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! And if you enjoy the newsletter, consider sharing it with friends and colleagues.

Dave Haynes & Petri Rajahalme (FOV Ventures)

In this edition:

• Startups & Fundraising

• Major Platforms & M&A

• Datapoints

Startups & Fundraising

AR investments remain strong, with a constant cadence of finances flowing into companies building out their software capabilities. If you're ready to dance, then consider looking into Encore, an AR live performance app that raised $9m. And Malaysia-based BuzzAR raised $3.8m in seed funding - just cutting it short from Beem, which raised $4m to live stream in AR.

Interestingly, we've seen an increase in the number of celebrities investing their funds into promising Metaverse projects. One example is MindMaze, a MedTech company backed by Leonardo di Caprio that raised $105m. Virtual celebrities are in vogue; we see virtual avatars populate Twitch more and more, and the trend will continue into 2022. Companies like Soul Machines, which raised $105m, service the demand for these 'digital humans.'

On the metaverse, Portals raised $5m to help build a metaverse metropolis based on the Solana blockchain. To help walk around the city, Aglet raised finances ($N/A) to build out their operations. And if the journey ends in injury, don't fret: XRHealth raised $10m to build out their VR health services. Bandai Namco is investing $130m to build out its 'IP metaverse,' leveraging their lucrative properties. Foxconn is investing $100m into XRSPACE to expand their work, while GoHub invested 700,000 euros into Onirix for the same reason. Governments are investing as well; South Korea's Ministry of Science and ICT will invest $7.5bn into digital technologies, 9% of which going into the metaverse and cloud tech.

Continuing the cadence of metaverse-related financing, Matrix World raised $4.5m to finance their blockchain-based world. Making a calculated bet, sports betting company Entain is investing $130m into a global innovation lab to develop immersive experiences. Meanwhile, enterprise training continues its mature evolution, as Talespin raised $20m to continue its expansion. On the components side, Protech - which makes micro-LEDs - secured $20m in Series A funding to expand their business as well.

Major Platforms & Acquisitions

Meta's financials were weaker than expected via a seismic loss in its Reality Labs division as they build towards their vision of the metaverse. The 'loss' should be no surprise however, given Mark Zuckerberg's public commitment to 'invest' $10bn yearly into what he sees as a long term vision. Roblox was raked by issues as well, as major sites investigated their worlds for malicious content, reducing their stock price. The coverage signals the start of a bit of Metaverse backlash, which is inevitable given the preceding hype. We see a lot of opportunity for startups to fix some of the emerging challenges created as we spend more and more time inside immersive virtual spaces.

But alongside the news came a sense of buoyancy as metaverse investments and M&A activity continue continued to pour in. Epic Games just announced their acquisition of Bandcamp. It came as a bit of a surprise, but could prove to be a savvy purchase giving Epic access to more music rights and artists/bands to plug into Fortnite, Unreal Engine and the metaverse in general. It also adds another creator-led marketplace (like Sketchfab) to the Epic family.

Doubling down on this point, Epic's Unreal team pointed out that the metaverse will likely be creator-led; saying in a recent blog post, "we believe it should be built by all of us," where everyone has a "stake" in the Metaverse. It's a big market opportunity as well, with Morgan Stanley saying it is worth $8trn in China alone.

With its promise, all hands need to be on deck. Nike and Disney are both hiring quickly, and while we do not have firm numbers, we know that it forms a part of their expanded strategy. Qualcomm opened XR Labs Europe to spearhead R&D in the region with their own investments. The fruits of these investments will be reaped in years, not months.

The growth of the Metaverse is hard to predict, as Unity's AR/VR head argued in an interview. But perhaps it will lead to an implosion of activity:

Outside of these activities, companies are making moves to pivot towards their goals. Moving away from first-party game development, Improbable sold Inflexion to Tencent, as they "saw a future for itself in a different direction."

Datapoints

Sensor Tower found an influx of apps using 'metaverse' in their name, with a significant spike in November 2021 and a slight ebb in January. Such a leap demonstrates the volume of opportunists in the space. As one analyst at eMarketer said, "it will be a while before marketing campaigns can move beyond gimmicks."

That’s all for now. Have a great March and keep your eyes for some exciting news in the coming weeks. As always please do send us your feedback, comments or any interesting new startups you know of in this space!

Dave Haynes & Petri Rajahalme (FOV Ventures)