Magic Leap – Backwards leap.

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Massive setback means more money likely to be needed 

• It appears that Magic Leap has hit a major problem with the commercialisation of its technology and the question really is: are its investors patient enough to hang on while a new solution is found?
• Magic Leap is an augmented reality company that has a very high profile because:
  • First: It has promised a user experience that other augmented reality companies can only dream of.
  • In most systems the virtual world can only be superimposed on a portion of the user’s field of vision.
  • Effectively there is a letter box in front of the user within which the virtual world exits and from which it cannot escape.
  • For productivity applications, this is not really a problem but for the consumer, there is no way this will fly.
  • This is the problem that I think Magic Leap has solved and if it can produce a good product, it could dominate the consumer market for AR (see here).
  • Second: It has very high profile investors (Google, Alibaba etc.) and a valuation of $4.5bn.
  • $4.5bn is a sky-high valuation for a company with no product, no prototype and no time frame within which a product will come to market.
• Despite some rumblings around whether one of its latest demonstration videos is genuine, the older demonstrations show clearly that Magic Leap offers a full superimposition of the virtual world onto the real.
• However, this is not where the problems that I can see are to be found.
• The problem is that the device is huge, clunky and uncomfortable to wear making it completely unsuitable for the consumer.
• I have long held the view (see here) that for AR to work, the entire unit needs to be no heavier or intrusive than a regular pair of glasses.
• The original idea was that Magic Leap would use a laser shone through a vibrating fibre optic lens to create the light field (see here) but it seems that this solution does not work properly.
• A recent demonstration (the information) of a head unit attached to a PC with multiple cables produced images that were of a lower quality than Microsoft’s HoloLens.
• It looks like this has laid bare the weakness in the laser / fibre optic solution in enabling a move from being the size of a fridge into a head unit.
• Furthermore, the press does not like being made to feel foolish and so the knives are now out following the possibility that the latest video is a concept rather than real footage.
• Either way, it looks like it is back to the drawing board for Magic Leap in terms of figuring out how to ut full field of view AR into a pair of glasses.
• This is a huge problem as I suspect it means a lot more time and a lot more money.
• With no revenues and aggressive hiring over the last 12 months, Magic Leap’s burn rate must be tens of millions of dollars a month raising the likelihood of another funding round probably at a lower valuation.
• The big question is whether its investors will continue to support the longer development time required and if so, what price will they pay?
• The longer development time also gives rivals such as HoloLens, Meta and Atheer Labs time to fix their issues with the field of view.
• With risks increasing and sentiment souring the valuation can only come down.