Apple will begin selling their new headsets on February 2nd, 2024.
As a result of their entrance late stage AR/VR is on fire!
I've been waiting 10 years for this. It's finally here.
However, I've noticed the early-stage AR/VR startups are all struggling. I put together a survey to find out why...
When I started studying Virtual Reality in 2015 I flew to Los Angeles for VRLA in March. I asked every founder I could find; What’s your biggest problem?’’
The most common answer: “We need venture capital funding.”
After a few years, and a UK passport, I too was a VR founder with the same response; ‘we need more capital.’
As I look back at that time in my life, it’s hard to quantify just how delusional I was. We had $0 revenue, an un-proven team (myself included), a product that broke every few minutes, and (I repeat) $0 of revenue.
Yet, I spent hundreds of hours of my life pitching VC’s trying to convince them to give us money. I was delusional. I’ll be the first to admit.
I decided that it was time to measure the XR industries level of delusion to see if everyone is falling for the same trap as I did. 17% of founders I surveyed want to raise $5M+, 30% want to raise $1.5-5M, 10% want to raise $500K to $1.5M, and, 32% want to raise $100-500K.
That all sounds great, until you measure the income levels. Roughly 37% of us want to raise $1.5-$10M, yet only 13% of us are generating $250K+ per year of revenue.
Back in 2015,I figured the VC’s didn’t get it. But 9 years later, I realize it is our industry which doesn't get it. Myself included.
When I was building my VR startup, I was so focused on the cool tech progress we were making, and all the fun product features, that I totally forgot about what it meant to run a business; REVENUE and PROFIT.
I was pitching VC’s and then walking out frustrated, thinking, “they just don’t get it. They’ll see one day. I’ll show them!” – boy, was I WRONG. The startup opportunity I was offering venture capitalists at the time was pathetic.
My hope is that the rest of the XR industry doesn’t fall victim to that same mindset which took me down the wrong path for 3+ years of my life.
Continuing my deep dive, I dug in on the monthly income for XR Startups who want to raise $5M+. 55% of startups trying to raise $5M are doing <$25K per month of revenue. And 30% are doing less than $5K per month.
Maybe that was just a statistical anomaly, so next I dug down into monthly income for XR Startups who want to raise $1.5M - $5M.
90% of responses are generating $10-25K / month of revenue. Sounds great, right? But, roughly 80% of that revenue is one-off consulting/project based work. That's amazing for a lifestyle business, but not a single VC will ever bite. Why? Because project based revenue is not a scalable product. So please ask yourself – is it more worth your time to try and raise VC if your revenue is almost fully from Agency type work, or, are you better off spending that time selling to customers where you have high margin services? If I could go back and do it again, I’d have been much better off just continuing to build slowly, and bootstrapping via sales. Instead, I wasted my time doing the following 3 activities:
When you’re running a startup, your #1 most valuable asset is your time. You are resource and time constrained; more resources can buy you more time, but it’s all for nothing if you aren’t spending your time wisely.
If I could go back in time and change my startup, I’d have focused 80% of my time on selling to big brands and customers, and 20% of my time on fundraising. Not the other way around :). I hope you founders out there can learn from my mistakes
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