Magic Leap Open To Raising More Capital

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Magic Leap Open To Raising More Capital
August 13, 2018
The Magic Leap One headset is aimed primarily at 'creators' — from app developers to the artistically inclined — rather than mass-market consumers

 

Magic Leap raised more than $2bn before its long-awaited “augmented reality” glasses went on sale last week, an unprecedented sum for a new start-up ahead of its first product launch.  With the $2,300 Magic Leap One device finally shipping, founder Rony Abovitz said the company was open to raising even more capital as it gears up for a long-term fight against larger rivals such as Apple and Microsoft, which are developing their own AR headsets. 

 

“Any company like ours attempting to do something at this scale, we are taking on some of the biggest companies in the world,” Mr Abovitz told the Financial Times in an interview last week. “We are probably always in the mode of being opportunistic about capital.”

 

Magic Leap’s production of the headset, which has included developing bespoke components, an all-new operating system and establishing its own manufacturing facility, has been costly but Mr Abovitz said the company still had “a lot of capital in reserve . . . We are judicial stewards of our capital”. 

 

Extra funds could help Magic Leap expand internationally and broaden its product portfolio, he said, while also providing further opportunity to build demand and awareness for what remains a nascent product category of glasses that place “holograms” precisely on to the real world. 

 

For now, Magic Leap One is an expensive new product with a limited range of applications, aimed primarily at “creators” — from app developers to the artistically inclined — rather than mass-market consumers.  “Are we about instant profitability or revenue growth and innovation? We are studying what other great companies have done in the past,” he said. “These are the kinds of gears we are now thinking about,” said Mr Abovitz.

 

Magic Leap’s most recent financing came from telecoms and media conglomerate AT&T in July, extending its Series D funding round that valued the Florida-based company at more than $5bn and bringing its total capital raised to $2.3bn. 

 

Alongside financial backers such as Singapore’s Temasek, Saudi Arabia’s Public Investment Fund, Fidelity and T Rowe Price, Magic Leap has assembled a formidable collection of strategic investors from the tech and media industry, including Google, Alibaba, Qualcomm and AT&T’s Warner Bros. 

 

“Now that we have a shipping platform with a developer environment, we can start to link to great software and services that partners like Google make,” Mr Abovitz said. That could include allowing third-party artificial intelligence services, such as Google Assistant, to connect to Magic Leap’s own onboard AI. 

 

But the company was cognizant of the potential privacy implications of connecting such technology to a device that “sees what you see and hears what you hear”, he added. “We want to take it a little slow and a little patient to understand how spatial computing weaves its way into society.” 

 

That cautious approach — alongside limiting initial sales of the “Creator Edition” of the first Magic Leap device to only six US cities — contrasts with Mr Abovitz’s more bombastic claims in the past.  In 2016, he promised the company’s first product would be a cultural landmark akin to The Beatles’ release of their classic 1967 album Sgt. Pepper’s Lonely Hearts Club Band.

 

“We want to deliver something fully-formed and amazing . . . We are not about putting out the rough cut,” he told the FT then, suggesting also that the device would be shipping “soon”.  While he hopes that Magic Leap One could still appeal to millions of “creators”, Mr Abovitz concedes that he might have promised too much. 

 

“I think we are kind of in, like, maybe the early Rubber Soul period,” he said in last week’s interview, referring to The Beatles’ 1965 album. “We still have the White Album, Sgt. Pepper and more coming.”

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