Published on April 6th, 2021 | by Emergent Enterprise0
Get Ready for More VR Unicorns
Most of the general public does not know or understand AR/VR/XR technology and applications and would be at a loss as to what to do with a headset if handed one. Will that change with the “VR unicorns” rising up around the globe? This interview of Tipatat Chennavasin by Janko Roettgers at Protocol is an intriguing look at this world from an investment standpoint. What are savvy and knowledgable investors looking for in VR companies? Chennavasin shares his strategies and insights and gives us an idea what the investment world is risking their money on. Keep an eye on the unicorns and it just might be the clue as to what is going to cause XR to go mainstream.
Photo: Tipatat Chennavasin and Jane Seidel/Protocol
Tipatat Chennavasin was not surprised when VR metaverse startup Rec Room raised $100 million at a reported $1.25 billion valuation last week. As general partner of Venture Reality Fund, Chennavasin invested in Rec Room early on, betting that the small and agile team behind it was on the right track with its take on social VR.
VR Fund has also backed Beat Games, the maker of Beat Saber, as well as Vacation Simulator maker Owlchemy Labs, two companies that have since been acquired by Facebook and Google, respectively. More recently, the company began to raise a new $50 million fund with participation from French telco giant Orange.
To evaluate companies, Chennavasin spends a lot of time crunching publicly available data and correlating it with information he receives from his portfolio companies, similar to the approach app analytics providers like App Annie and Sensor Tower take in the mobile space. In an interview with Protocol, Chennavasin shares some of the secrets behind his data analysis, opines on the role Apple’s much-rumored headset will play in the AR space and predicts that we will see more unicorn valuations and M&A deals.
What was your reaction to the Rec Room news?
I’m not surprised at all that they’re the first VR software company to hit unicorn status, and to do it in such a short term. They have a million MAUs in VR, which is huge, considering how big VR is right now. But that’s still just a subset of how many users they have; Rec Room started in VR, but now it’s on console and on mobile.
They have 15 million users in general, and 2 million of those users are creators. That’s really important. When you look at most creator platforms, typically it’s a very small percentage of creators compared to consumers or players. In Rec Room, you’re seeing a much bigger percentage of creators. I honestly think it’s related to their VR DNA, and how much fun it is to create in VR, be creative in VR. VR democratizes 3D creation.
Do you think we’ll see more such VR unicorns?
I believe so. Unicorn status is pretty rarefied, but we are definitely seeing VR companies hitting revenue points where they can be valued at that size both on the consumer side and on the enterprise side.
Beat Games got acquired by Facebook, so they’re not an independent company, and can’t be considered a unicorn. But [it’s been reported that] they made $180 million in the past three years, and half of that revenue is from last year alone. You’re definitely approaching that status where, if [it were] a standalone company, [it] would be considered a unicorn.
Most of the enterprise companies don’t really talk about revenues as publicly as some of the gaming studios. But on the enterprise side, we are seeing companies making significant ARR, dozens of companies easily doing a million dollars, and [some are] getting to $5 [million] to $10 million or more ARR. That’s definitely putting them closer and closer towards unicorn status.
Speak a little bit about how you track VR companies.
I come from mobile gaming, so we look at the number of ratings and reviews, and then try to extrapolate that to how much revenue is being generated. And fortunately, because of my portfolio and also because of having friendly relationships with lots of different game studios out there, I have a lot of different data points, and I can come up with some kind of understanding of what the market looks like.
Once Oculus put out their numbers, I was able to backtrack and see if this is actually accurate. And I was pleasantly surprised that I was fairly accurate.
Any interesting insights you gained this way recently?
When we saw the growth of the Quest from year one to year two, we saw over 5x growth in terms of the market revenue. And Oculus has already said 60 titles made over a million dollars, six titles have done over $10 million. Now, when we look at Steam, [and by] doing the same kind of [calculations], [we can extrapolate that] four titles have done over $10 million in revenue, and at least 40 titles have done over a million dollars in revenue.