Virtual-reality startups and their augmented-reality counterparts saw a record year in investment in 2016 as long-awaited “VR” headsets became available to consumers.
But following a year of excitement in their industry, investors are closely watching to see what will happen to some companies developing software and tools for the emerging medium. Most consumers haven’t even tried virtual reality, and most augmented-reality displays aren’t available to them either.
After a flurry of early-stage deals at competitive valuations, some investors expect a struggle for startups to hit the milestones that venture capitalists expect at the growth stage.
“I think that VR will go through a period where people are skeptical about it before they come back to it,” Jason Pressman, a Shasta Ventures partner whose firm is actively tracking early-stage startups in virtual reality. “That’s because most investors are just following the herd.”
Investors have poured $1.5 billion to date in 2016 into virtual and augmented reality companies, according to data from Dow Jones VentureSource as of mid-December. A year ago, the category took in $390 million.
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