Virtual reality (VR) has become one of the most promising technologies of the 21st century. As VR headsets like Oculus Quest gain mainstream popularity, the market size of VR is predicted to grow from $6.1 billion in 2021 to $300 billion by 2024. This creates huge opportunities for investing in virtual reality companies. However, the VR industry is still nascent with high risks. Investors need to deeply understand the VR landscape and evaluate factors like market potential, technology innovation, and team capabilities when selecting the right VR startups to invest in. This article provides analysis and suggestions on investing in virtual reality companies.
Focus on consumer VR companies with proven product-market fit
The consumer VR market has the biggest growth potential thanks to gaming and entertainment. Look for VR startups that already have popular apps and games with proven product-market fit. For example, firms developing hit VR games like Beat Saber which has generated over $100 million revenue. Such companies have derisked their business models and are poised for rapid growth.
Favor VR companies that own proprietary tech and IP
A key investment criteria is whether the VR startup owns any proprietary technology or intellectual property. For example, companies with patented VR headset designs, proprietary graphics rendering algorithms, or innovative VR software frameworks. Such tech and IP provide sustainable competitive advantages over rivals and increase the startup’s enterprise value.
Verify technological expertise of the founding team
A strong technical founding team is crucial for a VR company to keep innovating and maintain technology leadership. Analyze the track record of the founders and early employees to verify their expertise in 3D graphics, optics, VR/AR software. Relevant work experience at other leading VR firms is also a good validation of their capabilities.
Look for strategic investors to validate business potential
Having reputable corporate investors provides validation of the startup’s business potential. For example, VR companies backed by leading tech giants like Microsoft, Facebook, HTC indicates their solution has real market value. Strategic investors can also provide commercial partnerships and distribution channels to accelerate market access and adoption.
In summary, investing in the right virtual reality companies requires evaluating factors like product-market fit, proprietary technology, team expertise, and strategic investors. Companies that tick these boxes have the highest potential for massive growth in the bourgeoning VR industry.