The Investor's Perspective on Meta Connect '23
Views on the Quest 3, Mixed Reality, Ray Ban Stories, Meta AI etc
We held the second edition of our Investor Roundtables where we invite a handpicked group of friends and co-investors to give the VC perspective on a particular topic. Last time we analysed the announcement of the Apple Vision Pro. This time we were debriefing Meta’s annual Connect conference.
Another friend of FOV, Laurie Owen, was kind enough to give his perspective and write up the panel for us. Thanks Laurie!
FOV Ventures’ investor roundtable sheds light on the latest and greatest from Meta from the perspective of investors in the space. Meta’s annual Connect conference provided a look at lots of new XR hardware, but surprisingly as well equal attention devoted to AI.
The roundtable - which you can also listen back to on LinkedIn with full comments here - included, Dave Haynes (FOV Ventures), Arian Ghashghai (Earthling.vc), Amal Dorai (Anorak Ventures), Denise Xifara (Mercuri), and Tipatat Chennavasin (The Venture Reality Fund).
The investor panel breaks down:
Pushing Mixed Reality
Ray-Ban Meta Smart Glasses
Meta & AI
XR investments in 2024
Who was Connect for?
Not VR Developers? The pronounced focus on AI, especially non-XR AI, was surprising. Equally unexpected was the balanced emphasis given to both the Quest 3 and the Ray-Ban Stories 2.0.
The usual spotlight on individual VR developers/studios was noticeably absent. Plus, the significant emphasis on MR didn't match what most developers had been creating for Quest. For Tipatat, who attended Connect, the event perhaps seemed more tailored to shareholders than developers.
Similarly, the focus leaned very heavily into the consumer trend of Meta Quest with a similarly surprising omission of any real enterprise focus - although Meta did tease ‘Meta For Business’.
However, We Did Get Some New Numbers Out of Meta.
$2 Billion dollars of revenue has passed through Quest store! At Connect 2022, this figure was $1.5bn - so the increase seems to track relatively strong considering it is the end of Quest 2’s product cycle, and there are still only ~600 apps on the Quest store - 1.6 million on iOS for reference.
Meta Connect ‘23
Over 190 Quest Store titles have now achieved $1,000,000 in revenue.
This implies that Quest still presents a great opportunity for the the average VR developer, especially indie developers. In comparison the average Steam game makes 7,000 dollars. However, without a clearer breakdown of the Quest numbers it is perhaps still too early to assess all the implications.
Next Generation, Meta Quest 3
Most of the information around the new device was unveiled back in July, and the panel unanimously agreed that the Quest 3 seems state of the art, especially at $500. Dave pointed out that there were several pointed remarks directed at Apple here, saying that a key innovation of Meta has been to bring such a good headset to market that is still accessible to millions (vs. the higher priced Apple Vision Pro).
For Amal, the new device has the ability to provide more of a show stopper experience - especially in enterprise - with many of the bugbears around Quest 2 seemingly ironed out.
While Amal emphasised that Meta isn't aiming to be a primary hardware supplier—remaining focused on being a platform—the presence of robust hardware indicates that if it meets a high standard, enterprise will be drawn to it, potentially bolstering B2B VR.
Quest 3’s biggest challenge will remain adoption. The largest investor bottle neck has been market size, and the difficulty to prove traction. Investors such as Denise, who maintain a degree of skepticism towards VR, are waiting to see the sales performance of Quest 3. Moreover, they're keen to observe how many of those buyers will become active users of specific applications.
Emphasise on Mixed Reality
The TL;DR of Meta Connect is that Quest 3 targets consumer mixed reality.
Unlike former Oculus CTO John Carmack, Amal does see many compelling applications of mixed reality, especially in enterprise.
I remain unconvinced that mixed reality applications are any kind of an engine for increasing headset sales. High quality pass through is great, but I just don’t see applications built around integrating rendering with your real world environment as any kind of a killer app. I… twitter.com/i/web/status/1…
— John Carmack (@ID_AA_Carmack)
Sep 29, 2023
But Meta did pitch MR straight down the line at consumers.
Arian, who is an ex-Meta Reality Labs engineer, has noticed a rising trend of MR gaming in startup pitch decks. However, he believes that many of these games appear uninspiring and constrained by technical gimmicks rather than being driven by imagination and fantasy.
One of the primary appeals of VR is the ability to be in fantasy worlds, especially if the headset is already on the users face.
For investors the questions are, is the MR approach genuinely enhancing the gaming experience or just a novelty? Will it truly be enjoyable for players?
If VR is Escapism and MR is functional, the panel also doubt Quest 3’s MR as being a legitimate competitor to the Apple Vision Pro. While MR does remove some friction around headset use, Meta will find it tough to compete without Apple’s (bullish) vertical integration so the new uses cases Meta presented are all entertainment based.
Again, Arian, has observed that many startups are tailoring their MR developments primarily for the Apple Vision Pro, rather than creating something uniquely suited for Meta's MR platform.
What the.. Ray-Ban Meta Smart Glasses 2
Somewhat surprisingly a second generation of Ray-Ban Stories is in the pipeline despite the first model’s lack of success.
Aside from updated cameras etc, next year, Meta is promising AI onboard that will recognise objects through the cameras, and even read text. Will these glasses feel like smart assistants, and when exactly will that ship?
Arian, who spent 4 years at Meta working on this tech, believes it shouldn’t have shipped! However, Meta’s philosophy is to ship a lot and ship quickly. With all of the Smart Glasses efforts bubbling up to the future AR glasses.
The panel was mixed on these, there is definitely something compelling around positioning the product with Ray-Ban, considering Google Glass’ fell at the first hurdle on looks.
The hands free outdoor experience could be powerful, but it is still hard to see this product being everyday relevant, even with the ‘loose’ promise of the software upgrade with generative vision overlays.
Meta is Fully in The AI Game
Meta’s announced a foundational model for image generation, Emu, and a host of new AI-powered bots across its messaging apps.
One is an AI assistant called Meta AI - similar to Alexa/Siri - which will soon come to Quest 3. But outside of that, the panel struggled to see the target users of these products. However, this might stem from unclear communication about the potential trajectory or as a proof of concept for an AI studio— a platform that’ll let businesses build AI chatbots.
Importantly, Amal highlights that these elements - personas, AI imagery, assistants - all loop back to their central model: Advertising. This is where Meta could rake in trillions from AI-enhanced Ad-Tech.
Encapsulating Meta’s broad showcase was a comment from Denise, “It is ultimately intriguing the fact they are doing all of these things”.
They're employing a multi-modal AI platform approach, encompassing vision, and rolling it out across all their social apps and VR hardware. Clearly, there's a cohesive high-level strategy at play, offering tonnes of future opportunities for startups to build towards.
Lastly, where are the most interesting XR investments in 2024?
Arian: Social VR for Gen-Z/alpha; kids are playing Roblox for hours each day and social VR is a perfect extension of that.
Tipatat: Everything is still up for grabs, one killer app for me would be a Roblox level editor.
Amal: Similarly, everything still up for grabs, there is no Apple or Microsoft leader of VR.
Denise: More opportunities in the creator economy.
Dave: Consumer XR, especially interesting areas outside of gaming, things that already work today in VR but would extend extremely well to Apple Vision Pro, bottoms-up productivity tools targeting the Vision Pro ecosystem.