Apple’s Vision Pro headset attracts investors back to lacklustre sector

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Apple’s unveiling of its Vision Pro headset has reignited enthusiasm in virtual and augmented reality start-ups that have been starved of funding from investors who have preferred to bet on artificial intelligence groups.

The tech giant believes its new “mixed reality” device will usher in a “new era” in “spatial computing”, arguing the Vision Pro will have a similar impact to how the iPhone has revolutionised mobile computing.

That pitch has convinced some investors to back fledgling companies that work in augmented reality, which conjures up digital images into the real world, and virtual reality, which immerses users into a game-like realm.

AR, VR and mixed reality (XR) start-ups in the US in June raised $208mn, nearly as much in one month as in the previous three combined, data from PitchBook showed. That investment marked a 12-month high, apart from December when a single fundraising from Anduril Industries, a military tech start-up related to mixed reality, raised $1.48bn.

Funding in the sector had slowed in the lead-up to Apple’s launch, with investors cautious about making bets out-of-sync with the world’s largest company.

But the June 5 launch “generated tremendous energy” across the sector, said Ori Inbar, founder of Super Ventures, an early-stage augmented reality fund, with investors looking past the headset’s higher than anticipated $3,500 price tag and a vague release date of “early next year”.

The Vision Pro was “the proof the market needed that mixed reality is not a fad”, added Inbar. “I have been getting a lot more calls from investors seeking opportunities and several of my portfolio companies were able to accelerate their fundraising process.”

The investment, however, remains tiny compared with the $31bn that poured into US-based AI companies in the first half of the year.

Still, the recent surge in interest contrasted with a sense before Apple’s Vision Pro launch that the excitement over augmented and virtual reality was waning.

Mark Zuckerberg, chief executive of Facebook parent Meta, in 2021 announced a pivot to build an avatar-filled digital world known as a metaverse and has spent more than $10bn a year on the project. That ambition has proven unpopular with investors and Meta has recently raced to increase its AI investment. 

As doubt pervaded the sector, some XR start-ups avoided terms such as “metaverse” in their pitches for funding.

Eric Bellomo, an analyst for emerging technology at PitchBook, said consumer adoption of headset-based computing had been “underwhelming” but he acknowledged that Apple’s confidence in the sector had created “an inflection point” for capital flowing in. However, he cautioned the industry “not to pin all hope” on Apple.

Augmented and virtual reality products represent a relatively niche sector that other industry giants have invested in but failed. Google for more than a decade struggled to drum up interest in its smart glasses, finally throwing in the towel this year when it withdrew its enterprise edition from sale.

The attention on Apple was helping to “shine a light” on the ways that mixed-reality solutions could make an impact beyond consumer applications, said Kevin Hykes, chief executive of Augmedics.

His Illinois-based start-up builds tools to help surgeons navigate spinal instruments and implants during operations and attracted the biggest US deal over the past six weeks with an $83mn funding round on June 27.

Massachusetts-based Luminopia, which creates therapeutic visual stimuli, raised $16mn in late June. Vision Pro had served “to validate our broader vision that immersive reality will open the door for an entirely new category of therapeutics”, said Scott Xiao, its chief executive.