 82K in Aug. 2014
• Fell from #2 social app in Sep. 2014 to #87 by Jan. 2016• $73.5M raised, investors include Shasta & Azure
Users want to embrace their real identities. With the r ise of ephemeral apps, the overwhelming market leader, Snapchat, has users with real identities while anonymous counterparts have suffered. Facebook similarly differentiated from MySpace and others with real names rather than pseudonyms.
• Campus-focused app has been center of national conversation on bullying
• $61M raised, investors include Shasta, Sequoia, Thrive • $35M raised, investors include GV & Index Ventures
• Shut down Apr. 2015 and returned remaining capital to investors
– Palmer Luckey, Oculus VR Co-Founder
“Virtual reality will make it a lot harderto be a total dick to somebody.”
• VR is the perfect medium for metaverses — digital spaces that replicate, and in some cases surpass, the physical world.
• Early studies have shown that interaction in virtual reality increases empathy and willingness to help others.
• VR may surpass video’s ability to emote nonverbal communication.
Virtual reality creates real presence and identity, the opposite value proposition of anonymous networks.
VRCHAT Raised seed round Feb. 2016
Open source, device-agnostic metaverses are growing.ALTSPACE VR $15.7M in financing
• Multiple motion-capture input options• Can share 2D web content (spreadsheets,
movies, cat videos) within virtual spaces
A live improv show in Altspace.
HIGH FIDELITY $17.5M in financing
• Co-founded by Phillip Rosdale (Second Life)• 50+ domains, including re-creations of real-life cities
The companies that will scale quickly and create long-term value will focus on distribution over content creation,
building a meaningfully connected user base that actively contributes and adds to the community.
These platforms can differentiate from Web 2.0 counterparts by creating ecosystems that necessitate
complete immersion and presence, not just 360° video in a headset.
Creating high quality user-generated virtual reality content is becoming more efficient and less expensive.
Entry-point cameras available for as low as $400.
VR/360 video stitching and rendering software widely available, led by Kolor
(acquired by GoPro in Apr. 2015)
User-contributed VR video platforms:
$1.8M seed round raised Mar. 2015 Pre-seed raised Dec. 2015
Video platforms with professional contentwill only survive with big partnerships
— Fox Sports, NASCAR, NBA
— Disney/ABC, MLB, NHL
With rise of UGC for VR, video and social platforms that are confined to premium content will be at a substantial disadvantage in scaling.
The companies that will scale quickly and create long-term value will focus on distribution over content creation,
building a meaningfully connected user base that actively contributes and adds to the community.
These platforms can differentiate from Web 2.0 counterparts by creating ecosystems that necessitate
complete immersion and presence, not just 360° video in a headset.
Incorporating motion-capture and haptic technology is crucial to the value proposition of VR.
Fove headset with eye-tracking technology
HTC Vive user & “room scale” sensors creating ability to walk
around virtual world. Leap Motion sensor to detect and reflect hand movement into VR.
Transforms videos into 3D holograms that users can interact with and walk around.
Virtual hands responding from Intel RealSense sensor. Similar concept, NimbleVR,
acquired by Oculus Dec. 2014.
Distribution platforms that implement these technologies and deliver true presence will give consumers a reason to forgo Web 2.0 alternatives.
Startup Stage UGC? Social? Notes
Metta VR Pre-seedExclusively focused on user content;
Pre-launch active filmmaker engagement
Vrideo Seed Main focus on user-generated content
LiveLike SeedSports viewing with social component;
No league partnerships announced
Vrse SeedPlatform & production house;
Created original content for NYT, NBC, Vice
Littlstar SeedMix of user & pro content;
API to build video into other apps
8i Series A Turns video into full-volume 360 holograms
NextVR Series A Sports platform partnered with PGA, NFL, NBA
Wevr Series CUser-generated video and animated content;
Only available on HTC Vive
Jaunt Series CFull stack: VR camera, software, production
company, & viewing platform
Video VR Platforms
Platforms focusing on user content must engage with amateur filmmakers to help navigate the complexities of shooting video in VR. The next step: provide fully
immersive experiences using light-field and motion-capture technology.
Native/Web 2.0 apps: Oculus Video, Samsung Milk VR, YouTube, Netflix
Startup StageOpen
source?Full immersion
potential?Notes
vTime (Starship)
UnknownOnly available for Samsung Gear VR &
Google Cardboard
Beloola Seed Intuitive builder tool for non-developers
JanusVR Seed Active Reddit and Slack communities
VRChat Seed Has been live pre-VR for nearly 2 years
AltspaceVR Series AExcellent community management; Prioritizing motion-capture inputs
High Fidelity Series BDeveloped marketplace with user-created
items; High quality design
Social platforms are a natural fit for VR. Startups should actively manage their early users, create marketplaces, and prove they can attract mass audiences.
Native: Oculus Social
Social VR Platforms“VR is going to be the most social platform.” -Mark Zuckerberg
LOOKING AHEAD• The presence of active market leaders. Leading tech companies are more prepared than traditional media companies were for the rise of the Internet.
• Will Oculus, Google/YouTube, Samsung, and others crush any competition?• Active acquisition market?
• When will adoption curve set in? Platforms that succeed will require patience, timing, and luck.
• The power of network effects. At what size will network effects set in? What benchmarks are required for later stage investments?
• The impact of augmented reality. Will release of Microsoft Hololens and Magic Leap come at the expense of virtual reality? Or will entertainment apps always have a niche audience in VR?
