Last year was the worst games deals ice age in a decade, but the topline numbers in Digi-Capital’s Games Report for Q1 2016 make it look like there has been a thaw. However, the buoyant waters of the first quarter hide rocks beneath the surface, and games deal makers should look carefully before they dive back in.
Digi-Capital’s latest quarterly Augmented/Virtual Reality Report and Deals Database analyzed $1.7 billion of AR/VR VC investments in the 12 months to Q1 2016.
There is nearly as much confusion as there is excitement about Augmented and Virtual Reality. While VR could be big and AR could be bigger and take longer (VR $30B and AR $90B for combined $120B AR/VR revenue by 2020), there are more questions than answers out there. Business models are one of the big questions, and AR/VR hardware sales, eCommerce sales, adspend and mobile data/voice could drive over 80% of all AR/VR revenues. Things might look a little different to what you expect.
Augmented Reality and Virtual Reality investment reached $1.1 billion in the first 2 months of this year. This is the first time that AR/VR investment has topped a billion dollars in any year (let alone 2 months), and shows incredible growth compared to the $700 million invested during all of 2015. (See analysis of last year’s investment here)
Nearly $800 million came from the monster Magic Leap round, but another $300 million went into AR/VR solutions/services, VR hardware, advertising/marketing, distribution, video, peripherals, apps and games. Even without Magic Leap, investment is up 20% in Q1 2016 compared to the $250 million invested in Q4 2015. Plus there’s another 4 weeks left for investors to boost AR/VR this quarter.
Some of the other investments in 2016 so far include:
It’s hard to call the top of an investment market, but the massive numbers around mobile internet in 2015 have a tale to tell. 102 mobile internet unicorns became worth $1 trillion after adding $130 billion value in Q4 2015, but 4 mobile unicorns died (i.e. dropped below $1 billion). There was over $100 billion of mobile internet exits, as consolidation kicked into overdrive while IPOs cooled. $69 billion was invested into mobile internet last year, but investment dropped over 20% in Q4 2015 after 9 straight quarters of growth. Finally the mobile internet stock market of 92 companies across 16 sectors was flat for the year.
Every exit is an entry somewhere else