The DeanBeat: Seattle event marks the accelerated growth of virtual reality and augmented reality

SEATTLE — It’s not easy to find benchmarks for the excitement around virtual reality (VR) and augmented reality (AR) — two technologies that are expected to become transformative computing platforms. But my experience at the SEA-VR event is a good proxy. For the second year in a row, I attended the event, held this year at a bigger venue in Bellevue, Wash. It gave me more of a feeling for the velocity of the startup cycle and ecosystem for VR and AR. Going to the event for a second time gave me a sense of its business acceleration and how different opinions are emerging about just how soon VR and AR are going to be ready.

Stoking the fire are Facebook’s $2 billion purchase of Oculus Rift and Google’s $524 million investment in AR startup Magic Leap. VCs are speaking more openly about funding companies, such as Envelop VR, an enterprise VR startup in Seattle that raised $4 million from Madrona Venture Group.

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Last year, about 350 attended the free SEA VR event with about 23 companies. This year, the event drew more than 800 people, many who paid to attend. It had more than 40 companies exhibiting and a bunch of speakers. Most of those were from the Seattle region, but some big companies are also appearing in San Francisco and Los Angeles. VR developer meetups are popping up everywhere; I heard talks about it in Israel, where I attended the Casual Connect Tel Aviv show last week.

“The next wave of headsets are really impressive, and they deliver a better experience than before,” said Bob Berry, organizer of the SEA-VR event and chief executive of Envelop VR, in an interview with GamesBeat. “It does seem it is ready for the enterprise and consumer markets. It’s here.”

Berry believes that people are beginning to realize that VR and AR are not just about gaming. Berry enlisted science fiction writer David Brin, author of novels such as Existence, to give a talk to help the crowd come to terms with just how far-reaching VR and AR technologies are going to be. Brin referred to people in the audience as “gods,” or beings who are creating alternate realities for the rest of us to live and play in.

“We’re raising community awareness that these immersive technologies are going to affect every industry,” Berry said. “Most people when they hear about VR and AR think about games. We see that. But our exhibitors are doing everything from virtual surgery to commercial real estate visualization.”

Philip Rosedale told the crowd at SEA VR that he wants to build the Metaverse, the virtual reality experience depicted in the Neal Stephenson’s 1992 novel Snow Crash so many years ago. His first-generation attempt to do so was Second Life, the virtual world created by his former company Linden Lab. Now, as head of VR startup High Fidelity, Rosedale showed off his second-generation attempt to build a metaverse in a virtual reality environment. He showed a demo of two people collaborating with each other in a “virtual toy room.”

Their demo was good, but we know that we’re not quite there. Andrew Wilson, CEO of Electronic Arts, said in an analyst call yesterday that he is personally very bullish on VR, but it will have no material impact on EA’s earnings in the near future. EA is making sure its Frostbite game engine works with VR, so it can launch titles ahead of that mass market adoption.

“There’s work to be done before there is a consumer mass market,” he said.

VR and AR are such different computing technologies that they need their own supporting ecosystems. VR requires goggles that show stereoscopic images in front of your eyes at refresh rates of 90 frames a second or more. The goggles can plug into the PC, or you can use the Samsung Gear VR headset with Samsung mobile devices. VR also requires a 3D audio sound system, and input devices such as the finger-sensing Oculus Touch controls that are in prototype form. You also need to feel objects in VR using “haptics,” or touch feedback. Then you need to figure out what to do with your legs at some point, as moving around is one of the whole points of VR. And it all has to come together in a new computing platform that gives you a sense of “presence,” or a feeling that you have been transported somewhere else in a virtual environment.

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Military contractors and other VR pioneers tried to deliver this sense of presence using very expensive, custom technologies in the 1990s. Those technologies ultimately failed, as did the first iteration of VR, as Berry knows. He began studying VR in Japan back in 1998. Back then, he gave up on it because “all we could do was make you sick at different speeds.” But now he sees the approach of new immersive technologies that are inexpensive and standardized.

On the gaming front, we are clearly making good progress. Last year, Epic Games showed off a slow-motion demo dubbed Car Flip, or Showdown. It was a high-end animated scene that showed off a robot mech fighting with soldiers in an urban environment. It didn’t make me sick because everything moved in slow motion, and it was cool because you could look around the scene as objects were whizzing past you. That demo was made by a couple of people working for six weeks. You just put on a headset and let it run. There was no way to control it.

This time, Epic showed Bullet Time, a new VR demo that you could control using the Oculus Touch hand controls, which let you pick up guns with real gestures and shoot enemies with them. You could slow down time and transport yourself from one place to another — two tricks that can help reduce motion sickness. You get more freedom to move around. And you can accurately shoot.

“Most people get it with 80 percent or 90 percent accuracy,” said Ray Davis, vice president of engineering at Epic Games, in an interview. “It’s surprisingly intuitive. It’s very little between us and what you are trying to get done.”

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Sure, it’s just a shooting game. But for VR, that’s real progress, and it helps you believe in what you are doing, Davis said.

“The promise is there. People talk about presence. It’s one of those wishy-washy terms that no one’s really defined. But there’s a moment in the demo I got a year and a half ago now, almost two years ago, where you’re at the edge of a building,” said Jason Rubin, head of worldwide studios at Oculus, at our recent GamesBeat 2015 conference. “I’ve given that demo now hundreds of times. I stepped off the building, but it took a conscious decision to override my instincts not to. Nine out of 10 people or more, I can’t coach them to step off the virtual building. You say, ‘Look, you’re in a room. You were in a room 15 minutes ago. You know you’re not really on a building. We would never kill you. I’m gonna hold your hand in the real world. Just take a step forward.’ Most people say, ‘I get it. But I’m not gonna do it. I can’t.’ Even though it’s not interactive — no long-term gameplay, no compulsion loop, no feeling of achievement, all those things games will bring to it — I knew at that moment that if I can make you afraid to walk forward, I can make see you anything. I can make you believe you’re in another universe.”

AR, meanwhile, needs low-power technologies that can power the see-through lenses of AR, or mixed reality, glasses. Magic Leap’s goal is to create animations that can be layered on top of the real world in a way that makes the animation indistinguishable from the real world.

As Graeme Devine, creative director at Magic Leap put it at our GamesBeat event, “A true mixed reality game is something that takes the reality in front of you, takes this water bottle. It adds virtual content to it so the water bottle is involved in the game and there are characters doing something to that, so the tools can interact with each other. Or it can be playing cards or wooden blocks. It could be objects around your house. Then we can have something interesting that can’t exist anywhere else. You can’t have that game in VR. You can’t have that game on console. Only in mixed reality can that game exist. Then you’re on to something interesting.”

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It is from people like Rubin and Devine that we are learning just what will be required to make VR and AR believable. And they’re not the same thing.

“VR takes you somewhere else. It transports me and puts me in some other place,” said Devine. “AR presents information on top of the world. Mixed reality adds to the world, adds photons to the world.”

And because of people like this, venture capitalists are getting their footing about where to invest, Berry said. That was the case for Madrona Venture Group, a Seattle VC firm which invested in Berry’s company. Madrona had to figure out its investment thesis, a framework for how VR would evolve and grow.

“We’ve been looking at the virtual reality space for over a year. We have developed our own points of view on the category,” said Matt McIlwain, managing director at Madrona, speaking at the SEA VR event. “We’re delighted to announce we’ve invested in Envelop VR. We think this will be the first of many investments in the space. A lot of people use this term ‘seeing is believing’ for VR. I don’t think that is quite the term. I prefer ‘experiencing is believing.'”

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Back in the 1990s, the experience was weak. Now, the experiences are far better, McIlwain said. And he liked the experience that Envelop VR could deliver in making people more productive, much like the personal computer did in the 1980s and smartphones and smart tablets did in the 2000s.

“Our view is the smart headset is the next hardware platform that will fundamentally change the way we interact with the world,” McIlwain said.

Berry believes his company can deliver a better way at seeing data, particularly for traders who have to look at a bunch of monitors at the same time to understand fast-moving markets. VR can deliver a better command and control experience, he said.

“A few headsets in the right enterprise in the right space can have a profound impact on a business,” Berry said. “There’s a ton of money in the enterprise space because these technologies can fundamentally improve a business process.”

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Other people aren’t quite ready to dive in all the way. Sunny Dhillon, partner at Signia Venture Partners, said that consumer spending on content is still a ways off.

“I do think that content creation tools, in the early days of a new platform, are a pretty good bet,” Dhillon said.

Likewise, IDG Ventures is taking its time.

“I’ve been looking at VR companies since the ‘90s. Technology has come a long way. It’s an incredible experience. It’s absolutely the future,” said Phil Sanderson, managing director at ID Ventures. “Our job as VCs is to figure out when is the right time to invest in the cycle. What you don’t want to do in any cycle is invest a little bit too early, two or three years too early. The amount of money it takes to build a team and put out a product, you can lose that in a very short amount of time. I’m waiting for the right time. I feel like we’re maybe two years away, maybe three, from investing in publishers and developers in the category. But who’s to know?”

Big challenges remain. Poor VR and AR experience are all over the place, and they will make you sick, Berry said. Rubin, who started the successful Naughty Dog studio a few decades ago, acknowledges that making good VR is going to be really hard. But rather than wait, he believes that game developers have to start trying now.

“Naughty Dog just celebrated its 30th anniversary, so I’ve been at least 30 years in the games industry, and this is the single largest challenge,” he said. “It also feels like an inevitability to everyone that uses it. If you believe this is inevitable, and if you believe this is a hard challenge, getting in early and failing a few times – perhaps financially failing a little bit, struggling, making sure you make ends meet – is the best way to give yourself a shot at the next gold rush in the industry. ”

Figuring out what to do next is a very big challenge. In this pre-competitive stage, many of the VR and AR people are helping each other, which was the point of the SEA VR event.

“We’re in the phase where there is more we don’t know than we do,” Berry said.

There’s one more thing to figure out, before we all get started on making a big pile of money, Brin noted. The science fiction author reminded us that we have to make the right choices to push our horizons outward, rather than the wrong choices that could bring some kind of technological hell. Brin wants us to use the technology of VR and AR to bring us all closer. With AR, for instance, you’ll know the name of someone walking by you. That person will no longer be a stranger. It will be a global village, with billions of people in it.

“What we are looking at is the return of the village,” Brin said. “Show us there is more to be gained than feared by this. You have a village of 7 billion people.”

I’m going to more people about it next week at Intel Capital’s event in San Diego, Calif., on Tuesday, where I’ll moderate a panel on augmented reality and virtual reality. We can all argue about when the next stage of growth will come for VR and AR. But I don’t think you need to know exactly what will happen. Right now seems to be all about finding your footing in VR and AR, not knowing exactly what you’ll do. If you have your footing, you can react fast to changes and be flexible for when the moment really comes.