Zero Latency Raises $7 Million for Expansion of ‘Warehouse Scale’ VR Tech

Melbourne-based firm Zero Latency has raised $7 million in venture funding. The company specialises in out-of-home ‘warehouse scale’ local multiplayer VR experiences, and is beginning to open attractions around the world.

Consumer VR headsets are optimised for use in a small living space, and the vast majority of software is designed with these limitations in mind. But VR can benefit from much larger spaces, particularly when the experience involves multiple local participants and promotes energetic movement across a large space.

A natural fit for a larger space is a VR-enabled combat arena, much like a cutting-edge game of laser tag. Melbourne-based Zero Latency was one of the early enablers of ‘warehouse scale’ VR, utilising custom tracking systems for the headsets and gun accessory, combined with ‘backpack’ PCs to achieve a wireless solution that allows for large scale VR gameplay that goes beyond the sort of roomscale VR experiences available in the home.

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Originally known as the Inversion Project back in 2013, Zero Latency has developed rapidly, thanks to a $1m investment from Sydney-based Carthona Capital in 2014, along with crowdfunding to bolster the initial 2-player co-op ‘zombie shooter’ public events. It has been fully operational as a public attraction in Melbourne for over a year, and now offers three modes (zombie survival, puzzle solving, and space shooter) and supports up to six players. The technology was recently brought to Tokyo, Madrid and Orlando, and uses Alienware backpack PCs designed in collaboration with Zero Latency.

A fully-untethered, custom VR experience, played with friends within a large arena is undoubtedly the future of the laser-tag style attraction, as the possibilities of a virtual environment are limitless. Companies like Zero Latency are expected to grow, and according to The Australian, a further $7 million in venture funding was backed by Thorney Investment Group, Contango Asset Management and Regal Funds Management, with original investors Carthona contributing $2.7 million of the latest round.

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2016’s Record Breaking VR Venture Funding Has Been Driven by Mega Deals

After years of record-breaking venture funding in the virtual reality industry, we wondered if 2016 would continue on its torrid pace. The numbers are starting to roll in, as reported in the new Fall edition of the 2016 Virtual Reality Industry Report, researched and published by Greenlight Insights and Road to VR.

Mega deals in VR venture funding have been the story of 2016. A diverse set of companies made up the largest venture deals of the year. This year, MindMaze ($100M) and NextVR ($80M) have raised two of the largest single venture rounds we’ve ever seen. Moreover, the top ten deals make up a whopping $396M, with several massive rounds at the top end:

2016-large-investment-deals-1Excluded from the analysis of more than 150 venture deals in the 2016 Virtual Reality Industry Report are large deals in adjacent technology industries, such as Magic Leap’s $793.5M Series C (February 2016), which Greenlight Insights counts as an augmented reality deal, and Unity’s $181M Series C (July 2016), which is primarily a game engine. But even without counting these outliers, 2016 will end as a record-breaking year for VR investments.

“This year will shatter funding records. The number of deals and actual dollar value is up significantly year-over-year,” says Greenlight Insights’ Senior Vice President, Steve Marshall. “As for next year, we expect to see more breakout deals as the first wave of innovation matures.”

However, despite the vigorous funding environment throughout much of this year, Greenlight Insights still considers the virtual reality industry to be very much in its first wave of innovation, with much of the action still at the early stages and many potential success stories still waiting to be written.

The complete analysis of 2016’s VR venture funding, and everything else you need to know about VR this year, is available in the newly updated 92-page 2016 Virtual Reality Industry Report, which includes new market revenue and hardware shipment forecasts; for a limited time you can use the special code ROADTOVR to save $500.

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HTC Partners on $1.5 Billion VR Investment Fund with Shenzhen Municipal Government

HTC and the Shenzhen Municipal Government announced plans to set up a joint China VR Research Institute, creating a 10 billion RMB (~$1.45 billion USD) Shenzhen VR Investment Fund to accelerate the development of the VR industry in China.

China’s third largest city and one of the fastest growing in the world with a population of over 15 million, Shenzhen is considered to be the ‘Silicon Valley’ of Asia, manufacturing an estimated 90% of the world’s electronics. Like virtual reality, much of the successful growth and vast investment in this region can be attributed to the rise of the smartphone industry over the last 15 years. Home to Taiwanese manufacturing giant Foxconn’s biggest factory, the majority of the world’s smartphones are still produced here. HTC, another Taiwanese company specialising in consumer electronics, now at the forefront of VR development, naturally has strong links with Shenzhen. From June to October this year, the company assisted in creating a four-year “Action Plan for Promoting Technological Innovation and Industry Application in Shenzhen’s VR Industry”. This groundwork lead to the recent announcement, that HTC has signed a strategic partnership agreement with the Shenzhen Municipal Government.

image courtesy of Alvin Wang Graylin
HTC has been instrumental in spreading VR across China | Photo courtesy Alvin Wang Graylin

With an initial fund of 10 billion RMB (~$1.45 billion USD), the Shenzhen VR Investment Fund, established by the Shenzhen Venture Capital Fund and HTC will become what the organization’s claim is the world’s largest single VR-focused fund, aiming to attract relevant enterprises and investment from within China and beyond. The partnership agreement aims to promote VR development together with the Shenzhen VR Investment Fund through the formation of the China VR Research Institute. This level of investment anticipates major VR ecosystem development, with an all-encompassing reach, covering the healthcare, military, engineering, design, and manufacturing industries.

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Cher Wang, Chairwoman of HTC, said in the announcement “It is a great honor for us to enter into the Strategic Partnership Agreement with the Shenzhen Municipal Government. As a pioneer and market leader in the VR industry, HTC possesses groundbreaking innovative technology and expertise. We hope that we can take this opportunity to merge HTC’s advanced technologies and first-class, global talents together with Shenzhen’s local industry and academic institutes as organized and coordinated by the Shenzhen Municipal Government. Together, with this research institute’s multiple R&D centers and bolstered by the support of industry alliances and the investment fund, we will accelerate the development of the VR industry in Shenzhen and elevate the city’s R&D capabilities to an international level. We are dedicated to exploring the world of VR, and hope to usher in a new era together with Shenzhen.”

HTC has made major investments designed to promote VR development over the past year, with its Vive X Accelerator program announced in April and the introduction of the Virtual Reality Venture Capital Alliance, which now holds more than 14 billion USD in investable capital.

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Top Investors Discuss VR and AR Strategies and Opportunites at IMMERSE 2016

Business leaders gathered at this year’s Seattle based IMMERSE Summit (previously Sea VR) to explore how VR/ AR and Mixed Reality is transforming manufacturing, design, education, health and medicine and much more. Road to VR‘s Michael Glombicki caught up with two VR/AR investors to get their insight into the opportunities available in the immersive technology space and the strategies they’re employing to capitalise on them.

At this year’s IMMERSE Summit, Road to VR sat down with Matt McIlwain, managing director at Madrona Venture Group (investor in Envelop VR and Pixvana), and Patrick Eggen, managing director at Qualcomm Ventures (investor in Owlchemy Labs and Magic Leap), to discuss their investing strategies when it comes to virtual and augmented reality.

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Road to VR: Matt has mentioned before that it is very hard to pick winners when it comes to VR content. Qualcomm Ventures is an investor in Owlchemy Labs, which is a content creator, so, Patrick, can you talk about Qualcomm’s strategy regarding investing in VR content?

Patrick Eggen, Madrona Venture Group
Patrick Eggen, Madrona Venture Group

Patrick Eggen: We have this thesis that there is a content creation bottleneck in VR. There is very limited quality content out there. We are looking for early stage companies which have limited dependencies in the VR ecosystem. The beauty of a company like Owlchemy is that they are producing high quality VR content but there’s a broader play there. Longer term, there is a potential platform play where they make the picks and shovels for the broader VR ecosystem. Think of them today as being in content creation but ultimately opening up to enable other VR developers to seamlessly create VR content. First and foremost, I think that’s the challenge.

It’s the same with Pixvana, granted they are all video, but the sophistication of creating content on VR is very, very challenging. Look at a company like Matterport: Matterport is not a pure-play VR company. One of the use cases they have is seamlessly converting their 3D models into VR content. All of a sudden you have 300,000 homes which, in the future, will be VR models and arguably the largest VR library in the world. Think of us not as investing in pure-play content, but think of it as a near-term hedge strategy where there’s always a broader play.

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Matt McIlwain, Qualcomm Ventures
Matt McIlwain, Qualcomm Ventures

Matt McIlwain: I think that’s similar to our philosophy. Take a company like Pixvana, which we are investors in: it’s about real video and, beyond the point of capture, how do you stitch that video together? How do you process that video? How do you encode it so that it can be distributed to all different consumption devices? Well, they’re not a content company, but they might work closely with a couple of content creators to make some proof points and a demonstration of content that’s out and ready to be distributed broadly in the emerging VR world. I think that’s always been a balance between a company that wants to fundamentally have a broader technology platform but is trying to show existence proofs of what is possible now.

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I think companies here locally, like Pluto VR and Rec Room, that are trying to demonstrate shared presence are in a similar challenging time. You have to be able to show the actual application space. Rec Room’s got a great charades game and a really fun frisbee-golf game and my hunch is they have a broader platform play behind that, but they are using those applications to show what’s possible in terms of highly distributed shared presence.

Road to VR: Last year, this event was called SEA VR and it was focused mainly on virtual reality. With HoloLens and Magic Leap we’ve seen a broadening of the conference to include augmented reality as well. How do you see the comparison between the VR and AR opportunities for investment? Do you expect one to be bigger? Do you expect to see a convergence of the two?

Matt McIlwain: We think about a graph: there is VR and AR and then there’s tethered and mobile. Tethered and mobile will go across the time dimension and AR and VR will go across a sophistication dimension. Over time we think AR and VR converge into a world that the Microsoft folks call “mixed reality.” Over time, things will become increasingly untethered down to the point that they’re really kind of full 360 immersive experiences that I don’t need to have a separate computing device that I’m connected to through a wire. Is that a five-year journey? Is that an eight-year journey? Hard to tell specifically, but that’s the direction it’s going.

So, for me, there’s a set of technological things that feel further off in terms of what you might call “high-end AR” compared to what we are seeing in a “high-end VR” experience like an HTC Vive. I think Oculus is getting there, but I still think it’s behind, to be candid, even with the latest stuff that is coming out for Christmas. What Valve has with the Vive is the state of the art from a full, 360 immersive experience and I think that’s further along now. I think HoloLens has some interesting things that they’re putting out; we have a HoloLens in the office and we play with it in different use cases. Patrick knows more about Magic Leap so I’ll defer to him on that.

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Patrick Eggen: First and foremost, I concur. I think AR and VR are going to converge. In a simplistic way: VR takes you where you want to go and AR brings anything into your analog world and you can calibrate that dial. If you think of 100% of VR as completely immersive and digital and you dial back a bit you can see elements of both. I think the key is that they are all sort of distinct platforms today. Whether it’s mobile VR, or tethered VR, or VR with a console, or mixed reality, or AR, they’re all very distinct, so you currently have significant fragmentation.

We were early investors in the AR landscape. First, we invested in a company called Blippar about five years ago. Blippar was immediate go-to-market. They used the cameras on existing smartphones to amplify the analog world. They were working with 200 tier 1 brands and they were actually able to monetize. Three or four years before Magic Leap and this whole renaissance, AR was just a sea of dead companies. We were very adamant in investing in one company per sub-sector and we picked Blippar. Out of the gate they scaled to where it made AR mainstream. Basically, they made any object a media format. For four or five years we saw companies that had only one of the two aspects we were looking for: 1) technical acumen using computer vision and 2) marketing chops. Blippar was the one that had both of those attributes. Fast forward and you’ll see they ended up buying Layar.

It wasn’t until Magic Leap came along where we saw a new paradigm: a full-stack platform. I can’t really reveal anything about magic leap but it is fundamentally a new paradigm. If you look at what Rony [CEO of Magic Leap] said at the Fortune conference, he spoke about it as a full-stack compute platform. We think the AR/VR convergence will become the next platform beyond the smartphone and that’s where we’re investing.

In terms of AR, we’ve had a barbell strategy: Blippar was immediate go-to-market and Magic Leap is more of the moonshot going for a new compute experience and we are trying to search for a similar analog in the VR world.

Matt McIlwain: The other thing I’d say is that we’re already seeing, in VR, elements of the virtual reality environment being augmented by my physical world. For example, we’re investors in Envelop VR and they, ironically, help bring the things you did on the screen into VR. But then, when I’m in VR, a lot of people still like using their keyboard and their mouse, so through cameras, they can project your hands and your keyboard and mouse into your virtual reality environment. They’re augmenting your VR world with your physical world and so that is an example of the blending together of VR and AR.

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Road to VR: One of the things that is challenging from a media stand-point is covering China. Is that also true when it comes to investing?

Matt McIlwain: It’s not really our strategy because our strategy is to be early stage and mostly focused on companies based in the Pacific Northwest. We look around the world to see what the trends are and what’s real and what’s hype. That’s why having friends like Qualcomm Ventures is great for us because, through them, we can see some great things that we may not be seeing ourselves as easily. We do our own homework as well, but I really defer to Patrick and their team on what they’re seeing on the ground in China.

Patrick Eggen: You really need investment folks on the ground. It’s similar to the strategy that Madrona has in Seattle because they are the beacon for anything in the Pacific Northwest. Not only do they have dedicated investment partners here, but they have the very profound network of eyes and ears. Similar for my colleagues in China, it’s very competitive there and it’s important to have that access on the ground where you can get in early on these deals. I would say China is a hyper-competitive market. Valuations are not cheap. In fact, there could even be a premium there at times. China has really crossed this chasm from being a follower and copy-cat to truly innovating.

On the mobile VR side, we have a portfolio company called Ximmerse in China that a lot of people haven’t heard of. The big issue with mobile VR today is that it doesn’t have six degrees of freedom, so it’s very limited in positional tracking. With the right mobile VR input controllers, that resolves that gap and that’s what Ximmerse is doing. What we saw with Oculus at Connect is they sort of hinted at this holy grail prototype of untethered, optimized computer power, low latency, real time, 6 degree of freedom tracking.

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We see wonderful ecosystems like Seattle and LA where you could have break away companies. We’re not biased towards San Francisco and we’re one of the rare firms that invest in fly-over states. We are in seven different countries around the world and the talent here in Seattle that Madrona is investing in is very special. But, I think when you look at Asia, you see some amazing innovation from companies. This is not just a copycat sort of phenomenon. We have folks on the ground in Beijing in Shanghai to invest there. Given the somewhat tepid demand, from an investor’s standpoint, to invest in a series A or series B, we see a lot of companies from Asia, and particularly China, participating and that’s not dumb money. There’s actually understanding there.

Road to VR: Are there still hardware investment opportunities out there?

Matt McIlwain: I think the question there is if there are a lot of venture-backable opportunities versus bigger company opportunities. I think there’s only going to be a few Magic Leap-style bets out there. Ximmerse is an interesting example because they’re picking a broadly defined problem. What are the input devices that provide the ability to create without a big headset and PC sitting by me? They offer a possible solution from an input device perspective.

There’s probably some specific components within the hardware that I could imagine. For example, if there was a fabless chipset design that is going to go into a particular kind of device, I could see that as being an opportunity. But even still, I would bet on Qualcomm or somebody else more than I would bet on Joe with his startup team. If you talk to the folks at Microsoft, they’ll tell you they’ve been putting a lot of money into the hardware that powers HoloLens and I bet Magic Leap will say the same.

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Patrick Eggen: To Matt’s point, from a venture-backed lens, it’s challenging unless you calibrate your returns and are looking for a company to be bought. There will be a lot of these companies being very acquisitive by addressing product gaps. You may also see acqui-hires as we’re seeing in the AI space because I think a lot of this talent will be at a premium. But overall, I think early stage we’re investing more on the software side where there’s lower dependencies. Later stage or mid-stage, we’ll look if there’s a higher dependency like visual tracking or eye tracking or something really non-trivial that’s interesting to us but we will calibrate our expectations with respect to returns.

You have to remember that it’s still very early days. I hate to be jaded but the adoption is very limited today. We are in the midst of these platform wars. We don’t have enough content creation out there and it’s still a little unclear. We’re still treading very carefully. As we saw with the AR data points, it took a long time before we got through the woods to this renaissance. We are bullish mid to long-term but we are very cautious for the next 6 to 9 months. We have three investments in this area and we’re hoping to have more but we are very cautious in how we approach it as well.

Road to VR: Do you have a killer app that you are really looking out for?

Matt McIlwain: For me the, the most amazing experiences are the ones where I can be in a shared presence environment in VR or presumably AR. I’ve really only experienced these in a VR environment. That means that myself and somebody else are physically separated and are experiencing something together. Those same things could be as simple as you and I having a conversation in some shared space. It could be on the beach or it could just be in a room. But we could also work on a whiteboard together and when we’re done working on the whiteboard together, we have an electronic record because it was all done digitally.

I think this is a little bit futuristic, but we know they are working on it from the videos we’ve seen at Facebook’s F8 and Oculus Connect. Those are worth watching. In the F8 one, they took a selfie on the London Bridge and then posted it to the real world of Facebook versus the virtual world that they were playing in. That’s actually pretty close to what I want. We’ve seen those kind of experiences, in some cases further along, and I want to see those get commercialized. Those shared presence, rich, immersive experiences that are not just about you and I being in a room but the things that we can do.

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So why would you invest in something like that? I want to see that, but you could imagine there being somebody that says: “it’s great that Facebook does what it does, but how about all these other apps? What’s going to be the set of tools that are going to power that kind of shared presence experience?” I don’t think Facebook is going to open-source what they’re building. They’re trying to build a social network, so the strategic play there is somebody who’s going to license or sell that capability to all the other apps and all the other app builders that want to have the cool use-case and application that’s now a shared presence application instead of a single participant application.

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Patrick Eggen: I think that’s a really good, quintessential example and shows the power of Facebook. We looked at a company called AltspaceVR in San Francisco and their vision was that Matt and I could go into our own immerse environment, go on the whiteboard, and talk about deals. Then, we could go into the lounge and go watch the Sounders game in a way that amplifies the experience. It will take time and Facebook as the catalyst can just muscle and flex that much faster.

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VR Advertisement Platform Vertebrae Raises $10M Investment

Vertebrae, a virtual reality advertising platform that promises to bring ad supported monetization to VR publishers, today announced a $10 million series A fundraising.

Vertebrae’s platform, now out of stealth, is currently in private beta for use by content publishers such as entertainment studios, gaming companies, creative agencies, and brands that want to insert ads into their VR creations. The company didn’t specify who participated in the investment round.

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Vertebrae aims to deliver VR ads to both interactive rendered spaces and 360 video, including custom VR mini-games, branded image backgrounds, and content sponsorship.

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Vertebrae worked recently with Lionsgate to create a VR ad experience for the September 16th premier of the film Blair Witch (2016), according to Vertebrae the experience was designed to build intrigue and promote awareness that then drives people to theaters to watch the full-length film. The 90 second immersive ad was served as a pre-roll ad to the VR game Sisters, a VR horror title.

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HTC Invests $5 Million in VR Game Developer Steel Wool Studios

Steel Wool Studios has picked up a $5 million investment from HTC. The studio was formed in 2011 by Pixar and LucasArts alumni.

Steel Wool Studios, which today announced a $5 million Series A investment from HTC, was founded in 2011 and shifted their focus to VR in 2014, eventually launching Quar: Battle for Gate 18, a virtual reality RTS for the HTC Vive. Among the company’s future projects is Mars Odyssey, a “simulation” for the HTC Vive that’s set to launch on September 9th.

“The Steel Wool Studios team carries an impressive pedigree of creative talent that has already proven its ability to build cutting-edge content for the nascent VR category,” said HTC CEO Cher Wang. “Taking a look at Mars Odyssey and Steel Wool’s other projects under development, it’s immediately clear that this studio will drive VR adoption with great content that balances amazing visual fidelity with strong storytelling.”

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See Also: HTC-led Venture Capital Consortium Represents $10 Billion Earmarked for VR

In Mars Odyssey, players will head to Mars to repair some of the many robot emissaries that have been sent to the planet. The rovers will be in their actual location on the planet according to NASA data; players will learn more about the planet as they progress through the experience, the company says.

While HTC recently launched the HTC Vive X accelerator—a $100 million VR investment fund and accelerator program—it’s not clear whether or not the investment in Steel Wool Studios is being drawn from the same fund; the studio wasn’t listed among the first investments made by the accelerator. We’ve reached out to the company for clarification.

Steel Wool Studios says that beyond Quar and Mars Odyssey, they’ll soon be talking about upcoming projects which “span game, simulation, and narrative-based concepts.”

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