Digi-Capital’s new Augmented/Virtual Reality Report 2016 and AR/VR deals database captured $686 million of investments in augmented and virtual reality in 2015. There have now been 6 straight quarters of AR/VR investment growth, with a quarter of a billion dollars invested in Q4 2015 alone at nearly 6x the rate of mid-2014. The 2015 numbers are even more impressive considering that Magic Leap’s monster round from 2014 and even larger reported (but as yet unconfirmed by the company) round from late 2015 are not included.
The cash has been flowing into sectors where investors see both short and long term opportunities, including AR/VR video, games, solutions/services and both AR and VR head mounted displays. Lower investment last year in AR/VR advertising/marketing, consumer apps, tech and other sectors was a function of the early stage of the market, but investors are becoming well informed about their potential. Expect to see a broader range of investments in 2016.
As you sow, so shall you reap
There is always a time lag for early stage investments to pay back, typically with years of investment followed by years of exits and consolidation. So it isn’t surprising that the $311 million of AR/VR M&A exits were half the level of early stage investments in 2015. What is surprising is that AR/VR investments between 2011 and 2015 have returned 128% of all the money invested already (although a huge chunk of that was Facebook/Oculus). We’re seeing a high level of deal flow in the market, so there could be some chunky acquisitions this year as major players try to leapfrog the competition (if the macro-environment doesn’t get in the way).
The tipping point?
This year could be the tipping point for AR/VR investment moving from a few intrepid investors to the broader VC and corporate investor community. The next platform shift to AR/VR looks like it could drive growth to $120 billion by 2020, and there hasn’t been a better time for entrepreneurs in the space with something special to offer. Whether you like your reality virtual, augmented or mixed, things just got real, real fast.
You can read more about who invested what and where in Digi-Capital’s new Augmented/Virtual Reality Report 2016, which now bundles the full 2011 to 2015 investment/M&A database for free with report purchases.