UPDATED 12:56 EDT / JANUARY 09 2018

EMERGING TECH

Report: AR and VR companies raised a record-breaking $3 billion in funding in 2017

Investment funding in virtual reality and augmented reality reached a record-breaking $3 billion during 2017, according to a report today from industry analyst Digi-Capital LLC.

Almost half of that funding, more than $1.5 billion, was brought in during the last quarter of the year. The total represents a 30 percent rise in investments over 2016, during which the industry raised $2.3 billion, which was also a record.

AR developer Magic Leap Inc. raised a fifth of the year’s total funding, with $502 million in a Series D funding. It also revealed its erstwhile mysterious product: a pair of AR goggles similar to the Microsoft Inc. HoloLens. Magic Leap has been a massive magnet for AR/VR funding, raising about $1.9 billion in venture capital since 2014.

One standout investment includes scalable immersive worlds technology developer Improbable Ltd., which raised $502 million. The company is the developer of virtual reality operation system SpatialOS that is designed to facilitate large-scale simulations in the cloud – a necessary first step for building virtual worlds.

“We believe that the next major phase in computing will be the emergence of large-scale virtual worlds which enrich human experience and change how we understand the real world,” Improbable Chief Executive Officer Herman Narula said in a statement. “At Improbable we have spent the last few years building the foundational infrastructure for this vision.”

Another big investment was Unity Technologies Inc. $400 million round in May. As a game graphics engine developer, Unity provides resources for developers and programmers to build user interfaces and video games across multiple platforms. Unity estimates that 90 percent of Samsung Gear games and 53 percent of Oculus Rift games at launch were made with the company’s software.

Image: Digi-Capital

Image: Digi-Capital

Mobile AR games leader Niantic Inc., maker of the phenomenally popular game Pokemon Go, raised $200 million, pushing the games category over a tenth of the total for the year. It’s believed that Niantic and Pokemon Go set the stage for a multitude of smaller mobile AR/VR developers, which raised 40 early-stage rounds in 2017.

With the success of Pokemon Go, Niantic also announced an upcoming AR game based on the Harry Potter universe from author J.K. Rowling slated to launch this year.

The Digi-Capital report also cited that a variety of other AR/VR investment categories raised single-digit percentage shares, including photo/video, navigation, peripherals, location-based, lifestyle, social and entertainment.

The report also suggests that the AR/VR market is still in its earliest stages. That assertion matches expectations in a 2017 report from Allied Business Intelligence Research Inc., which predicts that the VR market would reach $60 billion worldwide by 2021 after a slow start, saying AR/VR investments represent a marathon and not a sprint.

Image: Oculus VR

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