It’s cutting edge and it’s growing quickly. Here’s what you need to know about the Augmented and Virtual Reality industry.
12 things you should know about AR/VR
The Digital Catapult estimates that the AR/VR market in the UK will be worth £1.2 billion by 2020. Experts in the industry say it has the potential to spawn a multi billion-dollar industry, and be as game changing as the advent of the PC. Here are 12 key things you should know about the sector.
- Globally the industry is expanding at a rapid rate, with 300% investment growth from 2015 to 2016 identified in the Realities Centre immersive sector investments trends analysis. GrowthEnabler’s 2016 Market Pulse report predicts the revenue for AR/VR technologies will continue to grow by over 100% annually for the next four to five years.
- In the UK, companies like Blippar, Improbable and nDreams are the big players and attracting notable funding, with Blippar’s £71.5 million investment making it one of the UK’s best funded start-ups last year.
- But outside the attention-grabbing deals, private and venture capital investment in this sector is ‘extremely patchy’ says Shaun Beaney, manager of the Corporate Finance Faculty at ICAEW. That’s the bad news. The good news is that it’s starting to heat up.
- The sector in the UK is young and still very fragmented. Dave Haynes, investment director at Seedcamp, an early-stage micro seed investment fund and mentoring programme, says there is a need for an angel network or syndicate in this space that understands the AR/VR market.
- With a small investment pool, companies need to think strategically and look at the industries that will be disrupted by AR/VR products in development. Affected sectors may be keen to invest to be part of the change. Fiona Kilkelly, head of creative industries and Immerse UK lead at the Knowledge Transfer Network, points to the competitions run by Innovate UK and KTN to drive innovation. She advises speaking to the team at KTN to find out how to make the most of the opportunities, which may come from within businesses or from research councils.
- The industry is London-centric. In a recent survey carried out by PricewaterhouseCoopers, London was the number one location for AR/VR companies, with 168 small or medium sized businesses located in the capital. Joint second on the list were Bristol and Manchester, with 15 companies each.
- Finance is not the only route to success for fledging AR/VR companies. Other opportunities to develop early business ideas, such as mentoring schemes, skills workshops and shared workspaces to pool ideas and resources can be key enablers of future success.
- Investor education is important. ‘There is a perception that the industry is hot’, says Aftab Malhotra, GrowthEnabler co-founder. “But many investors don’t really understand what the industry is or what it can do. There is a need to show venture capitalists what is happening in this market and to help them understand the potential, which will encourage investment.”
- The right mindset is fundamental to succeed. Dave Haynes from Seedcamp gives an example. “Nine months ago, I was talking to somebody in the UK about his VR project. He had already raised some money, but was working full-time, and could only develop his idea outside his day job. Around the same time, I came into contact with somebody in the US who had a similar idea, though not as well developed. He threw himself into the project and two months later, he had landed a $2.5 million investment.”
- Companies don’t have to move to the US to attract funding. There is a desire among AR/VR start-ups to go there, explains Jeremy Dalton, AR/VR lead at PwC, because of a perceived lack of funding for the sector in the UK. But the UK has a valuable eco-system that is not available in the US, particularly around cross-sector collaboration and R&D opportunities. ImmerseUK exists to facilitate the exchange of ideas across all industries disrupted by AR/VR.
- There are benefits to playing in a smaller space. While there is undoubtedly a bigger capital market in the US, nascency can have its own advantages, says Aftab Malhotra. In a smaller space, you have the potential to shine, to set yourself apart and stand out.
- There are several funders investing in this sector right now. The list includes Mercia Technologies (investors in nDreams), Seedcamp (TheWaveVR and Splash), Woodford Investment Management (Ultrahaptics), Hargreave Hale (Zappar), and Lansdowne Partners (Blippar).