Digi-Capital tracked startups raising over $6 billion across AR/VR/computer vision in 2018, driven by large, late-stage deals in China. A decline in deal volumes (number of deals) during the first three quarters of the year stabilised in Q4, while deal value (dollars invested) returned to a two-year average after large spikes from a few mega-deals (again in China). The next six months will determine whether or not this return to stability is a long-term trend.

There has been a gradual decline in overall AR/VR deal volumes in the last 2 years, with the most recent high well over 100 deals in Q4 2017. The stages which have seen the most variance are pre-seed and seed deals. Q4 2018 saw an uptick to approach 80 deals, although again pre-seed was somewhat limited. While accelerator deals (particularly HTC Vive X cohorts) skew deal volume data, even without them the overall stabilization in the fourth quarter holds true (although to a lesser extent). As expected, there are always far fewer later stage series B through series F deals. We will come back to these when we look at deal value.

The largest number of AR/VR deals by category in 2018 were in core tech, games, photo/video, solution/services, enterprise and smartglasses. However, there was a broad range of deals across 21 other AR/VR categories last year. Again, the next six months will determine which categories VC and corporate investors focus their attention on going forward. However, the general market narrative last year guided investors towards the crossover between computer vision and AR. There were also some VR investments (such as Varjo raising $31 million and Pico Interactive $24.7 million), despite media coverage to the contrary.

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