Magic Leap raises another $800mil

(Image courtesy Magic Leap.)

(Image courtesy Magic Leap.)

Florida-based virtual reality company Magic Leap has just raised another $800 million, the largest “C” investment round in Internet history, bringing its total valuation to $4.5 billion.

This is not the same company as Leap Motion, which tracks hand gestures, and does have products already on the market.

On Inworld Review this past Sunday, Mal Burns and I discussed the issue of product vs. platform, and the perils of investing in a single-product company.

For an illustration of the difference, consider old-fashioned flip phones and today’s smartphones.

When your old flip phone became obsolete, or you accidentally broke it, or you just got tired of it, you would go buy a new one — and you could pick from phones from any manufacturer. If your previous phone was a Motorola, there was nothing keeping you from buying a Nokia, or vice-versa.

By comparison, Apple and Google make smartphone platforms. When you buy an iPhone, or an Android phone, you become part of that particular ecosystem. You start accumulating apps and accessories that only work with that platform. Switching from an iPhone to an Android phone or the other way around is difficult since you lose all your apps and have to buy all new chargers, and migrating your other content is a huge pain. However, upgrading from one iPhone to the next model is easy, as is switching from one brand of Android phone to another.

If a company makes products, then growth is likely to be steady and linear. Every new product is a new battle for market share.

If a company makes a successful platform, however, then growth can be exponential.

Given the choice between making an early investment in a company with a cool product or a company with a cool platform, go for the platform every time because there’s so much more growth potential.

Is Magic Leap a product or a platform?

Based on what we’ve heard so far, Magic Leap is a mixed reality headset that’s a cross between Google Glass and Microsoft’s Hololens and that shoots light beams into your eyes.

That sounds like a product, and a particularly weird, niche product.

Do we really want to be running around our office shooting robots that are invisible to everyone else? Okay, maybe. Or it’s just me. But that’s not worth $4.5 billion.

(Image courtesy Magic Leap.)

(Image courtesy Magic Leap.)

CEO Rony Abovitz just released a blog post — his first in about a year — in which he says that it’s not just a product.

“Here at Magic Leap we are gearing up for our First,” he wrote. “Let’s not call it a product, although it is a product on many levels; but on some levels it needs to be more.”

That kind of makes it sound like a product, to me.

“We are setting up supply chain operations, manufacturing,” he continued.

That makes it sound like even more of a product.

“Engineers move about our spaces with a sense of urgency,” he wrote. “Intense debates about every form of science and art you can imagine float about. Plans have been made. Program and production managers track progress. Coders are coding. Operational and financial systems are being upgraded so that we can scale and deliver at the required volumes.”

(Image courtesy Magic Leap.)

(Image courtesy Magic Leap.)

That all sounds like a product.

But then he also says something else: “We are creating the future computing platform for everyone, one of context, presence, intelligence, and experience.”

He doesn’t go into any more detail about that. Instead he talks about joy and art and magic and other marketing buzz-speak that manufacturers like to associate with their physical products.

Given how many headsets are on the market today, it’s hard to believe that a single-product company — where the product hasn’t even been publicly demonstrated yet — can be worth $4.5 billion.

It makes more sense if they’re setting themselves up as a platform.

Today, I count five major virtual reality platforms — Google Cardboard, Oculus-Facebook-Samsung, Sony, HTC-Valve-Steam, and OSVR. Each has one or more headsets and accessories, software developers, and a distribution channel through which customers can get the software.

None have, as of yet, a usable operating system.

(Image courtesy Magic Leap.)

(Image courtesy Magic Leap.)

I expect Apple to come up with one, and then for everyone else to steal it.

Eventually, we’ll have a couple of major players in the general purpose virtual reality space, a couple of major players in the proprietary gaming space, and maybe a new startup that comes out of nowhere and suddenly dominates the market.

Could Magic Leap be that hitherto-unknown startup?

It could be, if it beats Apple to creating an operating system for virtual reality.

And if it is able to assemble an ecosystem of software and game developers and other content creators.

That second part is a long shot, given how far behind Magic Leap is. Google has just announced that there are more than 1,000 Cardboard-compatible apps in the Google Play store, and more than 5 million compatible headsets have been sold. And Oculus has the lead when it comes to game developers.

But the operating system race is currently wide open. The question is, can a startup come up with a brand new, groundbreaking hardware platform and a brand new, never-before-seen operating system, and also build an ecosystem from scratch? All the same time?

Personally, I’m waiting to see what Apple is working on before I place any big bets.

 

 

maria@hypergridbusiness.com'

Maria Korolov

Maria Korolov is editor and publisher of Hypergrid Business. She has been a journalist for more than twenty years and has worked for the Chicago Tribune, Reuters, and Computerworld and has reported from over a dozen countries, including Russia and China.

  • theguy126

    The “product” isn’t just an augmented reality tool for gaming, and it’d be highly myopic and ignorant to consider that as the primary use case. Rather, it has the potentially to completely eliminate the need for a lot of gadgets in our current lives, including screens, phones, tablets. If the interface is usable enough, you can do work or check your email anywhere without having to take out your phone. And you can visualize anything in 2D or 3D instantly.

    Imagine you are shopping with your spouse and now you have to meet with them to check out. In today’s world, we awkwardly take out our phone from our pocket, launch a messenger app, click on the spouse’s name, type “where are you”, hit send, and await a response which could take minutes. Do you even realize how ridiculous and primitive that is? Imagine instead you can just see them on an HUD screen, with an arrow indicating if they are “off-screen” and a diamond indicating that they are 231 meters away in this direction when they are in your field of view, like in Deus Ex Human Revolution.

    Imagine you are shopping for a bunch of beers. “Which one should I pick?” In today’s world, we awkwardly take out our phones and ONE BY ONE search a brand name and its rating to see if it’s critically acclaimed. Do you not realize how terrible this is? Imagine instead that you can just see the rating floating above each beer brand in real life and in real time.

    Efficiency of daily life and work, not stupid zombie games, is the promise of Augmented Reality. If Magic Leap truly delivers, it will make the world more efficient ten-fold, never mind the entertainment use cases.

    • Right — but that’s EVERYONE’s end goal. Certainly for Google Glass, and many of the mobile-based headsets allow for the use of the front-facing camera for potential future augmented reality applications.

      My point is that it’s not enough to have the one device. You need an entire ecosystem of apps, content, and so forth. Google is currently way ahead on this front, as is Oculus with the Samsung Gear VR partnership. The Oculus Rift, as a tethered device, probably isn’t a good fit for your grocery shopping application — who wants to lug around a $1,000 desktop when they go to a store?

      Meanwhile, the apps you mentioned — seeing where your spouse is, seeing the beer ratings — that is all possible now with just the smartphone screen. In fact, some of these apps are already available. Google Maps shows you where you are and where you should be going, Waze tells you about traffic conditions. There’s a Google translate app that lets you point your smartphone at street signs and they get automatically translated into your language.

      I personally would rather hold up a smartphone, launch an app, and point it at what I need to know than constantly wear a headset everywhere you go — but the form factor is likely to change and become less intrusive over time.

      And Apple is bound to come out with something soon, maybe an iWatch-style peripheral that is a pair of glasses, instead, that connects to the phone via high-speed Bluetooth.

      Both Google and Apple are rumored to be working on headsets, and they are both way, way ahead in terms of ecosystems, app delivery platforms, developer communities, brand name recognition, etc…

      Magic Leap is going to have to do something extra special to get beyond that. And Lightfield technology is not enough — that’s a feature, something you would invent then license to the Apples and Googles of the world.

      Like the foveated rendering of the Fove headset — it’s a cute feature, but without developers, apps, accessories and peripherals, they’re not really making a dent in this space.