All eyes on the future for virtual reality start-ups

As co-founder of Knetik, a digital services and analytics provider, Mr Bevilacqua regularly attended video games industry events such as the Game Developers Conference in San Francisco. At last year’s GDC, after seeing the interest in virtual reality technology from “people I really respected”, he ordered a pair of headsets to test on his family.

A VR spin-off of Jurassic World for the Gear VR made a particular impression. “It scared the hell out of several of my family members,” he says, as the feeling of being in a forest next to a giant dinosaur, while free to look in any direction just as they would in the real world, “amplified” their emotions. “That was kind of the beginning of the mission.”

Mr Bevilacqua was so convinced of the technology’s potential that he quit Knetik to launch Cognitive VR, a data-analytics company focus­ed on virtual reality.

“Looking at the types of experiences and the response that people had in VR, I felt that it was a fundamentally different medium that was going to take off.”

Entrepreneurs from all kinds of backgrounds are taking the same leap of faith and betting everything on VR.

Felix Lajeunesse and Paul Raphael, creators of the Jurassic World VR short that wowed Mr Bevilacqua, were making commercials and art installations in 2012 when they heard about Oculus VR, the virtual reality technology company. “We were convinced of the promise of the medium almost instantly,” says Mr Raphael. “Our very first tests felt like such fundamental shifts in what storytelling could become.”

The Montreal pair founded Felix & Paul Studios in 2013 and this year raised $6.8m in venture funding led by Comcast Ventures, the investment arm of the US cable group.

However, most consumers have never worn a headset. While low-cost, smartphone-based viewers such as Google Cardboard and Samsung’s Gear VR have sold millions of units, more expensive PC-based headsets, such as Oculus Rift and HTC Vive, are estimated to have sold about 200,000 devices since they went on sale this year. PlayStation VR, seen by many as an early frontrunner in high-end headsets because it works with 40m PS4 games consoles, will not go on sale until October.

The uncertainty over if and when meaningful numbers of consumers start buying VR devices raises the stakes for start-ups and their investors. “The timing is a multibillion dollar question,” says Eugene Chung, founder and chief executive of Penrose Studios, a VR content producer in San Francisco.

That is no rhetorical exaggeration, judging by the sums that Google, Facebook and other Silicon Valley leaders have so far spent on VR technology. Digi-Capital, a Silicon Valley-based tech adviser, calculates that more than $2bn has been in­vest­ed over the past 12 months in start-ups in VR and so-called “augmented reality”, a related technology that blends digital images with the real world, the latest example being Pokémon Go. While some of that went into gaming, the most likely initial market for VR, start-ups working on video, marketing, distribution and peripherals have all raised millions of dollars.

Mr Raphael, who recently returned from a 360-degree video shoot with US President Barack Obama in Yosemite National Park in California, says: “We knew the market wasn’t going to ramp up overnight. But the investors and the tech companies are confident.”

Mr Chung, who formerly worked on production at Pixar, Walt Disney’s animation studio,and as a venture capitalist at New Enterprise Associates, says the VR market has developed far faster than he expected. In 2014, he was the first employee in Oculus’s “film and media” unit, now Story Studio. Then Facebook swooped with its $2bn acquisition of Oculus and suddenly the tech world was paying attention to VR.

“What I thought would take 10 years got condensed into something like one or two,” Mr Chung says. He quit Oculus last year to start Penrose: “It seemedobvious that this was the time to do it, rather than two or three years later.”

VR content studios such as Penrose and Felix & Paul have become a particular focus of investment, while Within, previously VRSE, raised $12.7m from investors including Andreessen Horowitz, Live Nation, Elisabeth Murdoch’s Freelands Ventures and 21st Century Fox. Los Angeles-based The Virtual Reality Company, which released a VR spin-off of Matt Damon movie The Martian this year, received $23m from China’s Hengxin Mobile Business, alongside individuals such as Metallica lead singer James Hetfield and Hollywood director Steven Spielberg.

All see a unique opportunity to help define the creative language and storytelling style of VR.

Guy Primus co-founded VRC with film-maker Robert Stromberg. He has long been an admirer of cable TV pioneer Ted Turner, who founded CNN and Turner Network Television. “I’ve been waiting … for my Ted Turner moment when technology and content collided in a really organic and game-changing way,” he says.

Chris Milk and Aaron Koblin founded Within, whose projects include the 360-degree video Clouds Over Sidra, after working on digital arts projects, inc­lud­ing 2014’s This Exquisite Forest in the Tate Modern, London. “The promise [of VR is] that we could have the quality of the immersion and the accessibility of doing digital projects on the internet,” says Mr Koblin. “We want to be ready for what’s coming.”

While many VR entrepreneurs have come to the technology in the few years since Oculus rose to prominence, others have been waiting some time for it to reach maturity. Nonny de la Peña says that after reading Virtual Reality, the 1991 book by Howard Rheingold, “I knew that was what I wanted to do.”

After years researching “immersive journalism” at MIT and University of Southern California, Ms de la Peña entered the 2012 Sundance Festival with Hunger in Los Angeles, which combined computer graph­ics and audio captured at a food bank. “People were crying. Once I saw those reactions it was clear that this was going to explode.”

Ms de la Peña founded Emblematic Group in 2007. It creates immersive journalism and branded content, often using computer graphics to put viewers inside scenes, from a Formula One car to a Syrian refugee camp.

Yet after years of persistence, Ms de la Peña is realistic that the intensity of the hype around VR may soon cause a backlash. “I know we are in a period where there is a lot of VR crap being made,” Ms de la Peña says, “but, whatever! The quality will rise to the top … Something is going to happen. Something is bound to solidify out of this.”

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