Making Money in VR/AR
The WSJ story broke today that Signia is leading a $5 million round of funding for STRIVR (I’ll be taking our board seat). Here’s my controversial opener: STRIVR is not a Virtual Reality (VR) company. It is a human performance and training platform that happens to use VR as its primary mode of education. But, STRIVR’s customers can also use Augmented Reality (AR), mobile devices, or even good old computers. Here’s my second (less controversial opener), STRIVR is not a sports training company, it’s a VR training platform. More on that shortly.
If you follow anything tech related, you’ll know the hype around VR/AR is at an all-time high. Part of that is justified, we finally have real, reasonably priced, relatively stable headsets coming into the market from major players like FB/Oculus, Google, Samsung, HTC, MSFT, and more. We also have a huge amount of funding that has been poured into the space from investors (and we’re part of that trend at Signia). Magic Leap alone has raised almost $1.4 Billion without ever having shown a public prototype. It’s now not a question of “is” widespread adoption going to happen, but “when.” Take a look at the rise in interest level in VR over the past 3 years if you don’t believe me.
What’s the Problem?
For all the money/interest in this space, there have been few major exits besides Oculus being bought by FB for $2 Billion. Why? Most of the companies in VR today aren’t making any money. That tends to scare would-be acquirors away and definitely means nobody is going public anytime soon. There have been some early successes with gaming companies like Survios posting $1M a month, but we’re still waiting for large-scale consumer adoption to occur for those numbers to go up exponentially. Early success, ala Survios, is being driven by a small set of early-adopters (~25k new customer a month) desperate for good content. How do we solve this problem? Go after enterprise customers that don’t need to wait for consumer adoption, that’s where I believe the biggest opportunity for real sustainable revenue is over the next 2 years.
STRIVR = Real Recurring Revenue
According to Deloitte, corporate training is a $77B market in US growing 10–15% a year (last 5 years). Intuitively that makes sense, companies are spending more on retaining talent than ever before as the skill gip widens and it gets more and more expensive to recruit the right kind of employees.
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Here’s another even more important number: in 2015, their first year of operation, STRIVR did a healthy seven-figures worth of revenue and was profitable. This is without raising any funding besides a $30k check from Coach Shaw at Stanford and a few friends. You can read all about the company history starting with training pro/college quarterbacks here, so I won’t bore you with the details. Selling to any professional team is a hard thing to do, selling 6-figure annual subscription deals to NFL teams is almost unheard of for a new platform. They also have a laser-focus on data which they use to assess if someone is actually learning and how VR is actually helping performance in the real world.
I got involved because STRIVR figured out that they could take the same platform for sports training, assessment, and reporting and reuse it for any training scenario where physical repetition or danger could be involved. Think of dealing with Black Friday shoppers as a first-time retail associate, figuring how to do an insurance assessment in a disaster scenario, race and empathy training, and the list of potential use cases goes on and on. VR is great for situations where understanding an environment and picking up on visual cues is really important, which is a ton of situations that people face on a daily basis at their jobs. STRIVR already has corporate pilots for this enterprise training that quickly converted into seven-figure annual SaaS contracts. So, there is definitely already strong product-market-fit and a huge amount of pent-up demand.
STRIVR’s enterprise-focused product is a performance training platform that uses VR and AR (Augmented Reality) to help educate and train in areas like sales, operations, customer service, safety, and HR. It is an end-to-end platform, from content capture to reporting/assessment, and the content is viewed with regular VR headsets like Oculus and Samsung GearVR. A less-immersive, lite version is also available on mobile and tablet. STRIVR uses data and assessment tools to assess learner performance, enabling organizations to make data-driven decisions about individual preparedness for critical situations.
Even more important than the market/product: the team is a scrappy, smart, and fearless group of entrepreneurs that are committed 100% to the mission of elevating human performance. I love their drive and competitive spirit. It probably helps that something like 75% of the team played a college and/or pro sport. They like to win, but are humble and like to have fun along the way. I’ve loved working alongside them to continue to expand STRIVR. Thankfully as an investor, I know that they’ve already figured out how to make real recurring $ along the way.
