During our interview, our conversation took an unexpected turn into virtual reality. Here’s the “director’s cut” about VR and why we’re both hesitant to fully embrace it as “The Next Big Thing.”
In the fall of 2015, I lost my ‘VR card’ with an Oculus Rift.
It was an uncharacteristically warm afternoon during one of San Francisco’s Indian Summers, and I was visiting the offices of Rothenberg Ventures. The fund, known for investing in “frontier technology startups”, has a three-month accelerator program for VR and AR companies called River, and during a happy hour, software engineers gave demos of their work. For the first time, I tried a headset on and explored a virtual ring of fire, disoriented, not knowing where I was going or what I was doing.
You’ll always remember your first time with virtual reality. VR, in practice, has been around for almost 50 years, but it’s still in its very early stages, and I haven’t bought into the promise that it’s going to be The Next Big Thing by the close of 2016.
However, experts claim that widespread adoption is just on the horizon. Forecasts report that by 2020 VR will be a $14.6 billion dollar industry. And those are conservative numbers. If this new medium is fully embraced by the public that number could nearly 10x, reaching upwards of $126 billion.
From the hardware and software side, people are already buying their proverbial tickets to the virtual reality train. 200,000 developers have registered to build games for Oculus Rift. 3.6 million units of the Oculus Rift will be sold in 2016, worldwide, according to projections.
While there is palpable anticipation around virtual reality in Silicon Valley, it’s still unclear when this train is leaving the station and what will spark its adoption in the market. It turns out I’m not the only one who feels this way.
Hunter Walk, co-founder and seed stage investor of Homebrew, is still bearish on the imminent rise of virtual reality. After building paradigm-shifting technology platforms, his opinion on next-generation video games is one to consider seriously.
Hunter was a founding team member of Linden Lab, creator of the legendary Second Life where he gave the platform its namesake and helped launch the first version of the virtual world. Then, he went to YouTube where he helped 40x the platform from 2007 to 2011.
But what Hunter had to say about VC’s relationship with virtual reality (and its eventual adoption) surprised me. He wasn’t fully on board just yet.
“Virtual reality is one of those technologies where the statements you can make with great certainty depend dramatically upon the time scale you’re talking about,” Hunter said. “There’s a certain tourism to the way funds invest in VR.”
As a way to hedge their bets, some VCs are making smaller investments in companies with the name VR in the title, rather than basing their entire strategy in the category. Then there are the other funds and companies that are heavily investing in virtual reality as if it were their chance to colonize Mars.
“The nice thing about Homebrew being a sub-hundred million dollar fund is that we get judged by the deals we do, not the deals we don’t do,” Hunter told me. “I can find eight to 10 great investments a year without having to be in every sector that people believe in.”
“However, if I was a consumer tech investor, or one of the consumer guys at a billion dollar fund, and I decided to say, ‘Hey we’re sitting out this cycle of VR,’ and I was wrong, I’d be screwed, right? And in that case, I’d better hit three Snapchats.”
And as a venture capitalist (and as a company, like Facebook or Samsung), it pays to be the first to get on the train. However, for smaller early-stage companies, there’s always a risk that you’ll burn through runway before you can actually see market adoption and sell enough product.
When it comes to investing in virtual reality, timing is everything.
The success of virtual reality is going to be dependent on an unknown factor — what experience (gaming, health tech, or otherwise) will ultimately get the user to invest in buying the headset or see VR as a new hobby. Gaming helps with adoption, but Hunter believes education is staged to occupy the market, as well.
“I have a four-year-old. There is no doubt in my mind that at some point in her middle school or high school years, like grades sixth through 12th, she will be incorporating VR technology into some aspect of her learning,” he said. “It’ll be either in the classroom or outside the classroom, but could I tell you whether it’s five years or seven years from now? I have no idea.”
Whether in gaming or education or another field, early VR content developers should heed one of Hunter’s primary learnings from his time at Linden Lab: “Immersion doesn’t have to coincide with being photo-realistic.”
“I saw this in Second Life,” he continued. “The more you aspire to be photo-realistic, trying to create an environment that’s a perfect representation of the real world, the harder it is to accomplish, and the more you get trapped in sort of the uncanny valley.”
“I’m bullish on people and content designers who understand that immersion and virtual reality doesn’t need to be the holodeck. Virtual reality doesn’t need to look like real life.”
“Minecraft is a great example of what Second Life could have been, in some ways, if Second Life wasn’t so focused on having a physics engine, and a fluid simulation running the clouds,” he said.
As someone who’s carved out his career inside the guardrails of entertainment and technology — from NBC, to Mattel, to Second Life, to YouTube — investing or developing a VR platform would be a logical next step for Hunter Walk.
But his hesitancy isn’t about disinterest. It’s more about selecting the right time in the market.
“At Homebrew, we haven’t made any investments in VR for a reason,” Hunter explained. “We need to be early or contrarian and there’s not really a way right now as a smaller seed program to be early or contrarian.”
“For me, I’ll know it’s time to invest in VR when there are experiences that are not tethered to a computer and driven by an affordable headset and/or phone inserted into headset. These devices have to be not just immersive, but supplemental,” he continued. “The immersive stuff will be like gaming, which will drive a certain level of adoption. Then, with gaming’s adoption it’s going to kick start a very interesting part of the industry, like education.”
“So, if I had to make a bet, if the average person says ‘I think VR adoption is going to happen next year,’ I’d be like, ‘I bet it’s two or three years from now’,” he said.
Photos are from Knight Center for Journalism in the Americas, University of Texas at Austin and Maurizio Pesce and are made available under a Creative Commons Attribution 2.0 Generic license.