Presence Capital is a new early-stage venture capital firm that’s focused on funding virtual reality and augmented reality startups. I had the chance to interview one of the co-founders Amitt Mahajan at the VRX Conference about this new fund and how he plans on applying the lessons he learned from the causal, social & mobile gaming market to VR.
LISTEN TO THE VOICES OF VR PODCAST
Amitt Mahajan was a part of the early development of mobile and social gaming as the CTO of MyMiniLife, which was technology that was acquired by Zynga and used within FarmVille.
Amitt says that there’s a lot of parallels between what happened in social and mobile platforms, and what they expect to happen within VR. For example, in the early days of mobile gaming, the free-to-play business model was still evolving through in-app purchases and ad network models. But now that these have been established and proven to work, then we have the benefit of hindsight as we move into mobile VR games.
Amitt says that it comes down to user expectations when thinking about the differences between causal mobile games and a room-scale VR experience. Not only are the price points a lot different, but there is not going as much tolerance for ads and in-app purchases in a room-scale VR experience because it’s seen as a more premium and high-fidelity experience where you pay more upfront and don’t think about micro-transactions.
Another huge lesson that comes from mobile gaming is how it’s the early movers who are able to create a platform and network of users that can be used to release a series of games and not just a single release. A good example is King who were building Facebook applications like Candy Crush, and then cross promoting their mobile applications as well as new titles. Venture capital firms like Presence Capital are less interested in funding one-off games, but will be looking towards funding strong teams who are able to create a sustainable series of titles that build of one another.
Amitt talks about what he looks for in funding companies, how he sees advertising may play out in VR, and some of his favorite VR experiences including Epic’s Bullet Train and Oculus’ Toy Box demo showing the potential of social VR. He’s also really excited about the potential of productivity apps in VR as well as how VR can revolutionize education and training. Finally, he sees that there will be a lot more market opportunity for augmented reality in the long-run, even though it may be another year or two before that market will be ready for consumers.
Presence Capital announced an inaugural fund of $10 million and has already invested in VR and AR companies including Harmonix (makers of the game Rock Band), Baobab (story and character-driven cinematic experiences in VR), Waygo (Automatic translation of Asian languages to English), as well as some other unannounced companies.
Become a Patron! Support The Voices of VR Podcast Patreon
Theme music: “Fatality” by Tigoolio
Subscribe to the Voices of VR podcast.
Rough Transcript
[00:00:05.452] Kent Bye: The Voices of VR Podcast.
[00:00:12.056] Amitt Mahajan: My name is Amit Mahajan. I'm one of the founders and partners at Presence Capital. We're an early stage virtual reality, augmented reality seed fund. And right now I'm just looking for great companies and great teams to back. And we're really excited about the space and decided to start this fund because of it.
[00:00:29.825] Kent Bye: So what got you interested in virtual reality?
[00:00:32.847] Amitt Mahajan: My background originally, I was, you know, John Carmack was one of my childhood heroes. And so I was building 3D engines when I was like in high school and I ended up working at Epic on the Unreal Engine for a while before going off and doing kind of stuff in social gaming and so on. And so I spent the last few years doing that and then I kind of saw what was happening in VR and it was kind of like a return to my roots a little bit, you know, with 3D graphics and just building really cool kind of future technology. And there were a lot of parallels between what's happening right now in VR and what happened already on the social platforms and on the mobile platforms. And so I got together with my partner, Phil Chen, and Paul Bregel, and we basically decided that, hey, this is a really interesting time to invest at an early stage in these companies because we've already kind of seen what happened before on these earlier platforms. So we basically decided this is the right time to do that and started the fund.
[00:01:23.228] Kent Bye: So what are some of those lessons that you've learned from that mobile and social gaming that you've seen from the mobile market that you extrapolate and expect to happen, those same type of trends within VR?
[00:01:34.763] Amitt Mahajan: Yeah, so the first thing is that normally content-based businesses are really hard to fund, especially on mobile right now. If someone came to, you know, went to like a VC and said, hey, like, I want to start a mobile gaming company, unless there's like a very compelling reason that they're like gonna actually knock it out of the park. It's pretty hard to back a company like that. However, when a platform is early, you have unique distribution advantages. So, you know, Zynga was very early on Facebook, and as a result was able to get kind of outsized exposure. And when you have that opportunity, it actually means that, you know, you have the ability to do things like get featured, which would be much harder now than it was back then. You know, we're seeing that already, like, both HTC and Oculus and Sony, they all want really great content on their platforms, and they're willing to work with developers to make that a reality, help them with, like, marketing and give them featuring spots in the stores. And so we're kind of seeing that the same things that we saw play out in social and mobile are playing out here as well. What's interesting, though, is that we now have the benefit of hindsight as well. So things like in-app purchases, like, okay, we know that'll work, because we already have the infrastructure, especially on mobile VR, where people are just using their phones, they're already used to buying. So there's certain things that we know are going to work, especially on kind of the microtransaction front, which back in, you know, 2009, when we were doing FarmVille, it just didn't really, you know, it was a little bit debatable still, especially on the early days of the iPhone, it was also debatable. So we had the benefit of that as well. So all of those things are great. I mean, also the kind of the secondary companies that come off of that, things like analytics, user testing, ad networks, we're starting to see a lot of that stuff start to get developed a lot earlier now as a result. But, you know, before those companies really start to grow, they're going to have to know what the market size is. But, you know, it's I think it's playing out very similarly to the way those other platforms did.
[00:03:20.043] Kent Bye: When you look at in-app purchases and, say, mobile games, and you look at virtual reality, what can you expect to kind of see in the VR realm in terms of what might be a very lucrative in-app purchase model or sort of game genre within VR?
[00:03:34.326] Amitt Mahajan: I think we've defined that, I mean, there's a difference between mobile VR and, like, high-end VR, right? So one of the things is that it comes down to user expectations. So when you think about, like, I'm, like, setting up a room dedicated to VR. I'm, like, buying a really expensive computer. I'm putting on this headset. And I'm sitting down and like, I'm gonna get ready for an experience. It's like the equivalent of me going and buying like a home theater system, a giant TV and so on. I'm expecting one, a high quality experience and two, a lengthier experience because the investment to get into the experience is much higher. Versus, you know, now if I were to like, you know, view a video on my phone, I'm okay with like a three minute experience because it's gonna be something that's really easy to kind of launch on my phone. So I think for VR, what that means is if I'm going and I'm basically investing in the super heavyweight VR room experience, I'm going to want something that's going to be like a few hours sit-down experience. And so in that case, you know, the developers of titles like that can justify like a $40, $50, $60 price tag, just like we're seeing with console and PC games. Versus in mobile VR, where if I'm just going to an app store, I'm downloading a free-to-play app, and now I'm kind of buying content for it, I think it's much easier for me to actually go and buy and have things like episodic packs, consumables, and so on. I think all the same kind of ideas that worked well on mobile are going to mostly work well for in-app purchases on VR. There's really no reason why things like, you know, I'm playing the Candy Crusher VR, now I'm buying lives when I can't get past a level. There's no reason that can't be a viable strategy now either.
[00:05:04.159] Kent Bye: Yeah, I think the challenge as a VC, you know, how do you distinguish between something that is a novel tech demo that may blow your mind versus something that's actually going to be sustainably entertaining or add value over a long play period? So, you know, how are you able to kind of make that differentiation?
[00:05:21.148] Amitt Mahajan: I think at the stage we're investing at, it really just comes down to a team. It always comes down to a team. Do the founders really understand the market they're going after? Are they thinking from first principles? Are they thinking from not just, oh, we're going to build this thing and people will come, but they're also thinking about how do we engage and retain users? What's our user acquisition process going to be? Is it just we go get featured by Oculus? Or is it going to be that we're running demos or we're doing these partnerships? So it really comes down to the quality of the founders and the team. Because the reality is that we're investing at a seed stage. it'll be six, seven years before we actually know if something's playing out or going to work out. And you add to that the additional risk of the fact that these markets may not develop as fast as we thought. And, you know, it's going to take a really special class of entrepreneur to be able to kind of weather that and have the right amount of grit to actually bust through that market development phase, which is going to happen next year.
[00:06:10.090] Kent Bye: Yeah, and how important is the tech demo? Because you meet the team, it's a great team, you may check out their VR, it may have dropped frames, it may just be a terrible VR experience.
[00:06:19.955] Amitt Mahajan: So one thing that's unique about VR versus, I think, mobile, is the barrier to entry is much higher in terms of technology. Like, you can't have bad programmers, right? In order to get a quality VR experience, you need to have a really high frame rate, no dropped frames, etc. And that basically means you need to have a graphics specialist on staff who's able to be like, OK, well, we're not hitting this. What can we do to optimize it? And there is a step function level of difficulty going from building mobile titles to building full 3D, highly optimized titles. If there's a few drop frames in a King game or Clash of Clans or whatever, it's not a big deal. No one will really notice. But if there's a drop frame or there's a freeze while you're playing something in VR, it can make you sick. And it can actually really diminish the user experience. So the tech demo is incredibly important and that's actually something we screen for. We invest in folks, we have to see the demo before we invest and we look for teams that have a really strong kind of like technical co-founder or CTO that is able to actually, that understands the challenges involved with building fully 3D content and then optimizing it as well.
[00:07:20.883] Kent Bye: So what's some of the most mind-blowing VR experiences that you've had, then?
[00:07:24.546] Amitt Mahajan: I mean, that's hard. So my all-notter epic, Put Out Bullet Train, if you haven't checked that out yet, I highly recommend you do. They're kind of taking the best practices of everything and putting it into a really great package. And it's a lot of fun. And on top of that, when you have epic quality like graphics and artists like working on it, this is just gonna be awesome. So, Bullet Train's been fantastic. That's the most recent thing I saw. I really like Toy Box as well. I thought Toy Box was great because there was a real sense of a connection with the person on the other side. And I think that was the first time I really felt like, oh, I could see how social VR works and why it could potentially be a better experience than just like video chat or text messaging or something like that.
[00:08:02.983] Kent Bye: Yeah, and so some of those, you know, obviously there's gonna be a range of mobile VR games, desktop with motion controllers, and then full room scale. Is there any specific segment that you're more focused on, or you're looking at all three of those different realms, or maybe you have a different way of even looking at it?
[00:08:19.042] Amitt Mahajan: I think all three are interesting, right? Obviously my background is better suited to evaluate things like MobileVR, just given I can look at a title that's coming out from MobileVR and be like, okay, I can see this being a casual game that's going to do well. But also, I mean, the AAA experiences are really great as well. So we're really looking at everything across the board and we're just really interested in finding Again, great teams. Great teams working on interesting things. Gaming is kind of one piece of it, but the reality is I'm really personally excited by things like productivity apps. What's desktop VR going to be? What's that killer solution for desktop VR going to be? When can I go to the airport, put on my headset, have my entire multi-monitor set up there, and immediately get in the flow and start working well? There's that as well. I think it comes down to the team and what they're going after. There's interesting things to do across all levels of VR.
[00:09:05.917] Kent Bye: And in VR, it is so early that there could be an indie developer that all by themselves creates a smash hit in VR, you know, and it really takes off. And so, I guess from the perspective of, like, a developer, maybe they have just themselves or just a small team. Why should they get venture capital? Why should they take funding? What are the trade-offs that they're thinking about there? Because they could go on their own or they could take money. What are some of the ways that you find people would come to someone like yourself to seek for funding?
[00:09:36.715] Amitt Mahajan: That's a great question. So if you're building an indie project, which is kind of like your swan song, you're building one title. It kind of doesn't make sense to take funding. It's not the type of thing we'd fund anyways. What we're looking for in terms of people that we'd want to fund from a content perspective are folks that basically view VR not just as a single title for them, like the ability for them to execute on a single title, but the ability for them to build, you know, potentially a platform or a network. And that's when it starts to become venture fundable, in my opinion. For example, there was a lot of folks who were just doing one-off Facebook apps early on, but Mark Pincus at Zynga, he was like, OK, I see this as a platform. I want to build a series of games and do cross-promotion between all those games, and then build a network of players, and actually create a gaming network. And that was the idea behind Zynga. Right? And so, you know, if someone was doing that in VR, that'd be really interesting to us. Like, how do you go and, you know, basically build a single title, use that to build an audience, and then leverage that audience to then build bigger and bigger and bigger titles? The reason you'd come and raise money then from us is to do things like advertise, scale your audience, get really smart people that have done it before behind you. I mean, one of the biggest reasons to raise money is not because you need the capital, but because you want senior folks that have been in your shoes before helping you kind of navigate the problems of just growing and scaling a company. And so that's one of the other reasons that you want to do it. And so, like, my partner Phil is actually the founder of VRHTC and chief content officer there. So he's seeing it from that side. I'm kind of seeing it from the social gaming side. So between us, we feel we can add a lot of value to folks that are especially building things like games or content for a new platform.
[00:11:10.568] Kent Bye: Are there any mobile game companies that are out there that you think are really excellent examples of a strategy that they took in mobile that could potentially translate over into VR?
[00:11:21.460] Amitt Mahajan: Yeah, so I mean King did a really good job of this. They were building games on Facebook then cross-promoting them to their mobile apps. And actually, our third partner, Paul, backed a company called Resolution Games, which is a lot of the guys behind Candy Crush, who are now building casual titles for the Gear VR. It's kind of a no-brainer in terms of back-end, because they know what it takes to build a single title, you know, grow that into a hit, and then start leveraging the success of that hit to then put out further feature titles.
[00:11:49.831] Kent Bye: Great. And you're talking on a panel here. What are some of the things that you're going to be talking about in terms of virtuality and augmented reality?
[00:11:56.094] Amitt Mahajan: So for us, I think the topic of the panel is basically VR from two perspectives. So Phil's coming at it from the mobile hardware side and why he decided to go and start the Vive project at HTC. And my side of it is from seeing what happened before on Facebook and what happened before on mobile. How can we go and then take lessons from that and apply them to VR? Both of us got into the space because of our prior experiences, and so we're just going to discuss some of the things that got us excited, some of the parallels between the platforms, and, you know, where we think the future is going to go for both these platforms.
[00:12:27.597] Kent Bye: And I think one challenge with mobile gaming versus VR is that in mobile, you can have an ad that pops up, and you can kind of not really disrupt the experience of a game. But yet, if you're in VR, and you have an ad pop up, it may actually break your presence in some ways. And so how have you thought about how are ads going to work in VR, and what is the approach that you expect to kind of play out?
[00:12:48.743] Amitt Mahajan: I think that just like, you know, certain types of games just don't really lend themselves to having advertising in them, I think the same thing's gonna happen with VR. You know, there's several folks who are coming from mobile games who are trying to figure out what's the VR ad unit gonna look like. My last company was actually in mobile advertising, so I have some experience with this, and just like we're finding native ads are actually more effective on mobile, I think you're gonna find the same thing is gonna be true of the case in VR. It's not gonna be like, a giant screen in front of you that's playing a video. It's probably going to be something that's integrated to the system. And some really creative company is going to come up with a way that people really adopt and respond to. I don't know what it is yet, but if you see it, let me know.
[00:13:25.487] Kent Bye: What is a native app in a mobile context, and what would that look like in VR?
[00:13:29.052] Amitt Mahajan: Sure. So a good example of that is like, for example, if you see the ads in Facebook, Facebook ads aren't just like normal banner ads. They look like newsfeed items that have like buttons and comments. They just look like another item in your newsfeed. So as you're scrolling, it kind of, you know, it's skinned to look like the site. It's like not too intrusive. It doesn't stick out like a sore thumb. And it's more about the quality and the content of the ad rather than rather than trying to just get in front of your face and take up as many pixels as possible. In fact, they have a lot of rules that around like you can't put too much text into it, it has to be a certain size and so on in order to maintain the quality of their user experience. So, I think the same thing is going to happen in VR where maybe it'll be like a 3D model instead of a flat ad. Maybe it'll be something that doesn't ruin your frame rate. There's going to be certain rules that come up that lend themselves to being a much better experience for the user because at the end of the day, If you look at any company that places the value of ads over their user experience, they tend not to retain users very well. And thus, that hurts their bottom line, their lifetime value of their users anyways. So in order for these companies really to succeed, they need to find a user experience that incorporates ads still, that manages to retain their users without getting in their way. So I think that naturally, the smart companies are going to gravitate towards those solutions. You may see some bad apples there, but I think that the users will leave those people pretty quickly.
[00:14:46.285] Kent Bye: And finally, what do you see as the ultimate potential of virtual reality and what it might be able to enable?
[00:14:56.131] Amitt Mahajan: I think virtual reality could be, for me at least, I find that education and productivity are those two really exciting areas. I don't know if you've ever taken a MOOC or tried Coursera or any of these services, but it's really cool that you may have the best professor in the world on artificial intelligence teaching a course where 100,000 people are learning from that person. They're highly leveraged. Right? I think virtual reality now allows you to go and take like the best teachers in the world and put them in front of as many people as possible in the world. So maybe like the idea of being a math teacher as a job no longer exists. There's the one math teacher who's like the best at teaching it and they create the best content and everyone else is kind of TAs or they're working with people on that content versus like coming up with the course material itself. And VR has the potential to actually enable and create that environment, that ultimate learning environment. Like if you think about schools today, there's no reason the row of desks, like we would create a VR school where there's rows of desks. The reason that restriction exists is because of our physical limitations. Like I as a body need to sit somewhere in the room. But perhaps every person in a VR classroom can have the best seat in the house right in front of the teacher, where they're fully immersed and everything they're seeing is catered to their vantage point, their viewpoint. So I think VR can create those experiences. And then a lot of world problems are solved by having better education. And so I think it naturally lends itself to potentially improving the world in that manner.
[00:16:14.471] Kent Bye: Anything else that's left unsaid that you'd like to say?
[00:16:17.174] Amitt Mahajan: We really haven't talked about AR, but I think AR is also a really exciting opportunity, but it's at least a few years out. But I think AR also has the potential of taking the world as we see it around us and actually making it a lot more useful and usable. And we're also really excited in companies that are doing stuff there.
[00:16:31.151] Kent Bye: Well, how do you differentiate between the biggest value of AR versus VR?
[00:16:36.713] Amitt Mahajan: I mean, I think AR just has a lot more natural utility, because if you think about it, if I was using a mapping application, like I need to get from point A to point B, I'm not going to put on a VR headset to do that. It doesn't make any sense. It has to be something that exists in my real world. And if you think about it, your phone right now is a screen in your real world that is now allowing you to very quickly gain information in the real world. So AR has the opportunity to essentially do that in a much more seamless way, which has a lot more utility day-to-day applications. The nice thing about AR too is that from the outset you can actually have, you know, the added benefit of, it doesn't need, like, I think everyone's looking at AR gaming as being the first application. I actually don't think it is. I think there's a much I think it's actually much more useful in industrial or enterprise applications first before it will be in a consumer application. And the nice thing about that is you don't actually need to have a fully formed user experience to still be really, really useful. Like a mechanic under a car looking at a bunch of machinery. It'd be very cool, even if his FOV was limited, to be able to see augmented information about what each part is and so on, right? There's no reason that you actually need a full, even if the headset's heavier or whatever, they'll do it because it's that much easier to get their job done. They're incentivized to actually use it because it just makes their job that much easier. So I think we'll see a lot of that as well. Awesome, well thank you. Yeah, no problem.
[00:17:55.881] Kent Bye: And thank you for listening! If you'd like to support the Voices of VR podcast, then please consider becoming a patron at patreon.com slash voicesofvr.
