The State of Virtual Reality Today

Virtual reality is one of the most exciting technologies bound to change the way we interact with the world. While the technology is still nascent, the year has already been full of encouraging developments (and challenges). Media companies, content creators, VR start-ups and VCs continue to invest money and resources as consumers begin to get their hands on their first headsets.

Where are we today?

We are in the midst of witnessing the launch of first generation VR products such as Oculus Rift and HTC Vive. In the near term, tethered / desktop supported headsets will prevail as these products will likely be first adopted by core gamers, a key segment that will jumpstart the VR sector.

The key challenge will continue to be hardware distribution. Unlike Pokemon Go (a widely popular AR application running on smartphones), VR has yet to achieve a sufficient level of scale for it to become compelling for application developers. Product delays, supply chain limitations and high price points will hinder sales and it is unlikely that 2016 will be as robust as VR pundits had predicted.

Similar to any new computing platform, it will take time for VR to gain mainstream adoption. We will see an incredible product evolution from first-gen (remember the first iPhone?) to next-gen VR headsets in the coming years. As the hardware form factor advances and smartphones catch up to battery life and display technology needed to deliver immersive VR content, VR will become more appealing and affordable for large scale consumer adoption.

What about content and applications?

Content and the underlying creation process are still evolving. What is encouraging is that we are starting to see experiences that go beyond demos. Toronto International Film Festival launched VR Pop to bring VR storytelling to and companies like The Void are taking VR to a new level by creating physical spaces that deliver immersive gaming.

Blurring the Lines Between Virtual and Reality: How VR Will Permeate Our World

With respect to application development, gaming and entertainment continues to be at the forefront. However, expect to see an emerging group of start-ups that are pioneering applications for sectors, such as Education, where VR could significantly advance learning by providing virtual classes, collaborative tools or recreation of educational content in virtual environments.

Where is the money going?

VC investment in AR/VR is at an all-time high and 2016 has already seen a number of banner deals. While VCs remain cautiously optimistic, money will continue to flow in this sector. Significant capital has already gone to hardware start-ups and moving forward we will likely see larger capital investments deployed in vertical-specific use cases and software/solutions that enable the development, distribution and monetization of content and applications.

The VR ecosystem is buzzing with a lot of enthusiasm from coast to coast. There are numerous entrepreneurs and start-ups that are shaping the evolution of VR but their ventures may not well known or understood yet. Collaboration opportunities can be unlocked by bringing together the various VR clusters.

To gauge the opportunities and challenges for the VR ecosystem, OMERS Ventures launched a VR study in collaboration with the Canadian Film Centre Media Lab (VR start-ups are invited to join this study by completing a brief survey by July 29). Over 200 VR companies have already completed this study, indicating that a wave of VR innovation is about to immerse North America.

If you are an entrepreneur looking to build a VR company: find a specific vertical or segment that complements your expertise and where VR can solve a meaningfully pain point or enhance the current user experience. Think about what would make your product/solution different (and can’t be easily engineered by the big players like Oculus or Samsung) and chart a path with potential monetization options.

Above all, be patient as the exact timing of when VR will take off is anyone’s guess.

Prashant Matta is an associate at Omers Ventures, one of Canada’s largest venture capital firms.