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Billion Dollar Unicorns: For Magic Leap, Unicorn Status No Longer Virtual

Posted on Friday, Apr 1st 2016

According to Digi-Capital, augmented reality devices are expected to deliver $90 billion in revenues by the year 2020. On the other hand, virtual reality headsets are expected to generate only $30 billion in revenues by 2020. Technology giants have already started investing in the market. Two years ago, Facebook acquired Oculus Rift, another virtual reality technology developer, for an estimated $2 billion. Microsoft recently released its augmented reality offering in the form of the HoloLens headset. Sony Corporation in Japan is developing Project Morpheus and HTC Corporation in Taiwan is working with Valve Corporation in the US to develop HTC Vive, another head-mounted display. Billion Dollar Unicorn Club member Magic Leap is also racing to its product release.

Magic Leap’s Offerings

Florida-based Magic Leap was founded in 2011 by Brian Schowengerdt and Rony Abovitz. The company has been focused on developing special eyeglasses that would provide an enhanced augmented reality experience to its users. Magic Leap believes in its ability to create a world where “digital and physical realities seamlessly blend together to enable amazing new experiences”. According to Magic Leap, its technology will be able to offer a new kind of computing capability that will mix digital graphics into the physical world by projecting images onto the eyes so that users can see virtual 3D objects as part of the real world.

The company is yet to reveal a product of its own, but it has created impressive videos through its development platform such as that of a tiny floating elephant and a giant whale that splash into a school auditorium.

The market is eagerly waiting for virtual reality headsets. Facebook has been investing in the development of the Oculus Rift headset and is soon expected to release its first product priced at $600 apiece. Then there is Microsoft’s HoloLens that delivers holographic illusions. This week, Microsoft began shipping HoloLens headsets to developers at a price tag of $3,000 each. Analysts believe that the HoloLens could be used in projects such as home improvement, construction, car dealership showrooms, and in providing simulative training for high risk operations such as de-mining operations.

Magic Leap’s version of augmented reality is expected to be more than both these versions. It intends to deliver augmented reality by layering in digital images on top of real world through special eyeglasses to create the illusion of 3D images. Its Dynamic Digitized Lightfield Signal technology uses hardware, software, and firmware to project digital “lightfields” into the user’s eyes to deliver greater realism. Magic Leap wants to use its technology not just for gaming, but also in education.

Magic Leap’s Financials

Magic Leap has been working on developing a product now for over two years. It is yet to release a product, but the market has been so driven by the lure of virtual reality that the company’s valuation keeps on rising. The company has been venture funded so far with $1.4 billion raised from investors including Alibaba, Andreessen Horowitz, Fidelity Investments, Alphabet, JP Morgan, Kleiner Perkins Caufield & Byers, Legendary Entertainment, Morgan Stanley, Obvious Ventures, Qualcomm Ventures, T. Rowe Price, Warner Bros, and Wellington Management.

It received its latest funding in February this year when it raised $793.5 million in a round led by Alibaba at a valuation of $4.5 billion. Other investors in the round included Qualcomm Ventures, Alphabet, Warner Bros, Fidelity Management, J.P. Morgan, Morgan Stanley, T. Rowe Price, and Wellington Management Company. The investment will help Magic Leap expand its manufacturing and supply chain capabilities. Its current device has been seen only by a select few partners. The inclusion of Alibaba in the investor list could also help Magic Leap expand its presence in China, when it releases its glasses.

An earlier round of financing held in 2014 had raised $542 million and valued it at $1.2 billion. The round was led by Alphabet, which was also developing Google Glass as its augmented reality offering. Google Glass, however, did not take off. Magic Leap may be Alphabet’s entry into the augmented reality world.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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