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Extended Reality

Technologies bringing about a new reality

Overview

Extended reality (XR) is the umbrella term that includes Augmented Reality (AR), Virtual Reality (VR), and Mixed Reality (MR). These segments are characterized by the varying degrees at which reality interacts with the virtual world. AR refers to the overlay of computer-generated (CG) content (e.g., video streams, images, interactive data, holograms) in a real-world environment. VR is a fully immersive world made with real-world (360-degree video) or CG content or a mix of both prepared in advance. MR, as the name suggests, falls in between the AR/VR mediums and refers to CG content that interacts with objects in the real world.

Gaming has been the legacy use case for XR allowing players to interact in virtual worlds and adding to the realism of gaming genres. However, the industry is witnessing renewed interest driven by the application of this technology for B2B use cases such as product demos, distance learning, virtual therapy, remote work, and virtual manuals. The retail e-commerce boom, the birth of the metaverse, and the continued interest in social and interactive gaming post-pandemic could boost the industry’s prospects moving forward.

What's driving this industry?
Market Sizing

The extended reality market in the US could reach USD 16 – USD 35 billion by 2026

Conservative case

USD 15.5 Bn

Base case

USD 25.4 Bn

Expansion case

USD 35.2 Bn

USD billion01020304050202120222023202420252026
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COVID-19 IMPACT

  • The short-term net impact on the sector was neutral, while the longer-term impact could be fueled by favorable impacts on selected segments. The e-commerce sector was considered the largest positive contributor to XR.

  • The COVID-19 induced lockdowns and social distancing measures led to a surge in demand for digital workflows across industries, which expanded the scope for XR technologies.

  • Content and AR/VR platform segments catering to specific enterprise use cases also benefited from use cases such as remote assistance, collaboration, virtual meetings, and onboarding.

  • Although some areas of XR benefitted, the overall impact on the industry was neutral due to adverse impacts on the hardware segment as a result of production issues, while the location-based segment was severely affected by the lockdowns.

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Market Mapping


Extended reality industry players operate in five segments, with the content segment housing many startups in the space. This could be attributed to the lower barriers to entry when compared with the capital-intensive Headset/display manufacturers segment.  Startups from the headset/display manufacturers segment account for most of the total funding and include large players such as Magic Leap, DigiLens, Varjo, and WayRay. 

Incumbents in the space include Vuzix (a pure-play company headset manufacturer) and a mix of large tech companies. Most companies, similar to the disruptors, have directed their attention to the enterprise segment. Facebook, which changed its name to Meta in October 2021, leads the charge by spending over USD 10 billion toward the metaverse in 2021. Other large tech companies, such as Microsoft, Google, and Apple, are also in the mix through the in-house development of AR/VR headgear.

Incumbents in the space include Vuzix (a pure-play company headset manufacturer) and a mix of large tech companies. Most companies, similar to the disruptors, have directed their attention to the enterprise segment. Facebook, which changed its name to Meta in October 2021, leads the charge by spending over USD 10 billion toward the metaverse in 2021. Other large tech companies, such as Microsoft, Google, and Apple, are also in the mix through the in-house development of AR/VR headgear.

Incumbents
Growth
Early
Seed
Pre-Seed
Headset/display manufacturers
?
Content
?
AR/VR Platforms
?
Location-based AR/VR
?
FundamentalVR
FundamentalVR
FundamentalVR
FundamentalVR
Meta
Microsoft
Google
Apple
Vuzix
Sony
HTC
Lenovo
Snap Inc
Siemens
ByteDance
Nvidia
Magic Leap
MindMaze
Nreal
DigiLens
Realwear
WayRay
Ultraleap
Varjo
Dispelix
HaptX
Envisics
AdHawk Microsystems
StarVR
Mojo Vision
Brelyon
CY Vision
Lynx
SeeTrue Technologies
Meta
Microsoft
Apple
HTC
Lenovo
Snap Inc
Verizon
Unity Technologies
Qualcomm
ByteDance
Nvidia
Niantic
Improbable
Matterport
Osso VR
ETU
Blippar
Survios
Inworld AI
8i
Wevr
Resolution Games
FundamentalVR
The Virtual Reality Company
Alta
Holoride
Geenee AR
echo3D
ForeVR
Enliven
XR Games
Cognitive3D
Dimension X
Common Sense Machines
Meta
Google
Apple
Walmart
Siemens
MindMaze
Rec Room
TechSee
NantMobile
VRChat
Strivr
AppliedVR
Augmedics
Avataar
WIN Reality
Transfr VR
Talespin
XRHealth
Marxent
Interplay Learning
ScopeAR
Merge Labs
Tilt Five
FitXR
Rendever
PIXO VR
Taqtile
Prisms VR
KIT-AR
Virtex
Meow Wolf
Sandbox VR
Illuminarium Experiences
Dreamscape Immersive
Virtuix
AmazeVR
Wevr
Eva.gg
Kaleidoco

The Disruptors


The headset/display manufacturers segment includes the most prominent disruptors (such as Magic Leap, DigiLens, Varjo, and WayRay), which is likely due to the large amounts of funding required for research and development in areas such as eye and motion tracking, spatial data capturing, multi-sensory recognition, and laser beam scanning, prior to commercialization. The content segment is led by players such as Improbable, Niantic, and Matterport, combining for USD 1.8 billion in total funding (March 2022). 

Magic Leap is the highest funded disruptor in the space with USD 3.5 billion raised since 2014 (however, the effective funding can be considered as USD 850 million since it narrowly avoided bankruptcy in 2020). Similarly, Blippar, an AR creation and publishing platform was resurrected from bankruptcy as investors took a flier on it with a USD 5 million pre-seed round in 2021.  

Given the capital-intensive nature of the industry and relatively long path to commercialization, partnerships are a common way for disruptors to test proof of concept. Furthermore, several players focus on the enterprise space and in other cases have completely pivoted to enterprise applications—this includes Magic Leap and Blippar. 

Headset/display manufacturers

?

Disruptors

?
Funding in USD Millions
Magic Leap
3479
MindMaze
341
Nreal
246
Ultraleap
167
Varjo
163
DigiLens
160
Realwear
127
WayRay
108
Dispelix
61
HaptX
60
Envisics
50
AdHawk Microsystems
17
StarVR
Unknown
Watchlist
?
Mojo Vision
Brelyon
CY Vision
Lynx
SeeTrue Technologies

Content

?

Disruptors

?
Funding in USD Millions
Matterport
Public - Market cap USD 1.1 bn
Niantic
770
Improbable
604
Blippar
137
Osso VR
109
Survios
72
Inworld AI
70
8i
41
Wevr
39
Resolution Games
39
FundamentalVR
30
The Virtual Reality Company
25
Alta
13
Holoride
12
Geenee AR
11
echo3D
11
ForeVR
9
Enliven
1
ETU
1
Watchlist
?
XR Games
Common Sense Machines
Cognitive3D
Dimension X

AR/VR Platforms

?

Disruptors

?
Funding in USD Millions
MindMaze
341
Rec Room
294
NantMobile
110
VRChat
95
Strivr
86
AppliedVR
71
Augmedics
61
TechSee
54
Avataar
52
WIN Reality
49
Transfr VR
47
Talespin
41
XRHealth
35
Marxent
29
Interplay Learning
25
ScopeAR
12
Merge Labs
10
Tilt Five
9
FitXR
9
Rendever
2
Watchlist
?
PIXO VR
Taqtile
Prisms VR
KIT-AR
Virtex

Location-based AR/VR

?

Disruptors

?
Funding in USD Millions
Meow Wolf
185
Sandbox VR
119
Illuminarium Experiences
104
Dreamscape Immersive
67
Virtuix
48
AmazeVR
48
Wevr
39
Eva.gg
Unknown
Watchlist
?
Kaleidoco

Magic Leap

Magic Leap is a producer of AR headsets focused on enterprise applications of AR. Its flagship device called the Magic Leap 1 (launched in 2018) and its successor, the Magic Leap 2, was soft-launched in January 2022 and commercialized in October 2022. The company claimed that this would be the lightest and most portable device built and that it was targeting professional users. The company generates revenue through the sale of its devices which ranges between USD 2,295–2,995 (Magic Leap 1), and the Magic Leap 2, which will be available in three editions (Base, Developer Pro, and Enterprise), priced between USD 3,299–4,999. The company holds an extensive patent portfolio (1,900+) which includes the calibration of AR devices and object interactivity in virtual space. As of February 2022, the company had exposure in the health, manufacturing, oil, and gas, and transport sectors. It also caters to the defense and public sectors where it provides solutions for federal, state, local, and international government agencies.

The company, which was initially focused on consumer AR and faced bankruptcy in 2020, replaced its CEO and shifted its focus toward the enterprise segment in October 2020 due to its failure to capture market share in the consumer space and negative impacts from Covid-19. Magic Leap has used an acquisitions-based strategy to build its tech stack and bring technical talent in-house. Its most recent acquisitions include 1) Belgian startup Mimesys (May 2019) that was working on holographic teleconferencing software, and 2) Computes, a mesh computing platform (these leverage the power of grouped systems to push resources to the devices that need it most) in October 2018.

Key customers and partnerships

To reach the enterprise market, it partnered with semiconductor company AMD (June 2021) to incorporate a semi-custom system-on-a-chip (SOC, an integrated circuit that combines all or most components of a computer) for its latest AR device. It expects this to improve the fusion between the real and virtual world for its latest device. To improve the deployment of its device for remote training and frontline worker use cases, it partnered with cloud computing company VMWare in October 2021. 

Magic Leap announced its strategic partnership with IT and software development company Globant in May 2022 . Globant has a global network of more than 18,000 developers serving companies such as Coca-Cola, Unilever, and American Express. Magic Leap expects to use the technical expertise of Globant to tailor its software solutions to enterprise customers. Other strategic partners of Magic Leap include Google Cloud and NVIDIA.

Funding and financials

In the company’s most recent funding round in October 2021, it raised USD 500 million at a USD 2 billion valuation from existing investors. This was a steep drop from the USD 6.7 billion valuation it received in 2019. It was forced to raise funds at lower valuations as it wound down its consumer-directed operations, laid off roughly 50% of its staff, and received a lifeline investment of USD 350 million in mid-2020.

Segment:
Headset/display manufacturers
Total funding:
USD 3.5 billion
Competitors:
Varjo, StarVR, Nreal
Disruptor Funding History

Headset/display manufacturers:

Magic Leap
MindMaze
Nreal
Ultraleap
Varjo
DigiLens
Realwear
WayRay
Dispelix
HaptX
Envisics
AdHawk Microsystems
Mojo Vision
Brelyon
CY Vision
Lynx
SeeTrue Technologies

Content:

Matterport
Niantic
Improbable
Blippar
Osso VR
Survios
Inworld AI
8i
Wevr
Resolution Games
FundamentalVR
The Virtual Reality Company
Alta
Holoride
Geenee AR
echo3D
ForeVR
Enliven
ETU
XR Games
Common Sense Machines
Cognitive3D
Dimension X

AR/VR Platforms:

MindMaze
Rec Room
NantMobile
VRChat
Strivr
AppliedVR
Augmedics
TechSee
Avataar
WIN Reality
Transfr VR
Talespin
XRHealth
Marxent
Interplay Learning
ScopeAR
Merge Labs
Tilt Five
FitXR
Rendever
PIXO VR
Taqtile
Prisms VR
KIT-AR
Virtex

Competitive Analysis


Filter by a segment or companies of your choice
Headset/display manufacturers

Incumbents


Large tech players focus on the enterprise segment using in-house developments and acquisitions

Incumbents in the space include a mix of large tech companies, while Vuzix remains the only pure-play company. A balanced approach that includes a mix of in-house developments and acquisitions has outlined the incumbent's strategy in the space. Most companies, similar to the disruptors, have directed their attention to the enterprise segment. This includes Microsoft, Google, and Facebook, which were relentlessly pursuing the consumer market initially. 

Facebook, which changed its name to Meta in October 2021, leads the charge by spending over USD 10 billion toward the metaverse in 2021. In addition to its interests in the VR headset space (through the Oculus brand), it launched the VR-based remote working app Horizon Workrooms (now known as Meta Horizon) in August 2021. Other recent high-profile announcements include Sony’s PSVR 2 headset, Microsoft’s virtual reality platform (Microsoft Mesh), and AR/VR headsets that are still under development from Apple and Google.

Social platform players such as Snap and Tik Tok parent ByteDance have also entered the headset/display manufacturing segment for consumer and enterprise-directed products respectively.

Headset/display manufacturers
Content
AR/VR Platforms
Location-based AR/VR
In House Development
M&A
Partnership
Investment
Meta
Microsoft
Google
Apple
Vuzix
Sony
HTC
Lenovo
Snap Inc
Verizon
Unity Technologies
Siemens
Qualcomm
ByteDance
Nvidia

Notable Investors


No investor data is available

Funding data are powered by Crunchbase
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