A closer look at the VR investment data
What I found surprised me…
So if you’ve been following news about VR, you’ve probably noticed that the industry is a hotbed for venture investment. In fact, I’ve seen some articles cite total investment in VR of around $4 billion since 2010.
Scrubbing the investment data
But $4 billion sounds like a lot, especially for such a nascent industry. So, being skeptical, I decided to analyze the data myself. I grabbed investment data from Pitchbook and the results surprised me. First off, I noticed that a large portion, more than half, was attributed to Facebook’s $2.3 billion acquisition of Oculus VR. The acquisition was huge but adding that into the investment data is (in my opinion) a bit misleading. Those acquisition dollars go to the investors, but not the company — so this doesn’t help to fund additional R&D, sales and marketing, or other company expenses.
The second thing I noticed was that another ~$1 billion of investment was related to augmented reality companies. For my purposes, I decided to remove this investment data so that I could get a clear picture of VR investment alone. So I scrubbed the data, removing any amounts related to acquisitions or augmented reality, and the results painted a very different picture. The scrubbed investment data continued to show high growth, as you would expect, but the level of investment was remarkably lower.
Time series of VR investment data
If you add up those numbers, you’ll get $932 million…that is less than $1 billion since 2012!!! So in truth, investment in VR has not been as robust as advertised.
On a more positive note, it’s also clear from the data that investment in VR has really picked up over the last two years. After accounting for just $116 million and $113 million in 2013 and 2014, respectively, investment in VR jumped year-over-year by 3x to $337 million in 2015. Through May of this year (when I pulled the data), another $149 million had been added, setting a clear path to achieving another strong year. In fact, if you add Unity’s $181 million Series C round that was reported just a couple of weeks ago, then 2016 has already generated $330 million of VC investment in VR, and there are still five months left in the year!
So in short, investment in VR is not as robust as the media has made it seem, but it definitely is stronger than it’s ever been and I continue to expect the industry’s growth to attract more and more VC dollars in the coming years.
Thanks for reading. More posts on VR to come. Please share or follow me for my next post.
Disclaimer: I am on the investment team at Marker VC. The views expressed here do not necessarily represent those of my employer.
