Voyager Capital’s Erik Benson has seen plenty of technologies come and go during his nearly 20 years in the venture business.
That’s given Benson a bit of a Spidey-sense on when certain technologies may be moving into the overhyped category, something he definitely thinks is happening with today’s constant buzz around virtual reality.
“There are no VC opportunities in AR/VR in the near term,” said Benson, speaking Thursday at the third annual Lane Powell Startups Seminar in Seattle.
That bold comment sparked an interesting discussion with the other panelists on stage, with Tola Capital’s Sheila Gulati immediately piping up to say she’d take the counter viewpoint.
Benson worked in the motion-capture software arena in the early 1990s, which he said was “all of the rage” — inspired, in part, by Neal Stephenson’s science fiction novel Snow Crash.
“I think people are still kind of waiting for that world to exist,” said Benson, an early investor in the video technology company Elemental Technologies.
Benson then offered a more detailed explanation about why he’s bearish on VR:
“It was around 2010 and 3-D television came around and people were like: ‘Oh my god, this is so great.’ And people went out and bought their 3-D televisions and they had their little glasses. But, guess what? When you have those 3-D glasses on and you are watching your 3-D television, you can’t work on your iPhone; you can’t work on your laptop; you can’t talk to your kids. People today want to have diversity of experiences, and they want to have them at the same time. They almost want to be ADHD. They want to be doing a lot of different things. They want to be on Snapchat. Snapchat really killed VR.
If you want to be in a VR experience — that is completely isolating. I am not sure how many people have actually been in an Oculus … but you are submersed in that experience. And that is great if you are Valve Software, if you are Gabe Newell and you are building a $1 billion or $2 billion gaming empire. Or if you are Sony or Sony Playstation, or Nintendo. But it is not great for pretty much any other experience. I can’t really see any VR applications outside of gaming.”
Gulati countered that there are big opportunities when it comes to implementing augmented reality technologies in industrial applications, noting that augmented reality could be used by a technician to help fix an elevator or working on a manufacturing line.
“I agree that a lot of it is potentially not yet applicable to everything that we want to do, but I think there are really interesting scenarios and applications,” she said. “We are in the early stage of it, and I would say enterprise-applied AR/VR — we are still pretty early — but the applications are proliferating quickly and there’s a lot out there.”
Benson followed up those remarks by stressing that he sees limited promise in virtual reality, and that augmented reality is “different” with some possible industrial applications in areas such as medical or agriculture.
“But I don’t think AR is really going to be that interesting until they figure out how to implant it inside your head, because nobody wants to be seen with Google Glass on. It’s like you don’t see people walking around with VR headsets on, because it is not a socially prudent thing to do. So, again, if you are looking to zone out and be in one experience — like a game — I think it is perfect. But are you going to watch movies in VR? I don’t see it. Just like I did not see 3-D television.”
He added that most of the money flowing in VR today is coming from venture capitalists, not paying customers. “Today, I see no billion-dollar companies in VR,” said Benson, adding that there is basically no consumer market for people buying VR products outside of gaming. He said it will be at least 10 years for that to change.
Benson’s comments certainly run counter to the views of many venture capitalists, including crosstown rival Madrona Venture Group which is actively backing virtual reality startups. In fact, Madrona’s Matt McIlwain touted the promise of the technology last year after the firm raised a $300 million fund.
“We think the next decade plus is going to be a big transformation, and there are going to be a lot of winners up and down that stack,” McIlwain said of AR and VR.
Other VC funds are betting big on VR and AR, even with failures such as Google Glass. There were 94 virtual reality venture deals recorded last year, up from just 24 in 2014, according to CB Insights. And during the first half of 2016, $1.3 billion had been invested in 76 deals, a growth rate of 85 percent over last year’s total.
Much of that money has flowed to the highly-secretive Magic Leap, which has raised more than $1 billion from the likes of Andreessen Horowitz and others. Even so, things might not be all that bright at Magic Leap, with The Information reporting (subscription required) this week that the Florida-based company, with operations in Seattle, may have “oversold what it can do.”