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Virtual Reality Landscape & market study Orange Silicon Valley September 2016 Contents Section 1 Introduction to Virtual Reality Section 2 VR financing – focus on North America Section 3 Corporate VR projects Section 4 Market analysis Section 5 VR boom in China Section 6 Appendices 2 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Key takeaways • There is a growing interest in VR from the general public. The Oculus Rift, the HTC Vive, and the PS VR all repeatedly sold out in 2016, minutes after they were made accessible online. • The very definition of VR has expanded to include 360 video. Platforms like YouTube and Facebook and low-end hardware like Google Card Cardboard are driving the proliferation of both user-generated and branded content. • VR funding is growing, and going global. Swiss startup Mindmaze was the first VR company to raise more than $100M in a VC round in February 2016, from Indian group Hinduja. • VR has become a go-to destination for large corporate players. Both software and hardware companies such as Facebook, Google, Acer, HTC, and more are getting increasingly involved through either investments, product launches, or partnerships with startups. • With hardware penetration increasing, quality content might become a bottleneck in the near future. Both the distribution platforms and the hardware manufacturers are fighting to build a loyal base of content creators. • Entertainment today is driving the growth of VR. Content studios like The Virtual Reality Company are drawing large amounts of money, while VR arcades offer new distribution opportunities for both the manufacturers and the developers. • VR is booming in China, focusing on hardware, mobile and entertainment. Players like Baidu, Alibaba and Tencent turn to VR to drive their existing video and e-commerce businesses; meanwhile, entertainment companies are striking large deals with US startups. 3 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Introduction to Virtual Reality 4 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Introduction . Definitions - Virtual Reality (VR) is an environment that simulates physical presence in places in the real world (360 video capture) or imagined worlds (CGI-created), recreating sensory experiences. - Augmented Reality (AR) is a live direct or indirect view of a physical, real-world environment whose elements are augmented (or supplemented) by computer-generated sensory input such as sound, video, graphics or GPS data. - Mixed reality (MR) is the merging of real and virtual worlds to produce new environments and visualizations where physical and digital objects co-exist and interact in real time. Market of VR VR became a hot topic after Facebook acquired Oculus VR for $2B in 2014. 2016 is expected to be VR’s “first $1B year”. VR is expected to generate $30B by 2020, according to DigiCapital. Hardware The most common way to access VR is through glasses combined with software controlled content 5 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Investment evolution 2015 2016 Amount invested in VR (US & Canada) $338M $351M VC deals in VR 124 94 source: Pitchbook (09/06/2016) 6 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential In 2016 VR companies listed on AngelList 800 $4.8M average valuation for VR startups $1B+ expected revenue from VR in 2016 source: AngelList (08/24/2016), Deloitte TMT predictions (01/2016) 7 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential VR financing 8 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential VR financing VC and corporate VC 9 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Top VR transactions - worldwide Notable investors Type Date $2B Acquisition 2014 Developer of the Oculus Rift headset and of the Oculus platform $100M Series A 2016 VR motion capture solution with a focus on Healthcare $82M Acquisition 2014 Supplier of 3D motion capture products $80M Series B 2016 Live and on-demand event broadcast in VR $65M Series C 2015 Developer of a high-end VR camera, video tools and a premium VR source: Pitchbook, Crunchbase platform 10 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential VR deals – 2016 VC deals: 94 • angels, accelerators, seed, early & later stages • corporate Notable acquisitions: • RYOT – content – $12.50M – April 2016 – AOL 4 • Movidius – hardware – undisclosed – September 2016 - Intel source: Pitchbook (09/06/2016) 11 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Top VR transactions – 2016 - worldwide Notable investors Segment Country Date $100M; series A Platform Switzerland February VR motion capture solution with a focus on Healthcare $80M; series B Live capture US August Live and on-demand event broadcast in VR $35M; series B Hardware China January Baofeng Mojing Manufacturer of mobile VR headsets Hengxin Mobile $23.6M; series B Content US June VR studio for narrative content and experiences $20M; series B Content US February VR studio and distribution platform for premium content source: Pitchbook, Crunchbase 12 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Top VR transactions – 2016 - North America notable investors Type Date $80M Series B August Live and on-demand event broadcast in VR Hengxin Mobile $23.6M Series B June VR studio for narrative content and experiences $20M Series B February VR studio and distribution platform for premium content $20M Series A June Inside-out 3D hand and head tracking solutions $12.6M Series A March Live event VR platform with a focus on sports and music source: Pitchbook, Crunchbase 13 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential VR investments – breakdown by years 400 351 350 338 300 250 North American VR startups 200 150 114 108 100 amountinvested($MM) 54 50 12 14 3 0 5 4 2 0 0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 source: Pitchbook, OSV 14 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential VR investment landscape – breakdown by segments (1/2) Content Platform Hardware Software Gaming 18angles Dimensional Mechanics Mindhive MyPad3D Video hosting VRCinematic VisionaryVR Health Veeso Vrtify Wanderlust VR Woofbert source: Pitchbook (08/24/2016) 15 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential VR VC investment – breakdown by segments (2/2) 160 30 146 26 140 25 120 19 20 100 16 78 15 80 15 70 60 10 Number deals of 10 Amount invested ($MM) 40 31 18 5 20 2 5 1 3 0 0 Platform Content Hardware Software Gaming Video Hosting Health source: Pitchbook (09/06/2016), OSV 16 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Fund specialization in VR VC Corporate VC $50M $100M launched in March 2016 launched in April 2016 $10M $12B $50M launched in December 2014 launched in launched in December 2015 June 2016 n/a $12M launched in June 2012 launched in April 2016 source: VentureBeat, Roadtovr 17 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Fund specialization - focus on the VRVCA launched in June 2016 $12B+ total deployable capital 36 VC funds involved headed by Alvin Wang Graylin, HTC’s China Regional President of VR Notable investors 18 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential VC $93.4M raised $2.5M raised $13.7M raised $2.5M raised $2.5M raised $101.35M raised $44.85M raised $5M raised $2.2M raised $1.58M raised $15.1M raised $2.2M raised $48.4M raised undisclosed $3M raised $5.25M raised $3M raised $12.56M raised $15.7M raised $1.1M raised $3.5M raised undisclosed Primitive.io $6M raised $15.10M raised $0.7M raised $6M raised $17.5M raised $25.1M raised $1.25M raised undisclosed undisclosed $14.5M raised $6M raised $6M raised $14.5M raised $6.2M raised 19 Orange presentation OrangeFrance Silicon Telecom Valley -- OrangeOrange confidentialconfidential Andreessen Horowitz Based in Menlo Park, CA, USA – founded in 2009 Founded by investors Marc Andreessen and Ben Horowitz, Andreessen Horowitz (a16z) is world renowned for supporting the growth of emerging technology companies such as Facebook, Airbnb, Jawbone, Twitter and Skype. The firm has long been involved in VR and AR, with significant investments that include Oculus VR’s $75M Series B round in 2013 and Magic Leap’s Series B and Series C rounds in 2014 and 2016, respectively. a16z’s latest investments in VR are London-based Improbable, which provides the backend software to create simulated worlds, and content studio Within (previously known as VRse). In June 2016 the firm announced it was making VR one of its main interests. Specifically, a16z is looking at VR content and interested in potential applications of VR to verticals such as Enterprise and Social platforms. a16z has also positioned itself as a thought leader in the VR/AR space. In January 2015 the firm initiated a series of articles and podcasts about AR/VR, with topics ranging from a16z’s own investments to potential applications of VR to specific verticals. a16z’s first