VR on course to fail again as investment declines amid low user base
- Lacklustre consumer demand for VR headsets and a drought of capital has led to companies shutting down or laying off workers
- Some VR companies have found a niche, such as in creating VR attractions in shopping malls
A few years ago, virtual reality was all the rage in Hollywood, helping to fuel the rise of LA’s Silicon Beach tech hub with the promise of reinventing the entertainment business.
At its peak, investors pumped US$253 million into two dozen deals involving virtual reality and augmented reality (AR) start-ups in Los Angeles and Orange counties in 2016, hoping that pricey headsets projecting virtual worlds would become as popular as smartphones.
But investment in the technology has slowed dramatically in recent years, and what seemed like a promising boom has largely fizzled.
Several California companies that raised millions of dollars have shut down or laid off dozens of workers, as businesses scrambled to readjust their strategies in the face of lacklustre consumer demand for VR headsets and a drought of capital.
“It’s just been a drawn-out hype cycle that’s promised to be the next big thing for so long,” says Nicholas Pappageorge, a senior intelligence analyst at research firm CB Insights. “The investors’ patience for the industry has worn thin.”
The local decline in VR and AR investment is notable because it occurred at a time when overall venture capital funding in the two counties increased 36 per cent to nearly US$6.4 billion last year, according to the PwC/CB Insights MoneyTree Report. Investors parked their money in other areas such as cybersecurity and artificial intelligence.