Magic Leap – The greatest showman.

Rony shows his true talent.

• Magic Leap appears to have raised another $350m giving it a lifeline for a few quarters demonstrating that while Rony Abovitz may have difficulty in creating a decent product, he is a genius at raising money.
• The current climate of cash hoarding and extreme caution is one of the worst times imaginable to be raising money but somehow Magic Leap has pulled a rabbit from the hat.
• The cash injection has meant that Magic Leap has cancelled the 50% workforce reduction (see here) and it is now doubling down on the enterprise.
• The money appears to have come from a combination of new investors, existing investors including one that has a healthcare background indicating just how this round may have been pitched.
• Magic Leap has been in financial difficulty for some time and recently failed to sell itself to a buyer meaning that the newfound interest must be being driven by the pandemic trend of 2020.
• Healthcare is the flavour of the month at the moment and remote or socially distant healthcare doubly so.
• Magic Leap recently pivoted away from its long-held consumer position towards the enterprise and it seems that healthcare will now be a major focus going forward.
• This move puts it into direct competition with Microsoft and its HoloLens product.
• The issue is that when it comes to the enterprise, Magic Leap is far behind Microsoft’s HoloLens and has nothing like the financial clout of its major competitor.
• Microsoft will also be in a position to cross-subsidise HoloLens with its other offerings such as Azure as well as offer a far more complete solution.
• Hence, I don’t think that healthcare is going to help Magic Leap very much and this looks very much like the last gasp before the doors finally close.
• To make matters worse, Magic Leap has no assets of any real description as it has previously pledged all of its IP to JP Morgan as collateral on its loans.
• Hence, if the doors finally close, there will be nothing left for anyone except JP Morgan.
• This has probably been reflected in the valuation of the new funding round which must have been done at a small fraction of what has been paid in the past.
• Even at a very low valuation, this is a major achievement by Rony Abovitz who has proved that he is a better showman than entrepreneur.
• Needless to say, I do not expect this to go anywhere other than to prolong the inevitable for a few months or quarters.