The superfast rise of Oculus VR: How it went from startup to $2B acquisition in 21 months (interview)

The most amazing thing about the short life of virtual-reality gaming startup Oculus VR is just how short it has been.

It’s been just 21 months from the first public showing of the Oculus Rift virtual-reality goggles to this Tuesday, when Facebook announced it was buying the Irvine, Calif.-based company for $2 billion.

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Oculus founder Palmer Luckey learned the ins and outs of virtual reality at the Mixed Reality Lab at the University of Southern California. He became obsessed with creating a head-mounted display that could immerse people in a virtual world, and his work caught the attention of gaming guru John Carmack, the id software cofounder who also led development on Doom and Quake. Carmack asked for a prototype and showed it to the press at the Electronic Entertainment Expo (E3) tradeshow in June 2012.

That drew the eye of Brendan Iribe and Nate Mitchell, who joined Luckey and convinced him to turn a humble do-it-yourself project into a Kickstarter-funded developer platform that could eventually be mass-produced as consumer virtual-reality goggles.

They raised $2.4 million from more than 9,500 backers on Kickstarter. Then they raised $16 million in venture funding. That was a golden moment, but one marked by tragedy. Oculus VR cofounder Andrew Reisse was struck and killed by a car that was fleeing the police while he was in a crosswalk. His death brought everything to a halt at the close-knit startup.

The company eventually pulled together and finished its prototype work. Carmack came on full-time as its chief technology officer. Then Marc Andreessen, Netscape founder and cofounder of Andreessen Horowitz, joined in a $75 million funding round. Oculus created two more positively reviewed prototypes and a second development kit. During this time, Iribe and Luckey became friends with Facebook founder Mark Zuckerberg. We’ll let them tell that story below. Here’s a transcript of an interview from Tuesday evening.

GamesBeat: I wanted to know how this deal came about as you were talking to different suitors.

Brendan Iribe: We never intended to sell the company. We were building this thing and going along this path. I’d like to back up a bit and tell you our story and describe how we got connected. Palmer had this idea. He showed this prototype to Carmack. Then Carmack got excited and made this little demo. He went to E3. It became this popular thing. We met Palmer. He was ready to launch his own Kickstarter. We were able to convince him that — doing it with us, staying in control, paying your own way — would live up to his vision. We changed it from a DIY kit to a developer kit and putting it with all these different parts. That would make it bigger and get virtual reality out to more people. It took a while. We got him convinced. We joined and founded the company together. We remade the Kickstarter. You know the history from there. Each time we met with people, like the Series A investors, we told them our beliefs and how we wanted to do things. We wanted to go a certain way, open-source certain parts, and keep a commitment to the philosophy, culture, and movement we were trying to make. People kept signing up and saying OK.

It turned into an awesome journey. [Investor] Marc Andreessen saw the same thing. He was an absolutely amazing person to work with. Chris Dixon and he worked on the Series B [a $75 million funding round].

At one point, we were introduced to Mark Zuckerberg. He was really interested in what we were doing. He was fascinated like other people in the geek community, or gaming community. He was really excited about how we were making this thing work. He wanted me to show him the demo at Facebook. I told him there was a better demo down here in Irvine. He was able to hop on a flight down. He met the team. He saw the latest demos. We talked about the vision. The whole thing was about getting more comfortable with each other and the vision and becoming friends. He and I got to be really good friends, and Palmer met him, too. And then he asked, “How can I help? How can Facebook help you?”

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We said, “Uh, I guess we could make a Facebook app.” [Zuckerberg] said, “I don’t think that’s really going to work. It works on a 2D monitor or a mobile phone, and you don’t really have enough users yet. I don’t know if that’s the best thing. Is there any other way I can help you?”

We described our roadmap. Then [Zuckerberg] said, “What if we partner with you? You stay the same. Stay who you are. You expand that vision and focus on other things also. Gaming is core. But how can we help and invest significantly into the platform, the hardware, and bring down the cost of it. We could make it more optimized, do custom silicon, make this even better. What if we also invest in the parts so you can sell the virtual reality platform at cost?” It would use the best components and build a superior technology platform. Then let’s sell it at cost.

I said, “Sure.” [Zuckerberg] said, “I’m pretty sure I can help you do that.” It made so much sense. Stay the same. Stay who you are. And build the next computing platform.

GamesBeat: I’m interested in the different threads coming together here: social networking, games, and technology. These have never gotten along all that way. With social networking, you think of socialites. With gaming, you think of geeks. Putting them together has never really been the goal of anyone in the industry.

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Iribe: Well, we think there is a really good opportunity. A lot comes from our experience building virtual reality. A year and a half ago, I didn’t know anything about virtual reality. Most of us in this company didn’t. Palmer knew a bunch of what was out there that didn’t work. Palmer had a prototype that showed promise. But still, there was no content. No VR content. We didn’t know what the VR experience of the future would be. One of the things that we have learned on this journey, as we have been executing on it, we found that first-person games, like Team Fortress or Half-Life, are made for 2D monitors. They are not made for VR. Putting them in VR isn’t that good. Our Development Kit 2 is much better. But looking where this is going, it’s not the first-person experience. Those aren’t the magical things that will really work.

It’s something else. It is this presence. I am very sensitive. There are a lot of people like me. I am prone to motion sickness. Being in VR, running down the hallway in a first-person shooter while you’re actually sitting in a chair — that’s too jarring for me. I can’t really enjoy that. But being in a virtual experience where I don’t move a lot, I can really enjoy that. The sense of presence is so strong and good that you really do believe you are in a virtual world. You feel “Oh, my god” — I feel like I am really there. We had an awesome moment of learning what virtual reality content was going to be about. And we discovered this sense of presence. Then we imagined, what would be better than being in this impossible world by ourselves would be to have our friends or other gamers in here. If we could see them and believed they were right in front of us, and we could make eye contact, wave to them, and look at the same thing — you can’t get that in front of a monitor. That shared presence will play a huge part in virtual reality. We knew gaming would be huge. But there is an opportunity to be one of the biggest and best social communications platforms of all time. Who better to partner with than the largest social communications platform in the world?

That led us to this shared vision.

GamesBeat: You had some interesting reaction. The one that was interesting to me was from Markus “Notch” Persson, the creator of Minecraft. He took the view of being an advocate of gaming, and he wondered if Facebook would be good for it. What is your reaction to that?

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Iribe: This is a good time to throw it over to Palmer. He has been deep in the community. He has been on Reddit a long time.

Palmer Luckey: Facebook and Oculus are not an obvious fit, unlike WhatsApp or Instagram. You can see how they fit together. If I were to read the headline, I would be confused about why it would be a good thing. We’ve already said quite a bit. We’re going to have more good news about what we will be able to do now. We are working with Facebook, and we can’t announce it yet. Every developer we are working with has had a very positive reaction. My inbox is flooded by email. A huge number of developers. Some people are upset. But the vast majority who are actually software developers see why this is a good thing. Notch is an exception to the rule. After he sees everything we are able to do, I hope he will change his mind.

GamesBeat: I noted Carmack had an interesting tweet about how Facebook can help make virtual reality happen at the right scale.

Iribe: We wouldn’t have done this if the team wasn’t really excited about it. I mean the core members John Carmack, Palmer Luckey, Nate Mitchell, Atman Binstock [our new chief architect], and Nirav Patel, who leads a lot of the hardware behind the scenes. Everybody got incredibly excited about what this meant for VR. I got an email recently that said, “Remember the technology that is Android today began as a cool little company. Then it went mainstream with huge backing from Google.” We are set to go mainstream and set to take off. This is something that we are all committed to. Mike Abrash of Valve is a big supporter.

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GamesBeat: I would like to see the creation of a new gaming empire that is an intentional one. The intentional ones so far are Sony, Microsoft, and Nintendo. The accidental game empires are Facebook, Apple, Google, and maybe Amazon. Those guys always seem to have other interests at heart than games. It would be insightful to elevate games to an intentional part of the strategy and to make gaming into something more universal.

Iribe: Palmer, what do you think?

Luckey: I missed that. I’ll be honest.

Iribe: Nate, why don’t you tell him?

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Nate Mitchell: We want Oculus to deliver the best virtual-reality gaming platform ever. We have these major big ideas we want to try. There is a huge amount of risk to go with that. The partnership will let us bring all those impossible ideas we want to try into the product. We can execute them on day one. We know that virtual reality goes beyond games. I’ve talked about it with you. Brendan has. Facebook really gets that. One of the more exciting things about the partnership is that people don’t think of Facebook really as a gaming company. Brendan, Palmer, and I — none of us play Facebook games. We are hardcore gamers. Part of this is we want to teach Facebook about games and game development, just as much as they are going to help us on platforms, social, scalability, and operating at a whole new level. When these partnerships happen, it only works and is healthy if we bring something new to the table. I couldn’t think of a better partner than Facebook.

GamesBeat: I’m looking forward to seeing what you do.

Iribe: It’s an incredible journey that is only going to get better.

GamesBeat: Nobody has led an accelerated life like Oculus.

Iribe: [Laughter] It does feel that way. We got the deal done with Facebook in three days. That’s how accelerated it was. We locked ourselves up in the Facebook HQ and did the deal. I have been through a few of these deals now and they usually take months. This was done in three days. That’s incredible. That’s their commitment to moving fast. We are moving fast and getting together to make the next computing platform.