Six Shifts Shaping 2025

As Amara's Law reminds us, human nature tends to overestimate the impact of technology in the short term but underestimate it in the long term. The constant buzz of fleeting tech trends will come and go. But at FOV Ventures we’ve been firmly focused on a set of truly transformative technologies that have been unfolding gradually and are now converging to take us into a new era of computing.

Areas like AI, robotics, and spatial computing - that to many seemed like science fiction just a few years ago - are simultaneously reaching maturity and creating huge new opportunities.

While some of our focus areas have been steady companions for years, evolving in expected ways, others have accelerated dramatically. Physical AI and robotics, for example, have shifted from theoretical possibilities to practical realities. And other building blocks - from AI and computer vision to mixed reality and edge computing - are finally clicking into place.

The rapidly shrinking gap between our digital and physical realms has long been central to our investment thesis and in 2025, the signals are becoming impossible to ignore.

To kick off the year, we have listed out six key themes shaping this transformation.

Each represents a different facet of how computing is evolving beyond traditional interfaces, and represents key areas our fund is paying attention to.

If you are working on a startup, or investing yourself across any of these themes we would love to hear from you! Reach out on LinkedIn and submit details here 

1. Gaming tech expands, powering more than just games

Video games have long served as both a catalyst and testing ground for emerging technologies. Many people don’t realise, but Nvidia started out as a gaming company, with spend on graphics cards funding the R&D for everything that came afterwards.

This pattern continues today.

Gaming drives VR adoption and serves as an ideal testing ground for AI innovation, with game studios being first movers to adopt AI-powered creation tools (like FOV portfolio Scenario and Move.ai) to push creative boundaries.

In gaming, even AI's current limitations can become features, rather than bugs. "Hallucinating" NPCs (non-player characters) can create uniquely unpredictable and engaging experiences, turning what might be problematic in other contexts into a source of entertainment. 

The gaming industry's investment in real-time 3D engines like Unity and Unreal has created ripple effects far beyond entertainment. These powerful platforms, originally developed for games, now serve as foundational technology across diverse sectors. From e-commerce, visualisation, design, learning and education, automotive, training and military simulation (Anduril’s first acquisition was a gaming company).

These engines are now even playing a crucial role in AI development, generating synthetic training data that accelerates progress in fields like robotics.

This is a trend we’ve been following for several years now, but we expect to be more active in this area as a fund in 2025, due to several tailwinds.

Firstly, enterprise use cases have always faced high costs and bottlenecks for content creation, which thanks to AI will now shrink.

Secondly, 3D capture pipelines are rapidly improving (see FOV portfolio company M-XR). And a combination of techniques like gaussian splatting and image diffusion models are making it much easier to scan 3D assets and generate environments for use in areas like e-commerce (see FOV portfolio Graswald and Aino).

Thirdly, XR is continuing its steady march towards adoption, with the latest push coming from Apple (see below). It’s not obvious to most, but Enterprise use cases now make up over 70% of VR’s market value.

Finally, the introduction of AI NPC’s using autonomous agents and LLM’s are helping create much more sophisticated applications in areas that range from soft skills training to healthcare to collaborative learning. 

h/t to Troy Kirwin from A16z games for also highlighting this trend recently. Read more here and listen to his expanded thoughts here.

2. The long march to mainstream VR adoption continues, but in mixed reality form

2024 reshaped the VR landscape, marked by two contrasting approaches.

Apple's Vision Pro ushered in their 'era of Spatial Computing' with premium mixed reality features and a matching price tag. While it set new technical benchmarks, limited distribution and high costs have tempered initial developer enthusiasm. Apple is expected to iterate in 2025 with M5 chip integration, though a more accessible (ie. cheaper) next generation headset may not arrive until 2027.

Meta took the opposite path with their Quest 3S, delivering remarkably good mixed reality at just $300 and expanding beyond gaming into lifestyle and entertainment. On Xmas day, the Meta Horizon app was the most downloaded iPhone app, with hardware sales outstripping popular consoles.

In 2025 we expect to see both winners and losers within the Quest ecosystem. The best developers will rise to the top (Gorilla Tag has now surpassed $100m in revenue and 10 million players), whilst others may struggle or consolidate.

The competitive dynamic between Apple and Meta has levelled up the whole playing field. Crucially it has also triggered players such as Samsung and Google to re-enter the market. In 2025, expect the launch of a new Samsung device, following the joint announcement of Project Moohan. Meanwhile Meta will now also go head to head with Google’s ‘Android XR’ to push its own HorizonOS to other manufacturers looking to enter the market as the mixed reality platform wars start to heat up again.

The first device for Android XR, code named Project Moohan, and built by Samsung, will be available for purchase in 2025. But the operating system will extend to other XR devices, including AR glasses.

Head over to ARtillery for more thoughts on mixed reality and their key predictions for 2025 which include XR’s continued convergence with AI.

3. Smart Glasses get smarter, becoming the most human interface for AI.

2024 was a big year for smart glasses.

Sales of Ray Ban’s Meta glasses outstripped regular glasses in stores. This was even before they rolled out full AI functionality, which sits alongside the ability to receive calls, listen to audio and take videos. Meta then doubled down on this partnership, buying a 5% stake in Ray Ban owner EssilorLuxottica for a reported €5bn euros

As Meta's CTO Andrew Bosworth noted, AI capabilities proved to be a crucial catalyst in driving consumer adoption of this new wearable category, suggesting a shift in how we might interact with technology in our daily lives.

Announcements of Snap’s latest Spectacles, Meta’s ‘Orion’ and Google’s ‘Project Astra’ already show that within the next 2 years smart glasses with powerful AI functionality combined with partial or full AR displays will be a commercial reality.

We’ll be looking closely to see where startup opportunities are most likely to emerge. But in 2025 expect a cambrian explosion of experimentation in the space with new Ray Bans announced from Meta (that could include single lens AR displays), as well as developer adoption of Spectacles and independent smart glasses players like Brilliant Labs. Keep an eye out for other players too, including Halliday, Even Realities, X-Real and Raven who will likely lean on great looking glasses to be the perfect form factor for people wanting to interact with AI in a natural and real world orientated way.

Could we even see strong rumours or a possible WWDC announcement for Apple’s own glasses form factor? Let’s leave that one for next year’s predictions :)

4. LLM’s enter the physical world, as voice helps AI break free from the 2D chat window.

While chat windows on 2D screens have dominated our AI interactions so far, artificial intelligence is set to become more seamlessly woven into our daily lives.

Manufacturers of everyday devices – from headphones to smart TVs and speakers – are racing to integrate enhanced AI capabilities (as witnessed at this years CES). Alongside this, we'll see the emergence of entirely new devices designed specifically for AI interaction, marking a shift from text-based interfaces to more natural, ambient forms of engagement.

For us the most exciting new form factor will be smart glasses (as detailed earlier in this post). But we also expect to see everything from new wearables, IoT devices and even some early signs of in-home consumer robots. 2025 will likely be a year of experimentation, rather than mainstream adoption, but will set the stage for a paradigm shift in how the typical consumer interacts with their devices. 

As well as at-home scenarios, we’ll be on the look out for more vertical or workplace orientated solutions too. Whether that’s educating a factory worker on a new piece of machinery, or bedside assistance for patients or physicians. 

5. “Physical AI” is the new buzzword as world simulation becomes AI's next grand challenge

We now have foundational language models, vision models, audio models… but the big push in 2025 will be to develop world models. This means having simulations that provide physics-based, realistic virtual environments to generate synthetic training data and test models before they’re deployed for real in areas like robotics and autonomous driving. 

Earlier this month Google announced that it is forming a new team to work on AI models that can simulate the physical world. While Nvidia announced its own world foundation model Cosmos which has been trained on 20 million hours of video. As Nvidia CEO, Jensen Huang remarked during his CES keynote, ‘Cosmos is for the physical world what ChatGPT is for words and text.’

A number of startups are also chasing after world models, like A16z-backed World Labs, Sequoia-backed Decart and EQT-backed Odyssey.  

The growing focus on world models highlights their importance in bridging the gap between digital training and real-world deployment. As major players and startups invest heavily, the race to develop the most advanced world models is set to define AI progress in 2025 and beyond.

6. A new wave of robotics startups, leads to a surge in investor interest

We’re likely still a couple of years away from the ChatGPT moment for robotics, but the possibility has caught the attention of an increasing number of investors as falling hardware costs and advancements in physical AI (see above) remove the barriers of entry for potential founders looking to capitalise on a market which is set to be $200bn+ by 2030. 

Just as the availability of cheap cloud computing, and distribution on the internet allowed bedroom developers to start building software startups. Now any smart founder with pre-seed funding, a laptop and off the shelf components (or a 3D printer!) can conceivably start solving real world problems with robotics.

After a pull back in VC investment since 2021, we expect to see a resurgence of interest in 2025 with a rise back to 2022 levels or above. Notable rounds in 2024 included $400m for physical-AI focused Physical Intelligence, $675m for humanoid-focused Figure and $100m for Norwegian-based, OpenAI-backed 1x. Note: the numbers below don’t include the huge $5.6bn round for Waymo.

At FOV Ventures we made our own first forays into robotics with two, so-far unannounced, rounds in the back half of the year.

We go into detail in a recent blog post, but 2025 marks a pivotal shift in robotics, as these machines step beyond factory floors into our daily lives. While industrial robots have long dominated manufacturing, we'll gradually start seeing the emergence of other robots in everyday workplaces, from retail stores to office buildings. This transition mirrors how Waymo's autonomous vehicles transformed public perception of self-driving technology from science fiction to reality.

The year will be defined by three key developments:

• The rise of humanoid robots in service and workplace settings.

• The deployment of more sophisticated AI models capable of handling complex, generalised tasks.

• Growing adoption of teleoperated systems.

These advances are making robotics more accessible and practical for businesses that previously saw automation as beyond their reach.

As these technologies become more visible in our daily lives, even small and medium-sized businesses are beginning to explore how robots could streamline their operations. This of course signals a huge opportunity for founders and investors.

Some changes in 2025 will be visible on faces and factory floors - like smart glasses becoming as common as AirPods, or robots moving beyond warehouses. Others, like the race to build world models, are laying groundwork that will reshape technology for decades to come.

If you're building in any of these areas, we'd love to hear from you. While this list captures our current thinking, we're always excited to be proven wrong by founders seeing around corners we haven't yet turned.

Get in touch at www.fov.ventures