How VR, AR Innovation Can Finally Fulfill Its Potential


This post was co-authored by Matt McIlwain, managing director, Madrona Venture Group, and Steve Seitz, professor of computer science and engineering at University of Washington and “teleportation lead” at Google.

Virtual reality (VR), which immerses the user in the virtual world, and augmented reality (AR), which overlays digital information onto the physical world, are being touted as major innovation breakthroughs.

Goldman Sachs’ base case analysis sizes the market at $80 billion in revenue by 2025, adding that VR and AR “have the potential to become the next big computing platform, and, as we saw with the PC and smartphone, we expect new markets to be created and existing markets to be disrupted.”



We believe that this assessment is directionally correct. But one of the essential questions is why VR and AR are now—finally—ready for prime time. After all, these technologies have been around for a number of years.

First and foremost, the cost and quality of the components have meshed. And by components we mean network speeds, the cloud, high-resolution displays, and tracking gyroscopes, for example. In addition, VR and AR head-mounted devices (HMD’s) contain a number of key components that also work in today’s smartphones.

Second, there’s meaningful, multi-billion-dollar investment in VR and AR by companies like Microsoft, Google, Facebook, and others.



And third, there are a growing number of use cases—both consumer and commercial—for VR and AR. In the sciences, for instance, we see data analysts, engineers, and medical professionals eventually embracing VR and AR. In business, we see the real estate and construction industry already using VR and AR, and a slew of collaboration tools for virtual meetings coming to market. The military will continue to pioneer AR and VR use. Live video and video entertainment will become VR- and AR-based. The gaming industry will remain on the VR and AR cutting-edge. And, perhaps most importantly, social media will bring people together in a more realistic way, thanks to VR and AR.

Right now, there’s a debate brewing about whether VR or AR will have greater success. The conventional wisdom is that AR is harder than VR because, with AR, you have to make sure that what you’re putting into the world is locked in with what’s already there. That’s more difficult on the tracking side. There are also other AR challenges in terms of display brightness, field of view, and general ease of use.

But we don’t view this as an either-or or zero-sum proposition. VR and AR represent two completely different use cases. The technology for each has fairly similar ingredients, yet it’s really a function of whether the display includes the view that you’re in.

We believe that VR and AR can actually meet in the middle, in a place we might call “mixed reality.” There’s a company called Envelop VR, for example, that basically takes the screen experience you have in the physical world and moves it into the virtual world. (Madrona led Envelop VR’s $4 million Series A funding round last year.)

As promising as VR and AR are, barriers still need to be surmounted before mainstream adoption takes hold.

At this point, there just aren’t enough head-sets out there. Without an installed base, content and app developers are slightly wary about investing their creative effort and energy. Also, despite decreasing price points, we still need to see prices fall further in order to meaningfully boost demand.

From the users’ perspective, there’s often a sense of sickness that comes with VR and AR. And, just as importantly, VR and AR can be socially isolating experiences. As we noted, this will change, because, just like Skype, VR and AR can bring people together. Lastly, there’s a question about how mobile VR and AR technology can ultimately become:Is the computing being done in the head-set or in a high-powered PC nearby? We believe that the more wireless VR and AR is, the more it will be embraced.

In the end, though, like all transformational technology innovations, VR and AR will have to continue justifying their promise and potential through a series of user-driven breakthroughs. Based on what we’re seeing from the entrepreneurs in this space so far, our sense is that things are moving smartly on the right track.

Vikram Jandhyala is vice president for innovation strategy at the University of Washington. He is executive director of CoMotion, UW's collaborative innovation hub, and the UW co-CEO of the Global Innovation Exchange (GIX). Follow @vikramjandhyala

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