THE STATE OF AUGMENTED & VIRTUAL REALITY

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1 THE STATE OF AUGMENTED & VIRTUAL REALITY Analyzing AR/VR investment trends in the first half of 2016

2 WEBINAR RECORDING WILL BE DISTRIBUTED IMMEDIATELY AFTER The presentation will also be sent to you. Feel free to share with colleagues. The resolution of some slides may be suboptimal due to the webinar software. Those slides will look fine in the presentation that we send you

3 JOIN THE CONVERSATION ON TWITTER Share your favorite insights & data points on #arvr 3

4 The technology market intelligence platform. CB Insights software lets you predict, discuss, and communicate emerging technology trends using data in ways that are beyond human cognition. 4

5 A FEW OF OUR HAPPY CUSTOMERS The most publicly reference-able customers of anyone in the industry With CB Insights we can quickly and reliably aggregate data across the investing landscape, from sector trends to financing activity. The intuitive user interface and robust set of features have made it a go-to resource for our team, and the customer support is second to none... Kate Barrett Director, New Enterprise Associates See what other customers have to say at 5

6 ABOUT THE PRESENTER Nicholas Pappageorge Tech Industry Analyst, CB Insights Focuses on Internet of Things, AR/VR, Space, Drones, and Industrial IoT Published research and data analysis has been featured in Forbes, Fortune, Bloomberg, Wired, Quartz, Re/Code, and Business Insider, among other major media Previously held research role at 3D printing company MakerBot Industries Graduate of Hamilton College 6

7 IN THE NEXT MINUTES, WE LL COVER Private market activity in AR and VR What we know about Magic Leap Corporations competing in AR/VR Where startups see opportunity Enterprise and industrial use cases 7

9 STATE OF AR/VR: MACRO TRENDS IN THE GLOBAL LANDSCAPE 8

10 Since 2012, AR/VR companies raised: $3.3 BILLION across 375 DEALS 9

INVESTMENT INTO PRIVATE AR/VR COMPANIES SET FOR RECORD YEAR At the current run rate, both deals and dollars into AR/VR companies are set to reach record levels in 2016.

11 INVESTMENT INTO PRIVATE AR/VR COMPANIES SET FOR RECORD YEAR At the current run rate, both deals and dollars into AR/VR companies are set to reach record levels in Top Deals Since 2012 Magic Leap $794M // Series C Magic Leap $542 // Series B MindMaze $100M // Series A NextVR $80M // Series C Source: CB Insights. 10

12 Q2 16 SEES DEALS AND DOLLARS FALLING After a massive Magic Leap deal, Q2 16 hardly compared (even to quarters before the mega-round). Magic Leap $542M Series B Magic Leap $794M Series C Top Deals Q2 16 Meta $50M // Series B OTOY $37M // Series D The Virtual Reality Company $23M // Series C Lumus $15M // Series B Within $13M // Series A Source: CB Insights 11

13 AR/VR IS STILL DOMINATED BY EARLY STAGE DEALS Since 2012, early stage rounds (seed and Series A) have accounted for 69%-83% of deals to the space. Source: CB Insights 12

14 GEOGRAPHY: U.S. LEADS, CHINA AND UK TRAIL The United States saw the bulk of deals, followed by China and the UK. Canada and France saw 4% and 3% of deals, respectively. Source: CB Insights, percentages are rounded up. 13

16 MOST ACTIVE INVESTORS Interestingly, 4 of the top 8 AR/VR investors are corporate venture arms. Rothenberg Ventures tops lists, and also has a VR -specific accelerator. Presence Capital and GV tied for second most active. Source: CB Insights, ranked by number of unique companies invested. 14

17 INVESTOR ECOSYSTEM Accelerators Vertical specific VCs Generalist VCs Corporate VCs Note: select investors not ranked or exhaustive. 15

18 INVESTOR ECOSYSTEM CONTINUED Virtual Reality Venture Capital Alliance 38 investors, Headed by President of VR at Vive Source: VRVCA, TechCrunch 16

19 WHAT IS AR / VR (AS WE DEFINE IT?) Augmented reality (AR): A hybrid reality tech that combines the real world with a rendered one. Magic Leap s headset, still in development, is an example in the category. (Mixedreality, a merging of real and virtual worlds, is used somewhat interchangeably and bucketed here) Virtual reality (VR): a virtual world that is completely rendered. Examples here would include Jaunt, which enables cinematic VR. Both/Other: technologies that enable both AR and VR. An example is Eyefluence, which offers eye-tracking technology that can be applied to both virtual and augmented reality systems. 17

Over the next 10 years, the form factor's just going to keep on getting smaller and smaller, and eventually we're going to have what looks like normal-looking glasses that can do both virtual and

20 Over the next 10 years, the form factor's just going to keep on getting smaller and smaller, and eventually we're going to have what looks like normal-looking glasses that can do both virtual and augmented reality As a matter of fact, when we get to this world, a lot of things that we think about as physical objects today, like a TV for displaying an image, will actually just be $1 apps in an AR app store. Mark Zuckerberg CEO Facebook Source: The Verge Image Source: Facebook 18

21 AR VS. VR: DEALS FELL Q2 16 VR deals have been trailing downward in recent quarters. In Q2 16 there were 23, whereas before in Q4 15 VR deals hit a peak at 37. AR and Both/Other deals have remained relatively flat. Source: CB Insights 19

22 AR VS. VR: BOTH ON TRACK FOR DEAL GROWTH VR comprises the bulk of deals currently, though all types are slated for year-over-year growth in Source: CB Insights 20

23 ASIDE FROM Q1 16, MOST RECENT QUARTERS DOMINATED BY VR FUNDING Virtual reality startups saw more funding than AR startups in 4 of the past 6 quarters. The massive influx of investment Q1 1 6 can mostly be attributed to Magic Leap. Magic Leap $794M Series C Source: CB Insights 21

25 AR VS. VR: REMOVING FROM MAGIC LEAP YEARS, VR TAKES MOST Dollar-wise, AR is has taken an enormous share, nearly all of which went to Magic Leap. Magic Leap $542M Series B Magic Leap $794M Series C Source: CB Insights 22

26 WHAT DO WE KNOW ABOUT MAGIC LEAP? 23

27 WELL NOT A TON Source: CB Inisghts 24

28 THEY RE HIRING Source: CB Insights Help wanted: Principal Healthcare Systems Engineer 25

29 THEY HAVE A WIDE WEB OF INVESTORS, INCLUDING MANY IN MEDIA Business Social Graph Source: CB Insights Business Social Graph 26

30 USE CASE #1 Median early-stage fintech deals ere $4.6M in Q2 16, hitting a 5-quarter high and 53% increase over Q1 16. Source: CB Insights 27

32 USE CASE #1 Median early-stage fintech deals ere $4.6M in Q2 16, hitting a 5-quarter high and 53% increase over Q1 16. Source: CB Insights 28

GRAEME DEVINE, CHIEF CREATIVE OFFICER & VP OF GAMES, APPS, AND EXPERIENCES AT MAGIC LEAP [Devine] also describes successful products as things that pass the five mile rule: Things that you would go

33 GRAEME DEVINE, CHIEF CREATIVE OFFICER & VP OF GAMES, APPS, AND EXPERIENCES AT MAGIC LEAP [Devine] also describes successful products as things that pass the five mile rule: Things that you would go back for at home if you forgot them, but only realized five miles away. Smartphones he says, often pass this rule; Apple Watches do not. Magic Leap wants us to never feel like we should be separated from our augmented reality headsets. Source: CB Insights, Inverse 29

34 THE CORPORATES SMELL OPPORTUNITY 30

35 FACEBOOK-OCULUS KICKED OFF THE CONVERSATION Oculus - FB Acquisition March 2014 Source: CB Insights Trends 31

36 MEDIA CORPORATES JUMPED IN Source: CB Insights 32

37 M&A HAS SEEN AN UPTICK Source: CB Insights 33

39 PATENT SNAPPED UP BY PUBLIC AND PRIVATE COMPANIES Microsoft has filed the most AR/VR patents in the past 6 years, applying for a total of 611. But Magic Leap made big moves last year, filing 164 patents in just 2015 alone. Source: Envision IP 34

40 MAJOR COMPANIES MAKING HIGH-END HEADSETS SHIPPING HEADSETS ANNOUNCED PLANS WHO KNOWS? (BUT PROBABLY UP TO SOMETHING) 35

Facebook acquired Oculus for $2B After developer versions, Oculus began shipping the consumer-grade Oculus Rift in late March Partnered with Samsung for Gear VR, powered

41 Facebook acquired Oculus for $2B After developer versions, Oculus began shipping the consumer-grade Oculus Rift in late March Partnered with Samsung for Gear VR, powered by Samsung Galaxy smartphones as display Overall vision could be to create a metaverse (virtual world) Source: The Economist, Digital Trends, Vanity #arvr

TECH NO LONGER HOLDS A MONOPOLY ON SELF-DRIVING DEVELOPMENT Other high-end headset available today (along with Rift) Headset employs laser sensors to traverse 15' x 15' space (a much larger area than

42 TECH NO LONGER HOLDS A MONOPOLY ON SELF-DRIVING DEVELOPMENT Other high-end headset available today (along with Rift) Headset employs laser sensors to traverse 15' x 15' space (a much larger area than others), giving a more room-scale sort of gameplay Strategic partnership with gaming house Valve may give it edge in content and hardware development (Valve also developing its own hardware) Recent survey found developers prefer working on the Vive platform, beating out Oculus Source: ExtremeTech, TechRadar, Wall Street Journal Source: CB Insights #arvr 37

Hololens headset became available to developers (for $3000) in March, consumer release TBD Targets enterprise applications, has commercial partnership with Volvo (seeing applications in product

43 Hololens headset became available to developers (for $3000) in March, consumer release TBD Targets enterprise applications, has commercial partnership with Volvo (seeing applications in product development and for selling cars) Partnered with Autodesk for facilitating industrial design Partnered with Intel on Project Alloy, Intel s mixed-reality headset Source: UploadVR, Wall Street Journal, IB #arvr

44 CEO Tim Cook: "AR can be really great. We have been and continue to invest a lot in this. We are high on AR for the long run, we think there's great things for customers and a great commercial opportunity. So we're investing. Acquisitions suggest mobile-focused AR: bought facial recognition company Faceshift and smartphone AR company Metaio, and Flyby Media, which provided the imagerecognition in Google's tablet-based mixedreality initiative Project Tango Apple is also said to be prototyping VR headsets Recently hired a leading VR researcher. Sources: Apple Insider, UploadVR, Wall Street Journal, Financial #arvr

Releasing PlayStation VR, high-end gaming headset that will compete with likes of Vive and Rift Lower price-point ($399 atop $299 PS4 console) Huge gaming

45 Releasing PlayStation VR, high-end gaming headset that will compete with likes of Vive and Rift Lower price-point ($399 atop $299 PS4 console) Huge gaming footprint, the best selling major video game console (40M PS4s sold) Beefing up specs on PlayStation 4 Source: The Verge, Wall Street Journal, #arvr

Recently unveiled Project Alloy, untethered VR headset with built-in gesture control for merged reality experience Does not require high-end gaming PC Partnered with Microsoft for Windows Holographic

46 Recently unveiled Project Alloy, untethered VR headset with built-in gesture control for merged reality experience Does not require high-end gaming PC Partnered with Microsoft for Windows Holographic OS and Project Alloy s hardware Intel is open-sourcing its Alloy hardware so that anyone can combine the Project Alloy hardware with Windows Holographic platform. Image Source: The Verge Acquired Movidius (9/6/2016), a computer vision company with many AR applications Source: Wall Street Journal, VentureBeat, #arvr

47 MAJOR TECH COMPANIES IN MOBILE AR/VR RELEASED ANNOUNCED PLANS WHO KNOWS? (BUT PROBABLY UP TO SOMETHING) 42

Pioneering Google Glass project was ultimately unloved by consumers Moved into low-end mobile VR with Cardboard Auto Reported in May that 5M Cardboards were in hands of consumers (distributed widely

49 Pioneering Google Glass project was ultimately unloved by consumers Moved into low-end mobile VR with Cardboard Auto Reported in May that 5M Cardboards were in hands of consumers (distributed widely via partnership with NY Times); Cardboard App has hit 50M downloads in Play store Soon announcing plans for mobile VR platform Daydream Investor in well-funded AR startup Magic Leap Source: Wall Street Journal, TechCrunch, Fortune, Wall Street Journal In addition to its low-end mobile VR initiative (and retooling Android OS to handle VR), Google is reportedly working on a standalone headset that would not require a tether to a PC or #arvr #autotech 43

Partnered with Oculus shortly after FB acquisition in deal that granted them early access to Oculus software platform Gave away Gear VR headsets with Galaxy preorders

50 Partnered with Oculus shortly after FB acquisition in deal that granted them early access to Oculus software platform Gave away Gear VR headsets with Galaxy preorders Poised to be among the most-owned mobile VR headsets. In May, reported more than 1M had used the Gear VR Source: UploadVR, Wall Street Journal, IB #arvr

51 THE STARTUP ECOSYSTEM 45

52 ONE VISION OF AR/VR INVESTMENT The majority of AR/VR s use case in 2025 may still be for gaming and entertainment, but enterprise use cases still could repr esent nearly half of the market. Source: Goldman Sachs 46

DEALS ALREADY LEAN TO BUILDING BLOCKS & INDUSTRIAL APPS CB Insights data breakdown on deals says 55% is already going to infrastructure tools (building blocks like dev tools, gaming

53 DEALS ALREADY LEAN TO BUILDING BLOCKS & INDUSTRIAL APPS CB Insights data breakdown on deals says 55% is already going to infrastructure tools (building blocks like dev tools, gaming engines, gesture & motion tracking) along with Commercial/Industrial use cases. Source: Mark Linao, Technicolor Ventures, includes all AR/VR deals through Feb

USE CASE #1 - GAMING Driving most of the category currently, gaming headsets are currently

The Vive and the Rift are mainly being adopted by gamers.

CCP Games Total raised: $50M Icleand-based VR gaming studio focused on massively multiplayer

54 USE CASE #1 - GAMING Driving most of the category currently, gaming headsets are currently hitting the mainstream with the fall release of PlayStationVR. The Vive and the Rift are mainly being adopted by gamers. Niantic Total raised: $25M Mobile AR games studio (most famous for Pokemon Go title). Survios Total raised: $4.25M VR-based gaming content maker and immersive hardware/software developer. CCP Games Total raised: $50M Icleand-based VR gaming studio focused on massively multiplayer games. Usens Total raised: $25.6M Mobile-based positional tracking for AR and VR gaming experiences. Resolution Games Total raised: $6M VR game studio. AltspaceVR Total raised: $15.5M Social-focused VR platform that enables gaming and communication between users. 48

8M Mobile AR-based enterprise platform for marketing and sales. InContext Solutions Total raised: $19.9M VR shopping and retail solutions for store simulations.

55 USE CASE #2 - RETAIL VR and AR technologies could transform retail from both the supplier and the consumer. Examples here could be visualizing fur niture in a home, or virtualizing walkthroughs of shopping floor plans. Augment Total raised: $1.8M Mobile AR-based enterprise platform for marketing and sales. InContext Solutions Total raised: $19.9M VR shopping and retail solutions for store simulations. VividWorks Total raised: $1.6M Mobile and tablet-based AR tool for designers and manufacturers to help customers visualize interiors. SpaceView Total raised: $19.9M Mobile AR sales enablement platform. Image Source: Barco 49

USE CASE #3 LIVE EVENTS Live event streaming enabled by VR will make for a more immersive watching experience. NextVR Total raised: $110.5M VR-based content capture and broadcast platform.

57 USE CASE #3 LIVE EVENTS Live event streaming enabled by VR will make for a more immersive watching experience. NextVR Total raised: $110.5M VR-based content capture and broadcast platform. Jaunt Total raised: $100.5M Content platform focused on cinematic VR experiences. Voke Total raised: $24.45M Live event VR platform. LiveLike Total raised: $5.1M VR platform for sports broadcasters. Image Source: NextVR 50

58 MOST WELL-FUNDED AR/VR STARTUPS Magic Leap tops the list by a longshot, but VR motion capture and content platforms are among the most well-funded. Company Disclosed Funding $1.4B Description Stealth AR headset maker $118.5M Swiss AR and VR motion capture developer $110.5 Live events experiences in VR $100.5 Cinematic VR content platform $99M Mobile AR visual search app Source: CB Insights 51

59 WHERE AR/VR GROWS WITHIN INDUSTRY AND ENTERPRISE 52

INDUSTRIAL USE CASE #1-3D DESIGN AR and VR will enable faster and more collaborative industrial design, and allow different departments and clients to visualize sketches.

60 INDUSTRIAL USE CASE #1-3D DESIGN AR and VR will enable faster and more collaborative industrial design, and allow different departments and clients to visualize sketches. Autodesk, which is gearing its design engine for AR/VR capabilities, is working with clients like Volvo for design process an d for consumer visualization. Image Source: Daqri 53

USE CASE #2 - FIELD SERVICE & DOCUMENTATION Being able to see workflows, take video to connect with experts, and review compliance documents or technical drawings all while handsfree will be a big

61 USE CASE #2 - FIELD SERVICE & DOCUMENTATION Being able to see workflows, take video to connect with experts, and review compliance documents or technical drawings all while handsfree will be a big value to industry. Meta Total raised: $73.3M Enterprise collaborationfocused AR headset developer Atheer Total raised: $20.5M Enterprise-focused smart eyeware. Daqri Total raised: $15M Helmet-embedded industrial AR headset. Lumus Total raised: $15M Enterprise-focused smart eyeware. Image Source: Microsoft Hololens 54

USE CASE #3 - MEDICINE TRAINING AND THERAPY AR and VR could revolutionize the visualizing of medical imaging, help with surgical simulations, and be used directly for therapy (such as virtual

62 USE CASE #3 - MEDICINE TRAINING AND THERAPY AR and VR could revolutionize the visualizing of medical imaging, help with surgical simulations, and be used directly for therapy (such as virtual exposure to alleviate phobias). Surgical Theater Total raised: $4.25M VR-based surgical simulation and education. Psious Total raised: $1.2M Exposure therapy for patients suffering from phobias. Mindmaze Total raised: $118.5M Gesture/motion tracking for major gaming applications, as well as immersive VR for early motor rehab post-stroke. Innovative Imaging Technologies (dba Reacts) Total raised: $4M Medicine-focused video collaboration platform. Source: Surgical Theater 55

63 WELL-FUNDED COMPANIES IN ENTERPRISE / INDUSTRIAL AR Company Disclosed Funding $73.3M Description AR headset maker for enterprise $20.5M Enterprise-focused smart eyeware $15M Enterprise-focused smart eyeware $15M Helmet-embedded AR headset $2M Tablet and glasses-based AR solutions Source: CB Insights 56

65 @NpappaG QUESTIONS? 57

66 cbinsights +1(212)

Market Snapshot: Consumer Strategies and Use Cases for Virtual and Augmented Reality

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