The Business of VR – A guide for startups and investors
SeedingVR's Jason Ballor goes in to why you should invest in VR - and how crowdfunding can benefit projects.
Virtual Reality (VR) is a steadily growing market with a promising future in raising seed capital through equity crowdfunding. Jason Ballor, CEO of SeedingVR – the only equity crowdfunding platform specific to the VR industry – explores the current and future opportunities of VR for startups and investors.
The evolution of VR
Investors are always looking to put their money into the next big thing – a product, company or industry that is set to grow, or continue to bring strong returns. More often that not, investors are a step or two ahead of the majority of consumers, and make their fortunes through the early backing of once-futuristic concepts.
Recalling the dot com boom of the mid-nineties, VR is soaring – it could be as big as Netflix in the US by 2022, according to PwC’s annual report on global media and entertainment today.
Investors have realised that VR is not merely the next innovation in video games – a huge and continually growing market in itself – it’ll play a huge role in future of shopping, communication and business of all kinds.
As well as allowing gamers to explore virtual worlds like never before, letting agencies are using the medium to show properties to clients in a 360 degree immersive fashion. Meanwhile, brands are using it to sell products to consumers. Amazon has already launched a VR store, and futurists predict that the very future of shopping will be transformed by the medium.
So, in the coming years, people from all walks of life across the world will use VR to emulate a range of experiences never thought possible.
Among those to take the reigns of the VR movement include Google, Facebook, Microsoft, Sony, Apple, and many more of the world’s biggest companies. With the forecasted augmented (AR) and VR market size worldwide predicted to hit $209.2 Billion (USD) by 2022, it’s no surprise that investors are right behind them.
As the VR space is in its infancy, there are lower levels of competition, so those pioneering and investing in the tech now are likely to see huge returns in the future.
In fact, just four tech companies working with both AR and VR – Magic Leap, Improbable, Unity and Niantic – raised more than $3bn in venture funding in 2017.
So, where can startups look to in order to raise funds?
Funding options for VR startups
One of the traditional routes of funding for any ambitious project involves courting venture capitalists (VCs). Chances are that most VCs will be completely aware of the investment prospects of the VR space. However, it takes time to find and win over VCs, and they will want to see that your startup is showing signs of success. This can be difficult when you need funds to get your project off the ground in the first place, so it can be a chicken and egg scenario!
Another catch is that companies funded by VCs almost never get the money upfront. They first need to hit certain milestones, which often require funds to achieve.
Equity crowdfunding is a much more appropriate route for VR startups to gain some initial investment. Not only can startups expect to get all their funds upfront within a couple of days after their campaign closes, they’re also likely to pick up many future customers from the crowdfunding them. Equity crowdfunding is also a growing market.
In the next five years, the investment process is projected to grow by almost a third each year. According to the FinTech Report 2018 – Alternative Financing, equity crowdfunding is set to grow at an annual rate (CAGR) of around 32.5%.
I (unsurprisingly) predict that the marriage of equity crowdfunding and VR will be a harmonious one.
SeedingVR, while far from the biggest crowdfunding platform, is the only equity crowdfunding platform specific to the VR industry. It allows investors around the world to back VR projects by buying shares from as little as $100 on our US website, or £100 on our UK site.
Despite launching only a few months ago, we’ve already completed our first successful raise. Somnium Space – a continuous VR world that allows users to purchase plots of land and monetise them – raised 112% of their funding target.
We are also 1 of 44 companies with a Reg CF license in the US, which allows US startups to raise up to $1,070,000 per year.
Beyond capital alone, equity crowdfunding has additional benefits for startups.
Giving investors the opportunity to purchase shares in a young or growing company – particularly in an a space as promising as VR – brings experienced people into the fold.
As well as providing a cash injection, tech investors of this kind are therefore more likely to offer guidance, contacts and support of other kinds as your company blooms. Support of this kind is invaluable, and adds further strength to your company.
The future of VR growth
Despite the amazing levels of innovation already seen, VR is growing slowly and is still being pioneered. While there’s been an astounding amount of investment made to date, the majority of these investors are likely to be more patient-minded and forward-thinking.
For example, Mark Zuckerberg said that Facebook is “betting that Virtual Reality is going to be an important technology” and that while it will take some time to build, “now is the time to invest”.
“I honestly don’t know is how long it will take to build this ecosystem”, he told a German newspaper in 2016. “It could be 5 years, it could be 10 years, it could be 15 or 20. My guess is that it will be at least 10.
“It took 10 years to go from building the initial Smartphone to reaching the mass market.”
Investors have an absolute plethora of options when it comes to both VR startups and crowdfunding platforms. If you’re hoping to get your startup off the ground in time for the VR boom, make sure you do your research. This way, you’ll be able to win over tech investors – particularly those with an eye for VR – via equity crowdfunding in order to grow your business exponentially.
While fads come and go, I’m confident that VR will play a huge role in all of our futures. After all, I doubt that the world’s biggest companies have misjudged this phenomenon.