China-based funding for augmented reality (AR) and computer vision technologies hit US$3.9 billion over the last 12 months, surging ahead of similar investments in North America, according to Digi-Capital’s AR/VR/XR Analytics Platform, which tracks AR investments.
North American investment in AR and virtual reality (VR) fell from nearly US$1.5 billion in the fourth quarter of 2017 to less than US$120 million in the third quarter of 2018.
“Last year, 30 leading VCs told us about a fundamental shift from early-stage North American VR investment to later-stage Chinese computer vision/AR investment,” Digi-Capital managing director Tim Merel said in a blog post on the company’s website.
The number of deals declined by 10 percent per quarter over the last 12 months, and most of the declines happened in the United States and Europe, “where VCs increasingly stayed on the sidelines by looking for short-term traction as a sign of long-term growth”, Merel said.
Seed funding deals dropped by more than half in volume while Series A rounds were down by a quarter during the period. The declines were sharpest in North America and Europe.
Of the US$7.2 billion invested in the last 12 months, over US$4 billion went to computer vision/AR technologies. Well over US$1 billion went into smartglasses, with the bulk going to Magic Leap, one of the most talked-about startups in the tech industry. Games represented the second largest sector with around US$400 million.
Merel said venture capital was most interested in “native mobile AR with critical use cases”.
Despite the huge capital pouring into mobile AR, Digi-Capital believes the technology, which is still in the very early stage, won’t take off until 2019.
For Digi-Capital, computer vision/machine learning is more advanced than mobile AR, and could see dominant companies in the medium term. “VCs love CV/ML startups with real-world solutions to fundamentally disrupt industries, not research projects,” Merel said, but warned that there is the potential for overfunding during the earliest stages of the market.
Despite heightening trade tensions between the US and China over the past 12 months, Merel notices a growing confidence among Chinese investors. They appear focused on the long-term potential of the intersection between computer vision and AR, with later-stage Series C and Series D rounds raising hundreds of millions of dollars each time.
Chinese quarterly investment tripled in the last 12 months, with SenseTime Group raising over US$2 billion in multiple rounds and Megvii close behind at over US$1 billion. There are also smaller investments, in the hundreds of millions of dollars, received by Beijing Moviebook Technology, Kujiale and others.
On the other hand, a growing number of American investors have chosen to stay on the sidelines. North American quarterly investment hit a record high of nearly US$1.5 billion in the fourth quarter of 2017, and fell over 90 percent to less than US$120 million in the third quarter of this year.
This article appeared in the Hong Kong Economic Journal on Oct 9
Translation by Ben Ng with additional reporting
[Chinese version 中文版]
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