Virtual reality investors launch $10B consortium led by HTC

Investors in the Virtual Reality Venture Capital Alliance include Sequoia, 500 Startups and Redpoint

Financial trends and news by Steven Loeb
June 30, 2016
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Virtual reality is a really hot sector right now, with a lot of money going into it and a ton of potential. So some of the biggest investors in the space have decided the best way for it grow is for them to pool their resources in order to plunk down the money required to take it where it needs to go. 

Phone manufacturer HTC has announced the formation of the Virtual Reality Venture Capital Alliance ("VRVCA"), a consortium of 28 of venture capital firms who invest in the VR industry. The group will also be investing in augmented reality, and mixed reality, startups.

Some of the members of the VRVCA include GGV Capital, Matrix Partners, Redpoint Ventures, Sequoia Capital, and 500 Startups. Together they control over $10 billion in capital.

"This is the first time such renowned VCs are joining hands at this scale to drive the future of a new industry, rather than competing to find the best deals for themselves," Alvin Graylin, HTC's regional head of VR in China, said in a statement.

The organization says its mission is "to foster long-term growth in the VR industry through identifying, sharing and investing in the world's most innovative & impactful VR technology and content companies."

"We believe that VR is a transformative technology that will revolutionize entire industries, one that will leave a lasting impact for many future generations to come," it says on the VRVCA website. "In order to achieve that dream, we are working tirelessly to ensure that the VR startups today get the resources they need, so that they can grow into the industry titans of tomorrow."

This isn't the only VR startup accelerator that HTC is a part of. In April, it launched a $100 million fund called Vive X, with the aim of growing the VR ecosystem by giving startups financial support and mentorship.

The company also revealed had receieved 1,200 applications from over 30 countries to join, though half came from China. The first cohort for the program will be announced next month, and the second round of applications for Vive X will be accepted starting in November. HTC expects to start the program in January of next year. 

The virtual reality space

The virtual reality space is taking off like a rocket right now. In 2015, VR funding grew by 391 percent, with $465 million raised, up from $95 million in 2014. VR also saw a big increase in the number of deals as well, going from 24 in 2014 to 94 in 2015, a 292 percent growth spurt.

While virtual reality is a hit with investors, its also projected to make waves with the public. Revenue from these headsets is expected reach almost $1 billion this year, with a total of the 12.8 million devices sold.

A huge amount of that revenue, 77 percent of it, is going to come from the high end market, specifically from Oculus, as well as HTC and Sony.  However the vast majority of the devices that will be sold are going to be on the lower end of the price scale. Only 13 percent, or 1.7 million, will be from those premium devices. 

Virtual reality has been getting a lot of attention from some of the biggest players as well, with companies like Facebook making big bets and big acquisitions, including buying Oculus for $2 billion. Earlier this year Google formed a new division dedicated solely to the space

While VR is heating up, augmented reality, meanwhile, has been slowing down, with only $85 million invested in 2015, falling 81 percent from $671 million in 2014. AR startups also saw a 22 decline in deals in the same timeframe, dropping from 27 to 21.

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