Temasek Tracking - Magic Leap

2011 Founded
2017 Funding round US$502 led by Temasek Series E
2018  US$2,300 headset unveiled

What is Virtual Reality:  VR completely replaces the user's real-world environment with a simulated one.

What is Augmented Reality:  AR is also called Mixed Reality. There are 3 features - a combination of real and virtual worlds, real-time interaction, and accurate 3D registration of virtual and real objects


AR is the next big leap for computing. Modern smartphones offer a primitive version of mixed reality. Many big names in IT are working on some AR headsets. In 2003 Googgle Glass came and went. Microsoft has their HoloLens which also did'nt take off commercially although it has a more advanced version for industrial and professional use.

Every tech company wants to make AR glasses mainstream. Very very big buck beckons to the first to arrive. But all the big names know that it is still a long way off. Tim Cook said “the technology itself doesn’t exist” for quality AR glasses. 

AR will usher in a whole new age of computing, of new hardware, devices, gadgets, operating systems, applications, games, entertainment etc. It will be a game changer in lifestyles, education, healthcare, research etc. That is why the geek community, the tech firms and investors are terribly excited.

In 2011 Magic Leap was born. Co-founder Rony Abovitz is the typical eccentric and idealistic tech startup guy that can sell refrigerators to eskimos.  He promised a breathtaking futuristic product that will rival television or the telephone in societal impact. Magic Leap will produce not just a headset, but spatial computing technologies that offer consumers high-end AR experiences and tools to support remote working with futuristic mixed reality glasses for everyday computing. It will be a market-shifting creative platform and incredible hardware that would open up a new artistic medium that will replace phones, computers, and every other high-tech screen in our lives.

Big name investors signed up - NTT Docomo Inc., AT&T Inc., Alphabet Inc., (Google's holding co), Alibaba etc. Saudi SWF and Temasek followed suit at a later stage funding in 2017. Abovitz's pitch brought in US$2.6B and Magic Leap became one of the most highly funded tech startup with valuation of US$6-US$8B..

The Real Reality:  Magic Leap spent 7 years in deep secret development. Finally in 2018 it launched Magic Leap One. It's a three-piece system that includes a headset called Lightwear, a small wearable computer called the Lightpack, and a handheld controller. "Spatial computing" is having hologram-like objects projected into three-dimensional space with incredibly realistic virtual objects. It is a functional, thoughtfully designed headset with some very real advantages over competitors. But it doesn’t seem like a satisfying computing device or a radical step forward for mixed reality. It simply did not live up to it's hype. It failed to gain adoption by mainstream consumer public. .

Problems loom: 2019 and Magic Leap shifts its focus to selling its products to companies in the health care, industrial and financial sectors to survive. It began talks to sell the company, holding a view of a valuation of US$10B after an IPO soon to come. The sales is seen as an exit option for investors.Tech companies have been placing bets on the promise of augmented reality products. . A sale is unlikely for a few reasons. The scalability of the company’s technology could be an issue. Magic Leap does not own a lot of the integral sofrware patents. Mainstream adoption is a few years away which means buyers need to have financial capacity to carry the products for several years as AR technology evolves. 

Mega Leap had talks with Facebook and Johnson & Johnson which did not progress to deal talks. 

Then covid-19 pandemic struck. Magic Leap cut its workforce by half, letting go 1,000 employees. In May 2020 investors had to pump in US$500M emergency fund. CEO Rony Abovitz is stepping down.


Why do investors like Temasek keep pouring big money into firms like Magic Leap?

Because they missed out on the Virtual Reality wave, they don't want to miss Augmented Reality wave. The financial wheelers and dealers think they understand the technology but never have the tech sector bona fides and are really only throwing darts hoping to hit a potential success.

Consumers rejected Google Glass and HoloLens. Did Temasek really think consumers want to pay US$2.300 for Magic Leap One and walk around wearing googles the whole day long?


Investment watch:
It's game over. Magic Leap is in survival mode. Is this still carried in the books in Temasek? How much is the investment? My estimate -- US$750m.


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