San Francisco Sees Its Next Burgeoning Tech Cluster In Virtual Reality Technology
If you ask Matt Sonic, a San Francisco-based virtual reality developer who has been organizing industry events since July 2013, VR’s time has finally arrived.
Sonic, who has hosted meetups through a group called San Francisco Virtual Reality, has seen his events spike so much in popularity that “the biggest challenge lately has been to find a venue,” he said. In less than two years, SFVR has ballooned to more than 3,600 developers, creators, investors and fans working to shape the future of virtual reality.
What that future looks like isn’t at all clear yet — but Sonic and others are confident that VR is rapidly becoming San Francisco’s next burgeoning tech cluster.
“It seems really natural: San Francisco has all these tech people and artists at the same time, and VR is a great fit for that,” he says.
Both investors and large corporations are pouring capital into virtual reality production and technology: Virtual and augmented reality investing crossed $1 billion for the first time in March, according to a report by Digi-Capital, a Palo Alto-based advisory firm. Deloitte forecasts that 2.5 million VR headsets will sell in 2016, generating more than $300 million in revenue from game sales alone. VR-focused accelerators like Roethenberg Ventures’ River VR, UploadVR and Boost VC – all located in the Bay Area – have sprung up to meet the demand for virtual reality tools and content.
“To state the obvious, we are at a really exciting stage,” said Tim Merel, CEO of Digi-Capital.
Much of the development focus is broadening beyond games to “experiences” — interactive mini-worlds that showcase the immersive potential of the technology. With a $99 Samsung Gear headset, or sometimes even lower-cost models like Google’s Cardboard, users can take a tour of the solar system, work out alongside LeBron James, or dive into any number of 360-degree video experiences such concerts or 3D movies.
With the availability of low-cost headsets – Samsung’s model was released in fall 2015 – demand for fresh content is rising. San Francisco-based Unity Technologies is one of the software companies at the ground level of VR technology: Unity’s software supports 90 percent of the games created for Samsung’s Gear VR, the top-selling headset on the market.
A visit to Unity’s virtual reality room at their South of Market headquarters provides a window into both the possibilities innate to the medium — and the challenges. The virtual reality hardware setup consists of an HTC Vive – including sensors around the room to help ensure that the user isn’t running into walls. A quick tour of the content reveals a diverse range of experiences that include a surreal tennis match, a deep-sea scene complete with a shipwreck and roving whales, and a satirical game that simulates banal office life “before the robots took all our jobs.”
The possibilities seem endless at this point, and developers are racing to fulfill the medium’s potential. But that means overcoming a host of technical issues. Graphics processing and editing can be burdensome, and the immersive nature of VR means realism is essential.
“You can’t take a standard linear experience and move it into VR; usually it doesn’t work,” said Sylvio Drouin, vice president at Unity Labs, which focuses on VR. “There are optical problems, rendering problems – there’s a lot that we still have to figure out.”
Unity, which looking to more than double its current VR-focused staff of about 16 this year, is attempting to resolve many of the technical challenges through its suite of software tools. Among these is a real-time authoring feature that the company announced in February allowing developers to edit within the VR environment – without constantly having to remove the headset to make changes in the program.
If demand is running high, those technical challenges are still holding down the supply of VR content. Higher-quality headsets that can do a lot more cost a lot more – the Oculus Rift and HTC Hive are $600 and $800 respectively, and require a PC for running graphics. That’s holding VR back from hitting the consumer-products mainstream.
“Cost is a barrier to entry,” added Sonic. “My concern is that folks will try something like Cardboard or Samsung and won’t pick it up again, because it won’t be compelling enough.”
But beyond consumer products, industries are finding uses for the technology that range from healthcare – VR has been tested for treating post traumatic stress disorder and eye problems, for example – to architecture and even management training.
“We bring the technology in during the design process, and allow users and stakeholders to actually immerse themselves in the model,” says Mark Radell, vice president of McCarthy Building Cos., on how his company uses VR in the process of constructing medical facilities. “We can further enhance the client experience by engaging them in that environment and really confirming their expectations early on in the process.”
Like any other tech business, it’s all about the talent — and there’s already the familiar lament about not being able to find enough people with the right expertise in San Francisco. Unity, for instance, says it often has to hunt outside of the United States for talent experienced in 3D graphics, shading, lighting and all of the finer details of VR development.
That problem even extends to deep-pocketed media companies interested in using the technology: “You’ve got some of the big media conglomerates with multiple divisions across the world, and they’ve got 30 guys in a room desperately trying to figure out how to access this market,” added Merel. “But they don’t have the level of education and understanding yet.”
With expectations high and capital flowing into development, local developers on the ground level of VR are eager to bring more clarity to the market.
“As a market, we’re not necessarily talking about VR,” Sonic added. “It’s augmented reality; it’s sensory reactor technologies that are becoming low-cost, very good, and used to create apps that are seamless, intuitive and much more human.”
Oculus emerges: Facebook deal was a watershed moment for VR
“The incredible thing about the technology is that you feel like you’re actually present in another place with other people. People who try it say it’s different from anything they’ve ever experienced in their lives,” Facebook CEO Mark Zuckerberg said on the company’s acquisition of VR startup Oculus Rift in 2014.
Oculus Rift’s acquisition by Facebook was a watershed moment for the virtual reality business. The release of its long awaited first headset last month was another.
Oculus, which has most of its employees in Menlo Park, was originally funded through a $2 million Kickstarter campaign. Two years later, it was purchased by Facebook for $2 billion, the social media giant’s second-largest acquisition to date.
That set off a wave of fresh investment in the technology that included Google’s $524 million in Magic Leap, an AR/VR maker, along with development efforts by Apple, Microsoft, Samsung and others. The Oculus Rift headset debuted last month at $600 – plus the PC technology needed to run the VR. But as the cost of running VR comes down, many are expecting that the technology will soon hit the mainstream.
The concept of virtual reality been around since the 1950s. The 1990s and early 2000s saw a burst of primitive VR activity. More recently:
August 2012: Oculus launches a Kickstarter campaign to build Rift, its virtual reality headset, raising $2.5 million
March 2014: Facebook buys Oculus Rift for $2 billion
March 2014: Sony announces that it is developing ‘Project Morpheus’, a VR headset for Playstation 4
June 2014: Google releases Google Cardboard, its low-cost headset for use with a smartphone
December 2014: Roethenberg Ventures launches first VR-focused startup accelerator in S.F.
September 2015: Jaunt, a VR-focused software company, raises a total of $100 million
November 2015: Samsung releases $99 Gear VR headset for use with its phones
February 2015: HTC partners with Valve Corp. to produce the HTC Vive and controllers
March 2016: Oculus Rift releases its headset to the public, priced at $600
Source: San Francisco Business Times, Annie Gaus
Photo: “There’s a lot that we still have to figure out,” says Sylvio Drouin of Unity Labs. (Todd Johnson, San Francisco Business Times)