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Is This the Year Virtual Reality Goes Mainstream?

Oct 10, 2016

From the View-Master personal slide projector dating back to the 1930s to the 2009 movie Avatar, virtual reality (VR) is a concept with which most of us are at least vaguely aware. This may be remembered as the year, however, when the average consumer was able to purchase and use VR.

The Technology 

The headset devices, which need to be tethered to a computer or smartphone, use infrared tracking sensors and handheld controllers, along with lenses that allow for a wide field of view, to create a 3D experience. This experience can include sight, touch, hearing and even smell. 

The Uses

The devices were originally designed for virtual experiences and gaming. Participants can travel in deep space, kayak through the Grand Canyon, walk with dinosaurs and so on. However, a number of other applications are being considered, such as helping architects design buildings and the military train soldiers. 

There are also a variety of ways VR can be of use to the health care sector. Examples include surgery (training, robotic and remote); physical therapy and pain management; and using VR as a therapeutic tool to help people overcome severe phobias.   

The potential to use virtual reality as a medium has not been lost on marketers. Picture virtual advertisements for car companies, hotels, sporting goods companies and others. There also promises to be considerable consumer data that can be collected from users of virtual reality. 

The Players

Two of the main manufacturers of consumer VR products are Facebook, which markets the Oculus, and HTC, maker of the Vive. Each weighs just over 1 pound and uses a proprietary tracking system— Oculus (Constellation) and Vive (Lighthouse)—that offers a view field of 110 degrees and features an OLED display with a resolution of 2160x1200. The Oculus retails for approximately $600, while the Vive is about $800. Other companies targeting the VR market include Sony, Google, Apple, Samsung and Microsoft.  

The Market

Industry estimates place the current number of active VR users at 43 million people, mostly in the gaming area. This number is expected to quadruple in the next 2 years. This translates to roughly $1 billion in virtual reality sales for 2016. 

VR Unit Sales
6 million
11 million
16 million
24 million
 Source: KZero Worldwide


The Funding

The first part of 2016 has seen historic investment in the VR sector, with funding approaching $600 million. Investment has taken the shape of smaller crowdfunding campaigns for VR accessories up through $100 million hardware funding from companies such as Disney. 

A dedicated venture capital fund for virtual reality, The VR Fund, was created to provide capital, insights and strategic relationships to VR startups. Another resource for early-stage VR companies is growing trade events such as AWE USA, SALENTO AVR, and Siggraph. 

While VR hardware development has moved at a quick pace, there has been less movement on software and content. This led HTC to create the Vive X Fund, a $100 million fund to help new companies create software for the Vive VR headset. Facebook has created a similar fund, albeit at a much smaller dollar amount, to create a software/content pipeline for the Oculus. 

The Challenges

Manufacturers have faced a few market challenges. One is optimizing distribution channels. Products are available through a limited number of outlets, such as Best Buy and Amazon, but shipping dates have been repeatedly pushed back. Another is users need robust computer systems, typical of the ones gamers use, to handle the technology appetite of virtual reality products.  

An interesting VR malady is “simulator sickness,” the reported feelings of nausea and dizziness people get when using virtual reality systems. This is commonplace enough that Oculus rates its various games and experiences as comfortable, moderate, and intense. It is hoped, however, that this will dissipate over time with repeated use.  

Another VR concern is the continued march toward social desensitization by adding yet another device that captivates peoples’ attention. Some experts are even going as far as to predict the possibility of VR addiction. 

Regardless of the challenges, virtual reality appears here to stay, with The Wall Street Journal calling it a “glimpse of the future of computing.” 

Originally published in the September 2016 issue of TechNews.

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John Pennett

John Pennett is the Partner-in-Charge of the National Technology and Life Sciences Group and works closely with our IPO clients and their circle of legal and underwriting advisors to take an IPO from concept to close.

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