74. Virtual Reality Investing, Part 2 (Adam Draper)

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Today we cover Part 2 of Virtual Reality Investing with Adam Draper of Boost VC. In this segment we address:

  • Draper Virtual Reality InvestingVR, in various phases of maturity, has been around for a long time. Why do you think the next few years is the right time for VR to take off and attain some mass market adoption?
  • This is an area that can be very capital intensive early-on. How does that change your approach as a startup investor when you compare it with sectors or investment areas that require very little capital to achieve product-market fit?
  • What are the economics and business models for most of your VR-based portcos (SaaS, per app download, advertising, etc.)?
  • What are some of the most significant challenges to VR, whether technological or otherwise?
  • What are some of the more exciting things to look out for in VR in the coming years?
  • Some have tabbed audio speakers, implanted in human ears, and identification sensors implanted in human hands as some of the first biological IoT w/ near-term application. Do you think it’s science-fiction or science-fact that elements of VR will eventually be integrated into human biology?
  • Is there a set of Series A investors that specialize in VR that you partner with on a frequent basis?

Guest Links:

Key Takeaways:

1- VR vs AR
Adam described VR as creating an entirely new environment that the user interacts with. In a virtual reality experience, the user is completly immersed in a virtual world. Whereas he described AR as augmenting the real world with digital data. So with augmented reality, the user is seeing the real world and virtual objects are introduced or overlayed within it. And in Adam’s estimation, he thinks the two will converge into the same technology. As he looks to the future, it seems more likely that the glasses, or whatever lenses cover the eyes, will be the same for both VR and AR. It’s pretty amazing to imagine that, in the future, one will not have to turn on a TV to watch a film… they could have an even better viewing experience, no matter where they are, through glasses or lenses. Or if one receives a text message, they will not have to fish their smartphone out of their pocket, they can choose to have the message appear in their peripheral vision. As Adam mentioned, it’s pretty exciting that graphics, connectivity, and data transfer are at a place that allows the new VR platforms to realize this potential.
2- Major Segments in the VR Stack
1. Tools for Creating Content
-Types of Capture (360 video, 3D Volumetric scanning, photogrammetry)
2. Infrastructure Software
-Compression Technology
-Cloud Graphics / Rendering Software for computation as a service
3. Education
-Here he provided the example of the internet, which allowed all of the information around the world to be indexed, allowing users easier access and faster consumption. And now w/ VR it indexes experiences and allows them to be accessed more easily and consumed more quickly.
3- VR Industries and Market Opportunities
When reviewing consumer applications and industries for VR, Adam mentioned opportunities within Education, Social, Retail, Media, Entertainment, Content the Gaming spaces.
Some of the longer-term opportunities included:
Education: Adam talked about how the current eduation model is one that was created hundreds of years ago. It doesn’t apply to a world that has all of this data readily accessible. Skills can be learned faster and on-demad.
Retail: On retail, Adam talked about the potential for visiting stores and viewing accurate renderings of real products without ever leaving your home. It’s tough for me to imagine shopping for clothes this way, but retail has and will continue to be disrupted even more significantly in the future.
Entertainment: Here Adam talked about how movie makers are looking for new ways to tell stories and also disrupt the old ways that movies have been created.
Some of the shorter-term opportunties included:
Content: Adam mentioned how in the early days there were be few producers of content and fewer producers of really high quality content. So, while there won’t be a mass market of users at the outset, every user will dowload the best content b/c there won’t be much out there. This reminds me a bit of the early app market in the first couple years of the iPhone. The limited number of apps that existed made the better ones extremely popular.
Gaming: More interactive and high velocity options will exist and may be one of the purchase drivers similar to the way that many bought iPhones to access some of the best mobiel games. However, even though these games will be more interactive they may not necessarily replace existing methods of gaming which relates to our tip of the week and this week’s tip is…

Tip of the Week:   Zero-Sum Tech? Addition vs Replacement


Thank you for joining me for Part 2 of the interview with #Adam Draper on Virtual Reality Investing. In this installment we will cover how VR has been in various phases of maturity for decades, and why now is the right time for it to gain traction and mass market adoption, how Adam thinks about capital intensive areas of investment, and how he approaches investing in VR versus some segments that may require very little capital to achieve product market fit. We also talk about the economics in business models for VR; some of the biggest challenges to VR, both technological and otherwise; the exciting things to look out for in VR in the coming years. And finally #Adam’s thoughts on Virtual Reality that can be integrated into human biology and if that’s science fiction or science fact. Of course, we will always wrap up with the key takeaways and tip of the week. Here is Part 2 of the interview with #Adam Draper of # Boost VC.

Nick: So VR has been in various phases of maturity for quite some time. Why do you think the next few years will be the right time for VR to take off and attain some mass market adoption?

Adam: Well, I, you know, I can talk about how you know, graphics cards and all that stuff already. And like the infrastructure level is ready. But really like headsets are getting delivered. Like, we’re at the point where, you know, everyone has laid the groundwork for this, this technology to at least have a shot. And there will be millions of headsets on people’s faces in the next, you know, really 6 months, which is pretty exciting. The other thing like, you know, everyone says why now for virtual reality, why, you know, there was a wave in the 90s, there was a wave in the 80s, there was like a, you know, computers are strong enough to, everything is strong enough, but also what we have that they don’t for distribution is the internet. Like ideas travel faster. Everything moves a little, little quicker. And being able to interact is going to be such a big part of virtual reality with other people in VR that it wouldn’t have been possible to do those things before. It would have been way, it would have been different, and to say it was impossible is, I don’t like saying anything is impossible. It’s just the internet made everything move so much closer as far as networks. And so I think Virtual Reality is prime, right now is the time for all of those things to come together, to build this awesome thing.

Nick: You know, my investment partner brought in a Google Cardboard that he had ordered off at Amazon, the other day to our investment meeting. And we stuck our iPhone in this thing and in two minutes we were in Virtual Reality games and simulations. It was. And it’s pretty amazing, even just with an iPhone and a cardboard apparatus. You think about how incredible it’s going to be with, with an Oculus and HTC and some of these more advanced headsets.

Adam: Oh yeah. Oculus has an amazing demo called ToyBox that they were downloading I believe at CES. I would recommend trying to able to get a download there. But also the Vive, as far as controllers and motion tracking, is a very compelling experience. It’s awesome. We have a bunch of Vives set up in our office and we get to try all these really, really cool toys. I believe Oculus is delivering controllers later this year. So they’re not delivering the actual controllers to play in virtual reality on this when they’re delivering the Oculus in March. So Vive, in April you’ll actually be able to order it with the controllers and the sensors, which is, it’s a more compelling experience to be able to move in the environment.

Nick: So cool. So #Adam, this is an area that can be capital intensive early on. How does that change your approach as a startup investor when you compare it with sectors or investment areas that require very little capital to achieve product market fit?

Adam: So, it will be capital intensive in the way that the companies need to exist for a little while to. The expensive part is getting distribution of the headsets. So getting people to have headsets on their faces is the most expensive part of this job. And that’s being taken care of. So most of the other stuff is mostly just software.

Nick: Yeah

Adam: Being able to stand out on the software, yeah that, there is an argument for that being a little more expensive on a new platform. But I, I think that it will be, it will be equally cost efficient as building like a mobile company because it’s mostly, it’s still just software based businesses that we’re investing in. We generally don’t do hardware. We have, we have the 360 camera, we’ve done a couple other hardware based things, but we, in general we, we try to stay on the infrastructure software and early applications of a new platform. And so my, my answer is I don’t really think it’s too capital intensive. I think it’s actually a good time to start because the market is about to be there and it won’t cost that much. It’s mostly just software.

Nick: Are most of the business models for the companies in your portfolio, are they SaaS models, are they per app download models? You know, what are the economics on most of these types of  VR portcos?

Adam: It’s such a good question because no one’s sure how people are interacting and paying yet. Paying in Virtual Reality is a weird thing thus far. Like it, no you can’t technically pay in virtual reality because they haven’t built a good system for on boarding credit cards. But other than the two dimensional system which already exists. So like, you know, signing up for Paypal or signing up for Stripe, like those things are sort of how everyone’s doing it. But you can’t do that in the goggles, which is, is interesting. You know, a lot of people are setting out to be a hey just buy this thing and we’ll try to sell in app purchases or we’re, you know, I think SaaS will be a really interesting one. But what hasn’t been created yet is the ad network. I think ads are going to be a really big piece of paying for content in this world. And that’s something that a lot of people should start thinking about if you’re going to build a business. I’d say the ad network is not a bad model.

Nick: What do you think are some of the most significant challenges to VR right now, whether technological or otherwise?

Adam: I mean, the biggest one is pretty obvious is that no one has headsets. So there’s something like a 100,000 /  200,000 that are out there right now, and they’re all older models. The new models are coming out. So really it’s going to be the distribution. And then really it’s the opportunity is that we have sort of cited earlier, the major issues like creating content is difficult still in Virtual Reality.

Nick: Yeah

Adam: Like for the normal end consumer, I am not very good at creating content yet. It’s expensive to start creating content, whether you do want a 360 video camera. If you want high end content, it’s very, very difficult. So a 360 camera, the sensors, like all those things are expensive. So there is a varied entry on the content creation side. Other than that, it’s just getting bucks in the seats man. I like, we just need people to have headsets, we need people to be wearing them.

Nick: You mentioned some of the big milestones coming up here in the next few months. What are some of the more exciting things to look out for in VR in the coming year or in the coming next few years?

Adam: Oh yeah, I mean, definitely try everything. But yeah, I cited realities.io . It really is great to try to explore that, those experiences in Virtual Reality and being able to interact with the environment. We have one called Sculpture VR that’s really about creating worlds and it’s just weird if you’re like god creating a new world. It’s pretty awesome. And then we have just a wide range of different things. Yeah, it depends what you’re really excited about. But I’m just excited to see what these tools enable other creators to make. Like I, you know, people are going to have to create the Final Cut of virtual reality because Final Cut’s not all that great for cutting virtual reality content. There are all these tools that just need to get created and are going to enable builders to build more content and give people just crazier and crazier experiences. For a simple thing, what we actually show most people the first time they’re trying virtual reality, is the LeBron James experience. And the reason is it’s awesome, but you get a really good idea of what virtual reality will be able to enable, and then you also get to hang out with LeBron James. And that, it’s like, it’s pretty incredible, and because it’s so easy and it’s so obvious that it’s going to be like a way in which people use it. Every time we show someone the LeBron James experience, everyone takes off the goggles and they say is there a Steph Curry one? And, and it’s like, it’s just if you’re a basketball fan it’s the best. It’s just, you’re like oh man I really respect everything about LeBron James right now. And it was so good for LeBron James too because, so I think celebrities will use it to get closer to their fans. Give them a glimpse behind the life of what celebrities do, what athletes do, understand how they work out. I think there’s a movement media just to explore that opportunity anywhere. Like it shows with Instagram, how people use Instagram is really about like hey this is what I do behind the scenes of my life. Like I, you know, take pictures of food and I, you know, have dogs and I have a family. And like, celebrities use it that way. And then this will be another way in which you can get more one to one experience for everyone to interact with celebrities. I think that’s one way in which people will be using it. And it’s really going to be cool for that.

Nick: Super cool. Yeah, I’m a huge college basketball fan, and particularly I like the Indiana Hoosiers, and Mark Cuban is an alumnus of Indiana. And he recently gave a big large multi million dollar gift to assembly hall, the facility that they play basketball in to create this 3D VR technology for the whole basketball arena.

Adam: Oh wow

Nick: Yeah. So it’s going to be the only one in college basketball that has this. And I don’t know what means exactly. I don’t know if that means you can essentially be on on the court during a game with, hey, you know, you can simulate what it’s like to be Yogi Ferrell as the point guard. I don’t know what it means exactly but it sounds awesome.

Adam: It sounds so cool. Yeah, I, so I think what’s really exciting is that we have gotten to this point where we have this tool that has a lot of opportunity. And the next two years is all about figuring out what people do with it, what makes them save time or what really adds value to their lives, entertainment wise or just like actual value wise. So that’s really the exciting thing.

Nick: Yeah. I think we’ve touched on all these different consumer applications, but there’s got to be a lot of B2B applications too. Whether it’s architecture or civil engineering or

Adam: Absolutely. Architecture, construction, civil engineering, the big, yeah those are, actually one of the biggest huge cases right now is art. People are using this application called Tilt Brush and they create these amazing like almost sculpture models in virtual reality. Oculus has released one called Medium, that’s sort of similar but more about sculpturing than the drawing and painting in the world. But it’s sort of like you can create 3D art in this amazing way. And that’s, I mean, I, like that’s the thing that I think people have been having the most fun with. And I recommend looking up a couple YouTube videos of people creating things with Tilt Brush because it’s pretty cool.

Nick: So this next question is a little out of the box, but, some have tabbed audio speakers, implanted in the human ears, and identification sensors, implanted in the human hands as some of the first biological IoT with near-term application. Do you think it’s science-fiction or science-fact that elements of VR will eventually be integrated into human biology?

Adam: Well that’s a, I mean, a big question. My short answer is definitely. Because if you think about like the ideal, like the ideal scenario is that my body is the remote control. That’s what the controller is, of not only virtual reality but of the world. Like I, you know, I’m able to interact with it in that way. So okay I think it’s two distinct time frames though, because there’s computational bio that’s coming up through the ranks also as a future technology, that is quickly emerging as a real thing where 17 years ago you were able to, you needed to be a PhD to start an internet company, you have to be a PhD right now to start a bio company. But the age of someone starting a bio company is going down because the cost of starting a bio, a computational bio company is going down. And so like that is very exciting. People are doing really interesting things with that data, they’re able to build a lot of really cool stuff. And so I think that that correlating with this emergence of virtual reality hand sensor bio stuff, everyone is going to be like a super human.

Nick: Yeah. It’s, it’s nuts to think about.

Adam: Yeah

Nick: But certainly, you know, having a chip or a sensor in your hand to handle all payments and all verifications of identity, I mean, that’s something I would want. But any time I even bring that topic up with, with anybody not in the tech world, they, they give me really funny looks.

Adam: Oh yeah. You know, it’s a weird concept to think about and, you know, you sort of hope that you’d be able to do it without something that’s super invasive. You know, people already tattoo themselves though, so, I don’t know.

Nick: Awesome. Well, just to wrap up here, can you talk about some of the things you’re currently up to and most focused on at #Boost VC?

Adam: Yeah. I mean, we’re, you know, we’re in the middle of Tribe 7. So we’ve invested 134 companies. Really a large part of my job at Boost VC is it’s a lot of linking a network to, a Silicon Valley network, to these startups who are global. And then participating in the industry. So we try to play as big as role as we can in Virtual Reality as a sector and in blockchain as a sector. So a lot of my time is consumed by doing those things. My favorite part of my job is really working through problems with entrepreneurs, having good entrepreneurs in front of me talking through and working together to solve their major problems in creative ways is like my favorite thing to do.

Nick: Is there a set of Series A investors that also specialize in VR and blockchain that you partner with on a frequent basis?

Adam: Yeah. VR is still new, people are still coming out about, you know, whether or not they’re specialized. There are about 3 or 4 specialized virtual reality funds. In the big current blockchains space, #DCG Blockchain Capital already did a lot of deals. There are a lot of people who have been very excited about blockchain. So I, I really enjoy those, those funds. The people buying those funds they all are very altruistically and incentive-wise helping the space. Virtual reality, you know, it’s still to be determined who the focus players are in the space. We’re one of them. You know, RV, there’s one called Colopal, there are a couple other funds that are out there. So yeah, I would say we’re enjoying, we’re investing alongside other funds. It’s in the specialized part of it, it’s still TBD.

Nick: If we could address any topic on Venture, what topic do you think should be addressed and who would you like to hear speak about it?

Adam: Yeah. I, you know what I would want to hear about is, well I want to learn about artificial intelligence.

Nick: Yeah

Adam: Yeah. I would like, I’d want to hear artificial intelligence and I’d love to hear someone over at like #Austin Dynamicz or one of the, or a couple of the startups. Like I’d love to have the startups sourced and figure out who, who were the major like early startups who are trying to play big roles in that artificial intelligence space. I would want to use it for my own, you know, knowledge base just to understand what’s happening in that space a little better.

Nick: Sure. Great

Adam: And, you know, I also want to know what the timeframe is for robots to rise up against the humans.

Nick: Awesome. Well, finally, what’s the best way for listeners to connect with you?

Adam: adam@boost.vc Feel free to email me. I’m very happy to respond to emails, entrepreneurs, investors, anyone. If you have any questions, let me know.

Nick: Awesome. Well, thanks again for doing this. It has been a lot of fun and when you’re out in Chicago, give me a shout.

Adam: Yeah, definitely I will. Thank you very much. It was great to talk to you Nick.

Nick: Really fun interview there with #Adam. I can’t wait to see some of the companies that come out of his accelerator.

*Please excuse any errors in the below transcript