In 2014, when Rony Abovitz was talking to venture capitalists and corporate backers about his latest technology company, Magic Leap, he should have had a hard sell. For starters, he had to convince them that a new idea, combining real life with augmented reality into what he calls mixed reality, could not only work but become the basis for a whole new industry.
What Magic Leap is doing is complicated, and different from other virtual-reality technologies like those behind Oculus Rift and Samsung’s Gear VR. MIT Technology Review senior editor Rachel Metz, who has tested a prototype, describes it as “a tiny projector that shines light onto a transparent lens, which deflects the light onto the retina.” That light then blends in with the light being seen in the real world, leaving artificial objects “nearly indistinguishable from actual objects.”
Though Abovitz had a lot to explain, it didn’t turn out to be a difficult pitch to make. In two rounds, one in February 2014 and the other in October 2014, Magic Leap raised $592 million from backers including Google and Qualcomm Ventures, Wall Street financiers KKR and Vulcan Capital, and Silicon Valley VC firms Kleiner Perkins Caufield & Byers and Andreessen Horowitz. (An October report said that the company was seeking an additional $1 billion in backing.)
That money is going into hiring engineers and other experts—Magic Leap’s employees now number in the hundreds—and setting up a 260,000-square-foot pilot manufacturing facility in Florida. Abovitz says Magic Leap needed all that money “to really go to the moon” and develop brand-new technology.
Abovitz founded Magic Leap in 2010, and it became his full-time gig in December 2013 after he sold his previous business, the medical-device maker MAKO Surgical, for $1.65 billion. Nagraj Kashyap, senior vice president at Qualcomm Ventures, attributes much of his firm’s enthusiasm for Magic Leap to Abovitz’s track record building successful technologies and cultures. But he also sees good reason to believe that Magic Leap’s technology will create something new, a “pervasive and persistent” form of augmented reality.
Although virtual reality is not new, investors have been drawn back to it because of a substantial decrease in costs. Virtual-reality headsets that existed 20 years ago cost $20,000 to make, says Philip Rosedale, creator of Second Life and High Fidelity. Because it was so expensive, he says, “virtual reality in general has been a dream always five years in the future.”
In contrast, today “90 percent of the hardware in a virtual-reality headset is already in a cell phone,” says Nabeel Hyatt, a partner at Spark Capital, the original backer of Oculus VR, the virtual-reality headset maker Facebook bought in 2014 for $2 billion.
Spark Capital professes to like investing in markets so new their size can’t yet be determined. Even so, Hyatt says his firm believes the augmented reality of Magic Leap is still too far off to warrant investment. Significant technological puzzles still have to be solved in computer vision, 3-D rendering, strategies for mapping a room in real time, and other areas, Hyatt argues. “I am bullish on that,” he says, “but over the very long term.”