One of my earliest childhood memories was playing Battle City on the Nintendo NES with my family. Even with its 8-bit graphics, interactive media’s ability to transport you to a different world and bring people together was undeniable — I was hooked. That initial experience with gaming led to a lifelong interest in technology for me.
Fast-forward to today, powered by new platforms and freemium developments, the global gaming market is now $175B (20% YoY growth). Yet, the primary interaction method has remained pretty steady — a 2D display for output and touchscreen or joystick / mouse + keyboard for the input. There were some significant innovations along the way (dance pads, music instruments, balance board, 3D, etc.) that hinted towards to future. Still, in my opinion, none has gotten as close to fundamental change as VR.
Encouraging state of play
Immersive technology represents a generational leap in a new platform. This future interactivity has been much discussed and foretold about in academics, fiction, motion picture, etc. Its value so alluring that it has also led to real $ investments in the billions over the past decade.
Beyond the world’s fascination and my personal obsession with VR, I’m bullish as an investor for several reasons:
- Immersion and its potential for significantly better experience, engagement, and retention than existing modalities. Amazing things happen when one can be COMPLETELY PRESENT
- Growing consumer demand (from Gen-Z who are digital natives and looking for fresh experiences, to Boomers who could experience more through digital media at home) for newer and better experience through technology, magnified in a post-covid environment
- Emergence of Oculus Quest as a stable and predictable platform with regular upgrade cycles and backward compatibility, enabled by their integrated approach. Consumers and developers now have a platform they could have the confidence to invest in
- VR gaming is the first preferred destination, but it is about much more than gaming
- We are not alone. Multiple trillion- and billion-dollar companies are also working towards accelerating the future. More headsets (both low-cost and premium), more marketing, more utility, more building blocks
- Rapid value creation will come with new platform & consumer motivation shifts (we are witnessing quite a few now)
While we are clearly not there yet, and it will take longer still, we are traveling in the right direction. In four years, we came from needing $2,000+ worth of hardware to now being able to experience something quite delightful for only $299, with a much broader content base. Not mainstream yet, but headset adoption and VR software sales have now started to show some signs of life…
Massive promise, still in development
Everyone remembers their first magical moment with VR. Mine was when I got lost in a Lionsgate VR demo and almost dragged a gaming PC off its desk — it was something different and powerful. The hardware available is now is even better and closer to consumer-grade, and we are going to see more developers jump in and help us discover new use cases.
However, being in VR is still an active ordeal that a person has to prepare for, so it better be worth it. In addition, it has to deliver consistent and critical utility for someone to come back again.
Some of the current challenges I see in VR are:
- Physical discomfort and fatigue are still limiting factors for long engagements. (Accessories such as the Quest Elite Strap or replacement faceplates alleviates this a bit, but we need out-of-the-box comfort)
- (For untethered VR) Standby battery life needs to be drastically improved to facilitate more spontaneous usage
- No usable solution to stay connected with IRL. Being in VR is a full dedication to the experience, akin to putting your smartphone down for the entire duration. That can be scary for a lot of people. (FB integrating its services is one baby step in the right direction; and hopefully, with more privacy in mind)
- Virtually unlimited amount of content and applications across many platforms already available for the entertainment use-case
- Still a destination suitable mostly for at-home and constrained by time — this will not change until VR/AR becomes one seamless device. (Thought hard about not including this point as this post is about VR, but I think still worth mentioning)
Despite its limits, we are seeing people experiencing life-changing behavior shifts with VR. The numbers are small, but we are on track to claw out of the gaming audience.
Keys to the gates
I’m an enthusiast and will always appreciate new VR projects. But as an investor on the hunt for outsized outcomes, here are some things I look for in a new VR idea:
- Differentiation. Ability to deliver a unique magical experience to immersive technology — why VR, if mobile or PC/console is adequate, or even better?
- Short time to the magical experience. Immediate value and end-user benefit that hooks
- Repeatability. Beyond the initial novelty of a new experience, what is the underlying purpose and utility that causes the user to come back?
Gaming is the first application in consumer VR that is achieving some success. Still, by definition and the effort required, VR gaming is currently for a smaller set of hardcore users (who arguably could get a more reliable gaming fix on mobile or PC/console).
I am currently interested in non-gaming applications (wellness, fitness, social, education, etc.) that take full advantage of the immersive nature of VR, and have the potential to expand the audience beyond gaming. I believe this is ultimately also Facebook Reality Labs’ ambition — to achieve scale with as many users as possible. My obvious prediction here is that the untethered 6DOF VR headsets are the most appealing to consumers and will dominate consumer VR sales in the next couple of years. As VR gains more adoption amongst the public, non-gaming use cases will also become a preferred destination next to gaming.
Beyond the horizon
VR development is currently going through an exciting market discovery phase. There is the original ethos of enthusiast for the highest immersion and fidelity level; I put tethered devices in this camp (Valve Index, PSVR 2.0, Oculus Rift, etc.). On the other hand, the standalone form factor offers affordability and ease of use that will broaden the install base to a non-gaming mainstream. There is no right or wrong to either approach, I think we need both camps for VR to succeed.
New headsets with better specs and/or lower price points are on the horizon. In the coming years, immersive applications and install-base will continue to grow. VR and AR are two sides of the same coin, and I can’t wait for the day when we only need one device.
If you are working on something in interactive media, or want to chat more, shoot me a note! Emails and Twitter DMs (@sschou12) are open.