Startups offering virtual reality and augmented reality products have raised significantly less funding in the first quarter of 2017, according to a report published on Crunchbase. Twenty-six companies raised a total of $200 million this quarter. That sounds fantastic, until you compare it with fundraising results one year ago in Q1 of 2016 when 29 companies drummed up over $1 billion.
Crunchbase also pointed out that Q1 of 2017 saw "the lowest quarterly number of financings and investment total in over a year."
To be fair, the lion's share of funds raised for VR this time last year came from an $800 million burst of financing for VR developer Magic Leap. That round of investment carried four times the weight of any other funding for VR.
Image credits: Crunchbase.
The long and short of it is that VR isn't dead yet, but it's not exactly spritely, either. What's the problem? Several factors, the elephant in the room of which is the nascence of virtual reality. Consumer interest is low, leading Facebook to shutter hundreds of Oculus Rift demo stations at Best Buy stores earlier this year. Magic Leap has taken a beating from reports that its super-duper VR tech is much farther away from completion than it let on around the time it received financing.
More affordable headsets such as PlayStation VR and Samsung Gear VR fared better than the considerably pricier Oculus Rift and HTC Vive headsets. Still, the uproar around VR fell from a deafening roar to a deafening silence rather quickly. Facebook attempted to fill that void earlier this week during its F8 conference, where it devoted much of its time to VR-related announcements.
For now, however, both consumers and investors seem to be waiting to see what comes next. That could lead to a catch-22 where consumers clamor for apps and advancements in headset tech that fail to materialize because investors are waiting for interest in the medium to reignite.