Happy New Year and welcome to this month’s curated digest of viewpoints, news and investment activity covering the Metaverse, XR and Spatial Computing. If you know of founders, investors or anyone else that would find this investment-focused digest useful then please pass it along!

Dave Haynes & Petri Rajahalme (FOV Ventures)

VR wins Xmas 🎄

The Metaverse may have been the overall winner of 2021, at least in terms of hype (449 mentions in Q3 earnings calls). But it was the humble reality of VR that won Xmas. Meta's Quest 2 was a very popular gift, with several developers reporting record sales & activity. The Oculus app topped thecharts and anecdotally I heard of many people getting their first (or second) VR headset this Xmas. Even my Dad went out and bought one for himself, which came in handy given covid cancelled our usual festivities!

And just look at the potential developments in store for 2022

• Sony Playstation just announced its new PSVR headset

• Meta have at least 2 headsets in the pipeline (Quest 3 / Quest Pro?)

• Pico's new owners Bytedance will likely have consumer VR ambitions

• New form factors are being explored. From the thinner, casual headsets like HTC's VIVE Flow to mixed reality challengers like Lynx.

And all that before we even start to speculate about Apple announcing its new device later this year. Has there been a better time to be a consumer focused VR developer?

Fundraising Round-Up 💰

Niantic raised $300m at a $9bn valuation to build the ‘real-world metaverse, powered by its recently announced Niantic’s Lightship ARDK. Deadmau5 and Richie Hawtin backed startup Pixelynx is just one of the developers building on this ARDK and they announced their $4.5m funding round from Animoca Brands, Solana Ventures and others. Meanwhile in the AR space, Jadu announced its $7m investment from General Catalyst, Coinbase Ventures, The VR Fund, Sound Ventures and others to build out a playable AR mirrorverse.

Coming back to the non-AR Metaverse, Rec Room raised $145m at a $3.5bn valuation for its VR and cross-platform social gaming platform with 37m active users and 12m user generated rooms. Rec Room hit 1m VR users in the two days after Xmas day. The round, as with Niantic, was led by Coatue with participation from Index and Sequoia. Meanwhile, Asia’s own Roblox-challenging Metaverse platform, Zepeto, banked a similar amount, receiving $150m from Softbank valuing it at over $1bn.

Avatars, identity and virtual fashion was a huge theme through 2021. Last month ReadyPlayerMe solidified its position as a market-leader and announced its €13m Series A investment led by Taavet & Sten with participation from Konvoy Ventures (and ourselves)! Whilst web3 upstart OFF announced a smaller €3.5m raise to expand its ‘MYTY Camera’ solution and NFT-based avatar system

With more time spent in the Metaverse we’ll inevitably need better user interfaces. With this in mind (pun intended), OpenBCI raised an undisclosed amount from Bitkraft, re.Mind and NaCHO3, whilst Cognixion raising $12m for its own neural interface efforts. And in the more tangible world of gesture and haptics, Ultraleap raised $82m from Tencent and Haptx announced its $4m raise for its advanced glove solution. Also noteworthy was Mojo Vision’s $45m raise for its futuristic vision of AR contact lenses.

Other start raising money in the past month included Adloid ($4m), Affyn ($7m), Dent Reality ($3.4m), OQmented ($9m), PORTL ($12m), Solice ($4.36m), Spectalics ($2m), Space ($7m), VNTANA ($10.5m)

Exits and M&A 🍾

Nike got Metaverse-ready by acquiring virtual sneaker startup RTFKT. The price was not disclosed but with investment from Andreessen Horowitz and revenues from its NFTs alone clocking up at least $100m, it's hard to see that the price wouldn't have put it in unicorn territory. This is a huge nudge into the mainstream for both NFTs and virtual fashion.

Meta acquired Within Studios, makers of VR fitness app Supernatural, for a reported price of $400m. The company also boosted its Metaverse push by acquiring synthetic data startup Reverie AI.

Epic acquired Harmonix to help them "reimagine how music is experienced, created and distributed” as it continues its mission to build out the Metaverse. Meanwhile rival game-engine Unity continued its recent acquisition spree purchasing Peter Jackson's Weta Digital for a hefty $1.6bn to boost its footprint in virtual production. Adding to these efforts, SyncSketch also joined the Unity family, bringing with it its synchronized real-time collaboration tools.

In other M&A news, Qualcomm acquired hand-tracking startup Clay Air, Resolution acquired fellow Swedish VR studio Zero Index and Niantic caught Lowkey, a platform that offers gamers a fun and easy way to capture and share their favourite gameplay moments.

Quick Links 🔗

To finish off this month we thought we'd share some of our favourite reflections on 2021.

• 8th Wall's Tom Emrich looks back at his predictions for AR in 2021.

• Meta's Andrew Bosworth reflects on 2021 and looks ahead to 2022.

• CNBC's Julia Boorstin on what to expect from the Metaverse in 2022 (featuring ReadyPlayerMe)

• Adobe's Scott Belsky gives 10 forecasts for the near future of tech

• HTC Vive's Alvin Wang Graylin with his 2022 XR predictions

• The ARShow's Jason McDowall does his annual 2022 kickoff podcast

That’s all for now. Have a great start to the year and please do send us your feedback, comments or interesting new startups you know of in this space!

Dave Haynes & Petri Rajahalme (FOV Ventures)