Mapping the Israeli virtual reality and augmented reality startup landscape
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The IVR Meetup panel (sponsored by Carmel Ventures & Autodesk). From left to right: Alon Weinberg (Carmel Ventures), Guy Yamen (TPY Capital), Barak Rabinowitz (Genesis Partners), Daniel Cohen (Carmel Ventures)

The IVR Meetup panel (sponsored by Carmel Ventures & Autodesk). From left to right: Alon Weinberg (Carmel Ventures), Guy Yamen (TPY Capital), Barak Rabinowitz (Genesis Partners), Daniel Cohen (Carmel Ventures)

Will 2016 be a defining year, or a reminder of unjustified hype? And how is Israel faring in the midst of all of this VR, AR innovation?

Viola Group

By Alon Weinberg, Principal, Carmel Ventures and Irit Kahan, Principal, Deutsche Telekom Capital Partners (DTCP)

Virtual reality (VR) and augmented reality (AR) are still in their infancy, and, depending on who you ask – venture capitalists, analysts, visionaries, tech enthusiasts, sociologists, etc. – you’ll get different answers as to how brightly the future is shining for the VR, AR markets.

Will 2016 be a defining year, or a reminder of unjustified hype? And how is Israel faring in the midst of all of this VR, AR innovation?

VCs and analysts have been trying to get a sense of the maturity of the VR and AR markets in terms of technology, cost and use cases in order to estimate its growth and total addressable market. Goldman Sachs estimates that the size of the overall VR, AR market will be anywhere between $23 billion to $183 billion by 2025. The huge range reflects the uncertainty around uptake and adoptionSome believe that VR and AR will indeed revolutionize the way we interact with computers, disrupting various markets and creating new ones.

2016 is the year that several key mass market VR products are expected to launch with the goal of getting into consumers’ living rooms. The optimistic forecast is that more than 5 million units of high end VRs (PC VR and Console VR) will be shipped (various estimates predict 1-2 million units of Oculus Rift, 1.5-3 million PlayStation VR and 1-2 million HTC Vive) while tens of millions of mobile VR units are expected to be shipped. Perhaps more important than the actual number of units shipped will be the insight gained into VR usability across the different platforms and applications.

It will likely take more time for the key AR platforms to mature. Microsoft HoloLens and Google Tango are expected to hit the market first, followed by Magic Leap and potentially Apple as well.

The Israeli landscape

Since 2014, VC investments in VR and AR have amounted to $2.56 billion globally (including the $1.4 billion investment in Magic Leap and excluding the more than $2 billion Oculus deal). Over the same period, we estimate that somewhere around $120-$170 million was invested in Israel in the area of VR and AR.

Israel has great talent in these areas, along with a strong adjacent video and computer vision ecosystem (led by companies such as Mobileye, Elbit, and Verint) that can contribute to VR and AR innovation.

As evident in the Israeli VR and AR ecosystem map below, Israel is particularly strong in hardware and natural user interfaces (gesture control, eye tracking, etc.). These account for more than two-thirds of total fundraising volume so far for Israeli startups in the field,  although additional sectors are expected to develop as well (development platforms, vertical solutions, and healthcare, for example). Israeli companies may also leverage the county’s strong adtech and emerging gaming ecosystems in the areas of VR and AR.

Dozens of interesting Israeli startups currently under the radar might also emerge soon. Some of the big tech players such as Facebook, Apple, Intel, Microsoft, and Baidu have already made acquisitions and investments in the Israeli VR and AR ecosystem, the latest being Intel’s acquisition of Replay Technologies (a former portfolio company of Deutsche Telekom Capital Partners). This trend will likely continue.

Israeli Virtual Reality and Augmented Reality Startup Map, created by Irit Kahan (Deutsche Telekom Capital Partners) and Alon Weinberg (Carmel Ventures). The map includes only companies that have raised a seed investment of around $500,000 or more.

One of the most exciting aspects of VR and AR is their power to infuse certain experiences with a whole new level of emotion. To use an analogy, the experience we enjoy when we look back on endless amounts of video footage of our childhood is far richer than that of our grandparents, who only had a few black and white photos to remember their childhood by. But what if in the future we will be able to immerse ourselves in a time capsule and experience birthdays and other childhood memories in 360 degree 4K 3D video using AR and VR? If these industries play out as expected, VR and AR will offer us experiences with a whole new spectrum of emotions than the ones we’ve been used to until now. And Israeli startups may just be a key part of that.

This piece was adapted from a blog post that first appeared on Viola Notes

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Alon Weinberg and Irit Kahan

About Alon Weinberg and Irit Kahan


Alon joined Carmel in 2015 and has over 10 years of experience in product marketing, business development and international sales. Irit covers Israel-related investments for Deutsche Telekom Capital Partners.

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