The bulk of AR/VR start-ups aren’t selling outside their own backyards, at a time when growing revenue and extending financial runways are critical to survival. So, while there is money to be had internationally, many are simply leaving it on the table.
Although Chinese computer vision/AR investment grew 3x to $3.9 billion (€3.37bn) over the last 12 months, in stark contrast North American VC investment in AR/VR start-ups dropped below $120 million in Q3 2018. So North American start-ups (63 per cent of revenue generated domestically) are not making money in Asia (only 11 per cent of revenue coming from the largest revenue region) or Europe (just 16 per cent of revenue from the second largest revenue region) and could be putting themselves at risk.
Digi-Capital and Augmented World Expo (AWE) surveyed the global XR (AR/VR) community in September. The full results can be found as part of Digi-Capital’s Augmented/Virtual Reality Report Q4 2018, with all market data/analytics in Digi-Capital’s 500,000+ data point AR/VR/XR Analytics Platform. Digi-Capital Managing Director Tim Merel will present the results and more at AWE Europe on October 18th.
Digi-Capital User Strategy Director Isabelle Hierholtz said, “North American companies generate limited revenue in Europe (15 per cent), which Digi-Capital’s Analytics Platform forecasts growing larger than North America this year. Despite its scale, Asia is a source of only 11 per cent of North American companies’ revenue.”
“European companies’ international ambitions are North American focused (18 per cent), also with limited revenue from Asia (9 per cent). Given high levels of competition in North America, an increased Asian focus might be an effective complement to European companies’ international development.”
“Asian companies’ revenues outside home markets favour the highly competitive North American (19 per cent) market over Europe (12 per cent). While Europe holds significant potential for Asian companies, managing European fragmentation requires experienced local partners. This in itself could be an opportunity for pan-European players to help Asian counterparts, building both sets of businesses in partnership.”
“Outside domestic markets, Latin American companies are focused on North America (32 per cent) due to geographical proximity and scale. But for companies in this region with international potential, Asia (3 per cent) and Europe (6 per cent) are significantly under-indexed.”
“Companies based in the Middle East and Africa appear to be truly international, with their own region MEA (33 per cent) indexing similarly to North America (32 per cent). Asia (18 per cent) and Europe (15 per cent) also make up a significant portion of revenue. This could reflect the relatively smaller potential of the domestic MEA market, requiring companies to focus their growth efforts abroad.”
Digi-Capital Managing Director Tim Merel added, “The early stage of the industry was highlighted by many of the rest of the findings, as well as a strong enterprise/B2B focus. Looking forward to the next 12 months, survey participants gave clear priorities for growth and roadmaps to build their businesses and the industry as a whole. The industry is refreshingly realistic about today’s market and what it needs to do to scale. While startups remain focused on addressing their own pieces of the puzzle, there is a general consensus that platforms like Apple, Google, Facebook, Alibaba and others need to become more effective leaders for the market to realise its full potential.”