In a collaborative effort with dozens of founders and organisations, I’ve put together Australia’s largest primary research on Augmented Reality (AR), Virtual Reality (VR) and Mixed Reality (MR) which showcases the ever-developing landscape of over 100 startups, companies and institutions.
A hunger for projects, effective startups, passionate talent and a large need for additional financial support characterises Australia's AR/VR/MR ecosystem in 2018.
This report aims to increase awareness of the growing number of startups and improve the performance, job creation, and economic growth of the ecosystem.
Thanks goes to all the startup founders and organisations who took time to share their knowledge and their missions with me to educate the local and international market about the flourishing startup scene here in Australia and globally.
The broader AR/VR/MR ecosystem
This 2018 AR/VR/MR report demonstrates some positive trends in the development of Australia’s fast-growing AR/VR/MR sector and, more broadly, the innovation and technology sector.
By contributing to growth in jobs and innovation, AR/VR/MR startups play a critical role in Australia’s tech industry. Three years ago, the number of startups could be counted on two hands. However, since 2017, the number of AR/VR/MR startups and institutions has increased to over 100. This increase can mainly be attributed to an increased amount of available funding and startup accelerator programs, a talent increase provided by formal and vocational education providers, and growing technology adoption due to more accessible devices across Australia.
When taking into consideration the small number of people living in Australia (only 24M) and the country being surrounded by ocean for thousands for kilometers, the relative size of the ecosystem is comparable to other countries. Along with Fintech, Artificial Intelligence and further tech markets, the virtual and augmented reality industry grew from 4.2% in 2016 to 5.6% in 2017, providing a solid growth rate of 33% p.a..
The Australian VR headset market alone grew 40% in 2017 with 302,000 devices sold. This demonstrated strong growth will attract further investments which in turn will lead towards mass adoption in the coming years. The VR headset annual revenue is expected to grow to more than $200 million by 2020, compared to its revenue of $79 million in 2017.
Rapid improvements in fast information storage capacity, improvements in computing power, and increasing internet speeds have contributed to the uptake of the AR/VR/MR technology in end-use industries such as the real estate, automotive and healthcare industries. Higher resolution headsets, more immersive experiences and mobile AR/VR are driving the consumer industry growth. Further, the evolving demand for contextual information, interactive simulations, immersive games and visualising of contents for gaining additional insights is expected to provide traction to the industry.
Industry segments and use cases
I conducted multiple interviews with AR/VR/MR startup founders, executives from larger corporates, developers, networks and leaders of educational institutions. From firefighting training to interactive cinematic entertainment to the visualisation of people in real-time, AR/VR/MR use cases have made their way in a range of different industry verticals and respective use cases.
The ecosystem in Australia is still characterised by 360 video production, real estate solution startups and VR game companies. Driven by the TV and film industry (and thanks to enhanced accessibility through YouTube and Facebook via standard smartphones), a large part of the landscape is still covered with 360 video production. Some local startups are challenging the status quo in order to provide a more blended interactive experience: StartVR, for example, is creating another dimension of cinematography and storytelling.
Traditionally, one of the first niches of the industry that developed globally was real estate. Following that trend, Australia also has plenty of startups embracing the technology and providing solutions for Architecture and Construction professionals to build realistic simulations of future apartments, airports, and tunnels.
Training experiences such as educating about the farm and agricultural industry (e.g. FarmVR) and simulation solutions to design houses (e.g. Inspacexr's CAD for Architects) have started to enter the education market, Australia’s second largest export. This falls in line with a general trend towards more experiential, digital and immersive learning experiences in education. Universities and educational institutions are picking up with the demand equipping their labs with Oculus Gos and other headsets and computers, and introducing a focus on a large amount of topics such as web-based VR, health and safety, mining and more.
Creative agencies still struggle a bit to build solutions that solve a real problem. This is also driven by clients who are looking to quickly create "something with AR/VR" instead of fully embracing the completely new medium that requires a new way to think about the problem-solution fit. Instead of being product driven, most companies are dependent on revenue from custom development on a per project or time basis. A trend towards a platform service has started to emerge over the past year in order to cater for multiple clients with similar basic features and customer elements to make their product scalable.
While arcades still mostly offer ‘standard’ VR equipment like the HTC vive which is too expensive for the average consumer, Zero Latency from Melbourne brings VR to the next level — with free-roam and multiplayer games for up to 8 people in a warehouse scale experience with wireless tracking and a body controller. Due to its success, the company has already expanded to nine different countries.
In terms of hardware such as mixed reality glasses or interactive devices, Australia has some deficits compared to other countries. Only a few companies are taking the leap into the competitive part of the market. Recently launched startup viso.space from Sydney launched their Alto100, an omnidirectional locomotion board, which takes teleportation to the next level. In total, hardware startups instead seem to form outside of Australia.
The reasons why Australia’s entrepreneurs founded their companies are manifold and range from wanting to snatch Sonic the Hedgehog rings out of the trees while running down trails like Paul Martin, founder of tagSpace, to holographic telepresence technology, to virtual first aid courses. They have all one thing in common — they build their company in Australia. Besides Australia being a good place to live in general and its fairly stable government, there are various advantages and reasons why Australia is considered a strong AR/VR/MR market. There is, however, no single secret source of support that helped Aussie founders and startups get to where they are now. It often is a mixture of the team, investors, collaborators, their life partner, their dogs, own eagerness, the VR community, sponsors, partnerships, connections and many more.
Quality on Budget
Australia is, compared to more funded regions, very efficient when it comes to project realisation in terms of affordability and quality. This provides a fantastic basis for further sustainable growth opportunities as solid business models are required earlier in the start-up journey. “When we compare the work we [Australians] do to our contemporaries, the quality we producing is same if not better on a 5th of the budget,” states Kain Tietzel, founder of StartVR. Australian AR/VR/MR creators are able to compete on a global stage without having to be physically based overseas. It is, however, adventurous to have a representation in the US, for example.
Lack of skills in app development is not as visible as it was in previous years. This is influenced by the fact that more and more online tutorials are available and universities and other educational institutions are offering additional courses and degrees in AR/VR/MR related fields. In Australia, collaboration is key and encourages close-knit partnerships and learning communities. “The community is too small, the market too delicate to be too insular or insecure; sure it's risky but it's also an electric feeling to share ideas and approaches with people from different backgrounds, on different end-points and different industries” shares Matt Hermans from Electric Lens on his own experiences.
Access to funding improved
More and more companies receive funding. For example, this year The Pulse received a $500,000 grant from the Australian government and AR/VR education startup Academy Xi raised $2.2 million in 2017 from Alium Capital and Perle Ventures. As many AR/VR/MR creators are developers, the Australian government supports the industry by offering tax incentives. These are a great advantage compared to other countries. There are various opportunities to get support — the NSW governmental MVP Grant allows startups to build their minimum viable product and gives a $25,000 grant to successful applicants. The Building Partnerships grant funds new marketing partnerships here in Australia or overseas to develop innovative solutions for up to $100,000. LaunchVic provides mentoring, funding and professional development programs for ambitious entrepreneurs in Victoria. The NSW 360 Vision Virtual Reality Development Initiative funds projects for initial development for up to $20,000, while in Queensland, the Business Growth Fund co-contributes 25% to 50% of the total project cost with funding up to $50,000.
Passion & interest
From a content point of view, Matt Hermans from Electric Lens finds that the most unique aspect of Australian creators was their “aspect on nature/land/culture and [their] commentary on these subjects which differentiates us from the other amazing artists out there”. "We're great when it comes to the level of interest around AR/VR, we've got a strong number of companies exploring it and people keen to learn more", says Patrick from Dev Diner. This comes hand in hand with the increasing amount of AR/VR/MR companies in Australia. There is a real hunger for projects and growth acceleration.
Due to the political stability, wealth, relations and further reasons, Australia continues to have a high acceptance and usage of new tech devices and gadgets. Although it has been a playground for testing new tech products and services for a long time, it is important to note that Australia remains in that position even with evolving technologies being released at an ever increasing speed. Andre Selton from Plattar states that larger corporations are increasingly interested. Over the last 12 months, an increase of corporate interest in testing the market and to fit in their omni-channel strategy has been observed.
"The creative application of AR/VR is very strong in Australia in terms of content and the quality […] is at least on ties with the rest of the world if not maybe sometimes better", affirms Sean from Xperience Accelerator.
Australia's Challenges in AR/VR/MR
Quick evolving technology
One drawback is the fast pace in which the technology is evolving. Practices that have been taught a year ago are already outdated. Being up to date is one of the challenges in education. However, a more mature set of core software libraries, SDKs and development practices has started to evolve, which will make it easier to keep skills and capabilities up-to date.
Expertise due to novelty
Apart from 360 video, the growing but still relatively low number of AR/VR/MR technology experts is restraining the market growth to a certain extent. With new talent coming into the market, it will become challenging to provide enough guidance and mentoring to fresh graduates and beginners, which might create a gap between experts and novices that takes longer to overcome. When it comes to AR/VR events and meetups, Australia has been a bit reserved. Patrick from Dev Diner states "more community events, more hackathons, more active engagement brings more people into the community and gets people excited."
Mindset of Corporates
Andre Selton from Plattar suggests that Australia should get on the forefront rather than falling behind — “I think the corporate sector needs to be thinking a bit more differently, about taking risks, new technology and adapting emerging technology really quickly - otherwise we’ll be left behind”. Businesses need to be careful about balancing short-term and long-term strategies to stay competitive. In regards to VR/AR/MR, it seems that corporates mostly discount the long-term value and focus on short term marketing experiments without broader vision or pathways into their business models.
High sales efforts
Along with the mentioned bespoke experiences that are created based on clients’ needs, the sales effort behind VR/AR/MR projects is time consuming and costly. A difficulty could be to prove the ROI of the experience to clients, which will make on-sales more complicated. It is important “to make sure you build in metrics and getting the right data from the experiences” mentions Saxon Dixon, a VR instructor from Academy Xi and co-founder of Virtual Immersive.
High costs for consumers
To ignite further growth and improve the customer experience, the prices for consumer hardware like the HTC Vive and Oculus Rift headsets, as well as the computer equipment to run those experiences, needs to reduce in price. While we have seen prices decreasing over the last 12 months, a full set of high-end VR equipment can still require an average month’s salary. At the expense of tracking features, the standalone headset Oculus Go which requires only little setup and no expensive PC, in comparison, only costs $350 and can help to take VR more mainstream. Furthermore, the amount of content for a various number of interest groups needs to increase to provide an incentive for consumers to invest their disposable income in new areas that still are dominated by gadgets and short-lived games.
Access to funding
"Relevant grants are small, take a lot of time and effort (hence, money) to apply for and competition is fierce", says Paul Martin from tagSpace. Although having stated that access to funding improved, it doesn’t seem to compete with global standards. Financial support in AR/VR/MR means ignition of innovation and technology so eventually Australia can become a leader in the field. That being said, it is on the VR/AR industry to convince the government that it should increase support by demonstrating the potential of this new technology and to help justify a higher prioritisation in government support activities.
Australia remains more risk averse compared to countries like the U.S., which is historically less risk averse in adopting innovative technologies. Thus, some startups are planning to have a dependence on the U.S. due to the proximity of Silicon Valley as a tech hub and to increase their chances of successful investment.
Opportunities in AR/VR/MR
By 2023, the global market for Augmented and Mixed Reality hardware, software, and services will reach US$65.8 Billion. Due to its novelty, there is so much potential for solutions to create value and solve problems, especially in the education, health, travel, and environment sectors.
Creating experiences for 3D environments is often more complex than for 2D. Sean from Xperience Accelerator thinks that a pre-production tool for emerging mediums could be a potential field of growth. According to Sean, tasks like creating a movie script need to be reinvented. Compared to a traditional movie, creating a 360-degree or VR movie script is exponentially harder due to adding a whole new dimension. Thus, tools to get up to speed and reduce time when producing for new mediums would be helpful and provide a great opportunity. Along with this comes the opportunity to "democratise" content creation in VR by offering AV/VR creation tool without having to learn coding.
Patrick from Dev Diner thinks subscription models show promise: "rather than people purchasing each VR/AR app for a large sum of money only to use it once or twice, subscriptions make sense for shorter, one-off experiences”. He mentions a concern for more regularly used applications though as it would make them harder to monetise and maintain.
Instead of just looking at AR and VR as separate mediums, bringing them together with other technologies provides potential to build solutions with bigger impact and value creation. For example, combining the power of AI with AR or blockchain with VR is mostly unchartered territory with promising solution spaces.
Building on the trend of increased corporate interest, there are multiple combinations with a great potential of use cases and advantages when it comes to customisation and tailoring experiences. Corporates who are applying cutting edge technology in an outcome driven way will have a higher chance to position themselves as market leaders. Saxon Dixon, VR instructor from Academy Xi, confirms the massive potential, asking the question — "this technology can be applicable to almost any industry so why wouldn't you be part of the forefront of that"?
Once hardware can handle the necessary computing power and once immersive experiences can be easily created, devices for AR/VR/MR such as smart glasses (or a combination of devices) will be used by many people during their leisure time and by every worker in every industry. The hardware will replace both computer screens and phone displays. However, this will take a few more years and will probably have a more extensive section in next year’s market report with several companies like Magic Leap announcing the release of their AR devices this year.
Suggestion for exponential growth
To get the most out of the potential of the ecosystem and lead globally into a new economic future, I suggest the following actions:
Increase the support of early-stage startups in order to keep the talent in the market and grow their ideas
Create a global footprint with programs for representation of startups in an international context and invitations from foreign delegations
Continue to invest in advancements of internet speed, especially looking at 5G
Create tech industry friendly immigration laws allowing knowledge transfer and providing better access to talent
Drive for innovation of larger corporates to explore new and cutting-edge AR/VR/MR projects to solve problems and take on global industry leadership positions
AR and VR can already assist in many ways from education to training, retail, tourism and the medical sector for more efficient and accurate processes, as well as the showcasing of products while also entertaining and informing consumers.
I'm happy to advise leaders of government agencies, investors, organisations and startups with insights focused on actions needed to generate accelerated growth, increase the understanding of this emerging technology and to foster economic growth.
There are constantly new players in the market and I’ve tried to include representatives across all industries. Please feel free to send me an email, if you know further companies firstname.lastname@example.org as I’ll be updating the overview.
Thank you for your time Kain Tietzel – StartVR, Saxon Dixon – Academy Xi and Virtual Immersive, Andre Selton – Plattar, Paul Martin – tagspace, Sean Qian – Xperience Accelerator, Matt Hermans – Electric Lens and Patrick Catanzariti – Dev Diner. Landscape designed by Alexander Haase.