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Apple’s recent unveiling of the Vision Pro headset has reignited enthusiasm in the virtual and augmented reality start-up space. These ventures have faced challenges in securing funding as investors have shown a preference for artificial intelligence companies.
The tech giant claims that its “mixed reality” device will usher in a new era of spatial computing, much like how the iPhone revolutionized mobile computing. This pitch has convinced investors to back fledgling companies working in augmented reality and virtual reality.
In June, AR, VR, and mixed reality (XR) start-ups in the US raised a total of $208 million in funding, nearly as much as the previous three months combined, according to data from PitchBook. This investment marked a 12-month high, except for a single fundraising round in December that raised $1.48 billion for Anduril Industries, a military tech start-up focused on mixed reality.
Prior to Apple’s launch, funding for the sector had slowed as investors hesitated to make bets that didn’t align with the world’s largest company. However, the June 5 launch generated significant interest across the sector. Investors remained undeterred by the Vision Pro’s higher-than-expected price tag of $3,500 and vague release date of “early next year.”
Ori Inbar, founder of Super Ventures, an early-stage augmented reality fund, stated that the Vision Pro was the proof the market needed that mixed reality is not a passing fad. He has noticed an increase in investor inquiries and accelerated fundraising processes for several of his portfolio companies.
While this investment surge is notable, it pales in comparison to the $31 billion invested in US-based artificial intelligence companies in the first half of the year.
Prior to Apple’s Vision Pro launch, there was a sense that enthusiasm for augmented and virtual reality was diminishing. However, Mark Zuckerberg, CEO of Facebook parent company Meta, announced a pivot towards building a metaverse, which received significant backlash from investors. Meta has since shifted its focus to increasing AI investment.
Despite Apple’s influence, Eric Bellomo, an analyst at PitchBook, advises the industry not to depend solely on the tech giant for success. While the attention on Apple has brought much-needed attention to the potential impact of mixed-reality solutions beyond consumer applications, it is essential for the industry to continue diversifying its investments.
Other industry giants, such as Google, have invested in augmented and virtual reality products but ultimately struggled to gain traction. Google’s smart glasses, for example, failed to generate significant interest and were eventually discontinued.
Amidst the doubt surrounding the sector, some XR start-ups have refrained from using terms like “metaverse” in their pitches for funding.
However, the recent surge in interest indicates an inflection point for capital flowing into the industry. Apple’s confidence in mixed reality has shone a light on the potential impact across various sectors.
The attention on Apple has helped highlight the ways in which mixed-reality solutions can have a broader impact beyond consumer applications. Kevin Hykes, CEO of Augmedics, a company that develops tools for surgeons to navigate spinal instruments and implants during operations, secured the largest funding round in the US over the past six weeks with a $83 million investment on June 27. Luminopia, a Massachusetts-based company that creates therapeutic visual stimuli, also raised $16 million in late June. The Vision Pro has validated their belief that immersive reality has the potential to revolutionize therapeutics.
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