The term Metaverse went from relative anonymity to almost 100% exposure in October last year. While Metaverse rose to fame initially due to Facebook’s name change into ‘Meta’ to express their ambition to become a Metaverse company within 5 years (and perhaps deflect some of the negative PR), there are now many large companies, startups and brands working on their metaverse strategy. As investors in gaming, entertainment tech and consumer, this is a topic my partner Kevin Baxpehler and I have been actively researching and investing in at Remagine Ventures for the past few years.
What is the metaverse?
The term Metaverse was first coined by author Neil Stephenson in the novel ‘Snow Crash’ published in 1992. The book depicted the Metaverse as a 3D virtual world where people walk around as avatars and socialize / interact with one another as well as with AI-generated characters. The movie ‘Ready Player One’ also showed a representation of the Metaverse as one large virtual world where people socialise, play and compete with one another.
Today, 30 years on, the Metaverse is still being defined – in its essence it’s still a virtual environment where people can play, shop, socialise, and work. It’s a combination of virtual reality, augmented reality and virtual worlds (which today mostly consist of games like Roblox, Fortnite, Upland, Decentraland, etc). Several companies have announced or launched Metaverse products already including Meta’s Horizon Worlds, Microsoft’s Mesh, Nvidia’s Omniverse, etc. but rather than being a ‘place’ like the Oasis in Ready Player One, the Metaverse is more like a moment in time – where we interact with one another or with AI in a virtual setting. You don’t need to have smart glasses or a VR headset to be in the Metaverse.
Why is it interesting, especially now?
While games like Second Life, SimCity, Minecraft and the likes have existed for a while, three things are fundamentally different now:
1) Timing– the pandemic made a huge impact on consumer habits. It meant more time spent at home and much of it in front of screens. Working from home and social distancing translated to doing more things virtually – from virtual workouts to attending virtual concerts. Timing wize, Facebook’s public rebrand certainly helped, and since then we’ve witnessed a string of large tech companies and brands announcing their plans for the Metaverse.
2) Technology – Blockchain/Defi/Web3, 5G/6G and stronger GPUs, cloud gaming and graphic engines like Unity and Unreal, advanced GPUs, hardware (such as the Oculus Quest 2, the first mainstream VR headset at $300 a pop, with over 10 million units sold in 2021) all make it easier for the Metaverse to succeed now.
3) Generational readiness – Gen-Z, also known as ‘digital natives’ grew up with mobile devices and virtual worlds like Roblox and audio rooms like Discord or RecRoom spending more time online than any generation before.
For many of them, the time spent gaming is also social, interacting with friends online in and out of the game. Additionally, the rise of NFTs (non-fungible tokens), which reached $23 billion in sales in 2021, acted as a gateway drug for faster adoption of crypto-gaming, virtual goods trading and strong community engagement online.
The rise of the creator economy, driven by the growing number of creators and the consumer shift to consume information created by individuals, is also playing a role in our readiness for the Metaverse.
What opportunities do we see in the Metaverse?
As a venture capital fund, our success is driven by backing companies with large financial outcomes. According to Bloomberg and Jefferies, the metaverse represents a $1 trillion opportunity. This huge value will come from user purchases in virtual goods, eCommerce, digital collectibles/NFTs, etc. While now the majority of this activity is focused on entertainment/consumer (especially around gaming), the world of work and virtual collaboration also has the potential to be transformed.
We believe that the Metaverse is at its infancy and there are huge opportunities for entrepreneurs tackling the space. We’ve made several investments in this space. From consumer level applications such as blockchain gaming like our portfolio company Rebel Bots, to infrastructure level of 3D content management systems in the cloud like our portfolio company Echo3D. There’s also Novos, training the athletes of the Metaverse by providing the best in class training app for Fortnite and Toya, which builds experiences for girls on Roblox, working with the leading female IP holders worldwide. Populating the Metaverse with AI-generated video based on real human characters is also HourOne – simply generate video by writing text.
We share the vision that a new Internet is being built, driven by the Metaverse, Web3 and the Creator Economy. Why does a new Internet needs to be rebuilt to achieve this? because the current tools aren’t fit for purpose and new challenges need to be solved. It’s a combination of advancements in technology and changing consumer behaviour. We are excited to continue backing ambitious founders in this space with our second fund, especially in Israel and the UK. I will try to unpack this further on a future post.
What can you do if you want to get smarter about the Metaverse?
Read, get involved and talk to people! We share our learnings on VC Cafe, podcasts and the events we host (our next metaverse event is coming up on January 19th and you’re welcome to join our Israel Metaverse meetup). Not only can the metaverse be interesting as a spectator sport, but it can be a very attractive business opportunity. If you’re building something in this space, we’d be happy to chat, open doors and provide feedback to what else is out there.
Bring it on 2022!
Further reading material:
- Framework for the Metaverse – an overview of Metaverse components by Matthew Ball
- Metaverse Canon – good list of resources by Jon Raddof
- The Metaverse 101 – Megan Loyst
- All one needs to know about the Metaverse – an academic paper led by Lik Hang Lee
- Into the Metaverse – report by Wunderman Thompson
- Metaverse mania – an overview of Decentraland and Sandbox
- 2022 predictions – Benedict Evans offers a view on whether VR will replace the smartphone
- Metaverse economies – report by Grayscale
- Creator economy – check previous posts on VC Cafe and my latest Forbes article
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
- Weekly #FIRGUN Newsletter – November 1 2024 - November 1, 2024
- The Art of Non-Consensus Investing: Unlocking Venture Capital’s Hidden Gems - October 31, 2024
- Weekly #FIRGUN Newsletter – October 25 2024 - October 25, 2024
