Author: Hazel Moore

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Hazel Moore: Top 5 British VR/AR Companies

The UK, historically strong in the gaming and creative industries, has a leading role to play in the VR landscape in Europe, and has the largest number of up and coming VR companies of any European country, as featured in the recently launched European VR Landscape (available on www.thevrfund.com) published by the VR Fund and LucidWeb.

Here is my take on 5 of the most interesting companies in the UK in VR/AR:

Improbable:

In 2015 Andreessen Horowitz, an A-lister in Silicon Valley venture capital terms, invested $20mn in a little known UK firm called Improbable, only the second deal the firm had ever done in the UK. Improbable was developed by two computer scientists from Cambridge University, and has developed SpatialOS, which is a platform for third parties to build massive virtual and simulated worlds. The alpha version of the platform was launched in late 2016, and we expect a beta version in 2017.

Improbable

Ultrahaptics:

Ultrahaptics is a Bristol based company that is making waves, literally. It uses ultrasound technology to project sensations through the air, enabling the user to “feel” virtual objects without needing to wear or touch anything. The company is a spin out from Bristol University, and raised £10mn from Woodfood funds in 2015. Applications include things like changing the in car infotainment system with just a press of a virtual button in the air.

Ultrahaptics

Touch Surgery:

Touch Surgery, backed by Balderton Capital, was founded by surgeons to help provide surgical training via powerful software applications. With more than 200 apps and more than one million users worldwide, it provides medical students with a cost effective and safe practice environment BEFORE they start practising on people and wielding a sharp knife. In 2017 at CES Touch Surgery announced that it has made this content available for augmented reality platforms such as Hololens and Daqri.

Touch Surgery

Blippar:

Blippar is certainly the most high profile of the UK’s VR/AR start-ups. In 2016 it raised $54mn, reportedly at a valuation of $1.5bn, taking the total raised to almost $100mn. Founder Ambarish Mitra is on a high, having won the EY UK Entrepreneur of the Year in 2016. Recent signs are less positive, with the company cutting staff as losses widen, but the roster of clients who advertise through the platform includes some stellar global names.

Blippar-Header

Curiscope:

Curiscope has raised just $120k through crowdfunding, yet its VR film Great White Shark on YouTube has racked up an astonishing 16mn views. It has also developed the Virtuali-Tee, a £24 t-shirt available from the company’s website (currently out of stock), which, in combination with a smartphone, allows you to see “through” the t-shirt and view the wearer’s guts, heart, lungs and kidneys in graphic pulsating 3D. Biology lessons will never be the same again! Founder Ed Barton was named one of Forbes’s 30 under 30 in Europe for 2017.

Curiscope

There are undoubtedly many more great VR/AR companies in the UK, and the outlook is bright. The UK is fertile ground for large corporates looking to acquire talent in the VR/AR space. Facebook has made a number of acquisitions of UK companies, including Surreal Vision and Two Big Ears, while Snapchat snapped up Seene/Obvious Engineering, and Two Trees Photonics was sold to Daqri. Success breeds success, and Facebook has been expanding its UK team with further investment. In addition the pipeline of future talent is being nurtured more formally through two new accelerator programmes which have been launched in recent weeks to work with AR and VR start-ups:

* In February 2017 the Digital Catapult, which is funded by Innovate UK, the UK’s innovation agency launched an accelerator programme called Augmentor for VR, AR and mixed reality start-ups in the UK, in partnership with Seedcamp (augmentor.co.uk). Successful companies will have access to an enviable list of mentors to provide advice and experience to help companies become successful.

* Meanwhile Barclays has teamed up with Creative England to create Barclays Eagle Flight Lab (https://labs.uk.barclays/flight), a 12 week accelerator programme in Brighton to work with start-ups in the creative industries, including VR and AR, which will run from March –May 2017.

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China: The Fastest Growing VR Market In The World

Investors ploughed more than $1.4bn into augmented reality (AR) / virtual reality (VR) start-ups in the eight months to the end of August 2016, according to CB Insights, almost double the entire amount invested in 2015. The firm projects that $2.2bn will be invested in this sector in 2016, which is more than in the whole of the four years between 2012-2015.

AR/VR is undoubtedly hot, and nowhere is it hotter than in China, which is arguably leading the world in terms of consumer adoption, particularly in VR. Canalys predicts global sales of 6.3mn VR headset units in 2016, of which 40% will be sold in China. Adoption in China is being driven not only by a burgeoning number of domestic companies developing low cost mobile VR headsets aimed at the mass market, but also through the rapid growth of kiosks and cafes in shopping malls and theme parks, which allow consumers to pay-per-use for VR experiences and entertainment.

VR in China

There is a tremendous amount of start-up activity in VR in China to fuel this demand. It is not only financial investors getting in on the action. HTC, based in Taiwan and developer of the popular Vive device, earlier this year announced Vive X, an accelerator focused on VR based in Beijing, Shanghai, Taipei and San Francisco, backed by a $100mn fund to invest in VR start-ups, which is one of the largest funds dedicated to VR. More recently in September Chinese internet behemoth Baidu launched a $200mn venture fund to invest in VR, amongst other things.

One of the key issues for the Chinese market in VR is that there is a lack of core technology. Much of the innovation in VR has come from the USA. Rather than compete in hardware, the big three Chinese internet companies, Alibaba, Tencent and Baidu, have focused their efforts on building a platform and content, in seeding the ecosystem and in developing applications. Examples include iCIQI, the largest online video platform in China owned by Baidu, which launched a VR platform in May to encourage VR content and production. In August e-commerce giant Alibaba launched a VR shopping experience to enable consumers to view products such as clothing and fashion accessories in more detail than is possible on a regular PC. Meanwhile Alibaba’s payment unit Ant Financial is working on developing a system that could let shoppers strolling through a VR mall and make purchases with a nod of the head rather than having to take the headset off and return to the physical world to pay.

However in order for VR to take off and become mass market, there needs to be substantial investment in compelling content, and here Tencent has taken a lead, investing alongside Hong Kong’s PCCW in film and TV studio STX Entertainment which is also backed by Hony Capital, a Chinese private equity fund. STX is making a significant play in VR content, and in September acquired US based VR content producer Surreal, which will become STX’s VR division.

While consumer entertainment is likely to continue to be the driving force for VR in the near term, other applications are also starting to gain significant traction in China. Local companies such as 51VR, which develops VR applications for third parties and has raised more than $30mn in funding, are seeing rapid uptake in areas like real estate, education, tourism and automotive. As VR moves into the mass market, we expect to see M&A in this sector broaden from the largely US-based hardware and device transactions into a broader range of content providers, application developers and entertainment companies, and this should bode well for M&A activity in China.