Technophiles have championed the advent of the virtual reality (VR) revolution for decades. They’ve claimed it’s just around the corner for years. In that time, different iterations of the technology has been used to do everything, from training NASA astronauts to helping tourists navigate in cities with Google Street View. Most recently, VR evangelists have put their faith into video games, hoping it would accelerate mainstream adoption. However, the pandemic has encouraged them to change tack. Now they’re increasingly betting hard on providing VR solutions for companies.

It’s hardly a secret why that is. Social distancing restrictions forced corporate chieftains to begrudgingly embrace remote working. While some companies like Goldman Sachs now expect workers to return to the office, others have adapted to the new normal of remote and hybrid working.

They’re right to do so. Some 71% of professionals would rather work from anywhere but the office over being promoted, according to research from Ivanti. The global mass stampede of the Great Resignation has shown that workers are ready to quit their jobs if their bosses won’t accommodate this. Yet companies who have accepted the new normal are faced with a challenge: How do they keep remote teams engaged and well managed? That’s where VR ventures are seeing their opportunity.

A small San Francisco startup is the latest to make waves. Remio has just raised a new $4.5m seed funding round and is planning to expand the VR team building platform on the back of the cash injection. The founders declined to disclose the startup’s valuation, but admitted that the venture had benefited from Covid-19.

“The shift to remote work has definitely had a positive impact on our business and in turn, we’ve had a positive impact on remote work for our customers,” Jos van der Weshuizen, CEO and co-founder of Remio, tells Verdict. “We came out of our beta [stage] during the pandemic, making it difficult to compare pre-pandemic growth.”

Van der Weshuizen and Derrick van Schalkwyk founded Remio in 2020. Their goal was to create a VR platform for remote team building exercises. The result carries a striking resemblance to Meta’s professional network Facebook Workrooms and its adjacent gaming platform Horizon Worlds. The Remio VR platform has the same type of floating torsos and 3D environments. However, that hasn’t stopped it from attracting big names in the market. Today, it counts Google, Netflix, HubSpot, Fidelity, Twilio, Trello, and Nextdoor among its customers.

Venture capital firm Khosla Ventures led the funding round. It has previously invested in the likes of Blockstream and DoorDash. Version One Ventures, The Venture Reality Fund and Moai Capital also injected cash into the startup.

Remio raising its funding is the latest indication of the VR industry’s pivot away from video games to the boardrooms. The question is if the umpteenth time’s the charm for the VC revolution.

Will Remio be able to ride the VR wave?

VR isn’t something new. Tech wonks have been singing the technology’s praises long before The Zuck padded out Facebook’s portfolio with the acquisition of Oculus in 2014. “VR has been around for over six decades, in one form or another, but is still not a mainstream technology,” Rupantar Guha, principal analyst at GlobalData’s thematic research team, tells Verdict.

VPL Research founder Jaron Lanier popularised the term in the 1980s when the company first started to sell VR googles and wired gloves. In recent years, Lanier has been an outspoken critic against social media. He has accused the ad-based version of the internet, where people get free services in exchange for platforms like Facebook and Google farming their data, of creating a “manipulative society” that has polarised people and that will “eventually make society crazy enough to throw elections.” Ironic, given Meta’s big role in changing the VR landscape, which we will talk about in a bit.

For now, let us recognise that VR had it’s first big moment in the 1990s. That is when companies like Virtuality released the world’s first affordable commercial VR headsets. Then-video game giant Sega also announced forays into the sector and even had features about it in its own magazine. The company, however, scrapped Sega VR. Officially, the company said it was because of fears that the games would be too realistic. It was probably more likely that the low-resolution and the nascent technology just gave users vertigo. This is still a problem for many modern headsets.

Nevertheless, the innovations were big leaps forward. Anyone seeing stories about them in magazines or spots on the TV would be forgiven for assuming that the future wasn’t only nigh, but also virtual. The buzz around The Matrix in 1999 certainly amplified the enthusiasm. But years passed by and no VR revolution occurred. People were happy playing on computers, on TV and, eventually, on their smartphones.

The Oculus effect

Interest in VR slumped in the noughties. Google searches dropped over the years to record lows in 2012. However, things changed in 2014 when Facebook acquired VR company Oculus for $2bn. The record deal promised to set off a new VR gold rush. Big Tech giants leaped on the opportunity. Microsoft, Apple and Google all muscled in on the market.

Consequently, Google searches spiked over the following years, culminating at the end 2016. There could be several reasons behind that trend. New products being released by tech companies and a plethora of acqusitions and venture financing deals are two.

The Pokémon Go craze, which saw millions of people take to the streets across the globe to hunt digital monsters, could be another factor for the spiking interest in VR. Although, Pokémon Go was an augmented reality game and not a VR game, but that’s an easy mistake to make for anyone except die hard tech wonks.

Most people who tried the, honestly, uncomfortable headsets did it to play video games, attend virtual events or visit places, such as Mount Everest, they would never be able to afford to visit in real life. Journalists understandably inked puff pieces suggesting that year of VR was nigh. Unsurprisingly, the revolution failed to materialise. Again.

So why didn’t the VR revolution happen?

The scene seemed set for the VR revolution in 2016. Big tech firms and investors alike pumped money into the sector. New hardware was developed. In video game stores, VR adventures were given prime positions to enthuse prospective buyers. So why didn’t mass adoption occur?

“People who were reluctant to buy VR headsets before 2021 had very valid reasons: devices were bulky, the quality of experience was so-so, and there were few killer apps outside of gaming,” Guido Meardi, CEO and co-founder of deeptech company V-Nova, tells Verdict. “Casual users could be fooled into buying, so to speak, but not so much into regularly using what was available back then.”

While billions of dollars flowed into the sector, the technological limitations and lack of compelling content held back mass adoption. In 2018, a poll of IT professionals named VR the most overhyped technology of the year.

“If you have to wear a bulky headset to enter a virtual world that is low-resolution, moves sluggishly, has noticeable lag and doesn’t accurately track your actual motion – well, it’s a nice gimmick for the first 30 seconds, after which you’re just looking forward to taking your headset off,” Meardi says.

The sector still managed to make inroads over the years. For starters, the number of venture financing deals have skyrocketed over the past decade. Only seven venture financing deals were recorded in 2010, according to GlobalData. That number skyrocketed in the following years to reach 222 deals in 2019. The number of deals have slumped slightly since. 2020 and 2021 only saw 176 and 172 deals respectively.

The number also translated into billions of dollars injected. While only $64m was invested into the VR sector in 2010. In 2014, when Facebook bought Oculus, that figure spiked to $1.83bn. In 2015, it climbed to $2.26bn. It fell slightly in the following years. However, something happened in 2021. After the rock-bottom year of 2020 when only $934m was injected in the sector, $2.54bn was invested in the sector. To date, investors have splashed $1.03bn on VR startups in 2022.

That’s not the only reason for market stakeholders to feel bullish. The VR market was worth $21.83bn in 2021, according to Grand View Research. The researchers expected it to grow at a compound annual growth rate of 15% between 2022 and 2030.

Similar stellar predictions have been made about the VR video game industry. The industry was worth $6.26bn in 2020, according to research firm Fortune Business Insights. The researchers expected that to grow to $53.44bn by 2028.

Those stats, however, were dwarfed by other markets. The global video game industry in total was worth $198.4bn in 2021, according to Mordor Intelligence. That figure was expected to grow to $339.95bn in 2027.

Or to put it this way: when Microsoft bought video game company Activision Blizzard earlier this year, it did so for $68.7bn – more than three times the size of the entire VR market.

Going through these figures, the enthusiasm for the sector is understandable, but doesn’t hold back from the fact that VR came off as a technology in search for a problem to solve. People are interested, but it hasn’t really been a big boom yet. As the Remio funding round shows, the VR industry may have just found that problem.

Covid-19 and remote working

It’s been said ad nauseam, but Covid-19 did change everything. People were locked in for months without being able to go to the office or to see friends. Delivery companies, online shopping businesses and fintech companies have are just some of the sectors that enjoyed a boon to their bottomlines as a result.

The pandemic also created an opportunity for VR companies. The obvious one is that people bought more headsets for entertainment.

“[Our] relationship with technology has changed dramatically since the advent of the iPhone and social media, a change that has been compounded by the Covid lockdowns,” Leon Gauhman, CSO at digital transformation consultancy Elsewhen, tells Verdict. “As consumers, we are increasingly comfortable in the digital space and more ready for VR than we were in the past. A lot of money is being spent by really big companies that believe in the VR vision. So yes, this time it is going to be different.”

In short: the pandemic created a demand for solutions to make remote working easier to manage for businesses. VR ventures like Remio are happily stepping in to meet it. Meta and the plethora of new metaverse companies are in no small part aiding their efforts.

Enter the metaverse

Mark Zuckerberg announced that Facebook would become a metaverse company during an earnings call in 2021. He later doubled down on this announcement in October when the social media company rebranded to Meta.

The Zuck’s vision to create a fully digital world where people can shop, party and work is not new. The term metaverse itself was coined in the 1992 dystopian novel Snow Crash by Neal Stephenson. Books like Ready Player One have played with similar concepts.

Meta needs to create a new business model. Politicians are increasingly clamping down on Big Tech firms on privacy, making it challenging to turn a profit on the company’s old ad-based model. Whistleblowers like Frances Haugen have accused the company of prioritising profits over users’ health, claims Meta has rejected. It doesn’t help that people are abandoning Facebook. Creating a new virtual ecosystem is a hail Mary for the future of the business.

Following the announcement, there has been a rush by other companies to rebrand themselves as metaverse companies. Often, this hasn’t really meant much change to their business model. VR companies, arguably, could be some of the winners behind this trend. Some market watchers even suggest this is that will make the VR revolution finally happen.

“The difference this time around is that we are seeing an ecosystem that is thriving thanks to the backing of companies like Meta,” Tom Ffiske, editor of VR blog Immersive Wire, tells Verdict. “Because of the ecosystem, we have a positive cycle where there is enough software to entice VR headset sales, and enough headset sales to support the growth of VR development. Because of the virtuous loop, we are more likely to see VR develop further and further.”

Meta and other companies looking to create metaverses aren’t just looking for the consumer market, but for the business segment too. In fact, in the months since The Zuck’s announcements, the company has made it clear that they take the business segment seriously. Meta’s VP of VR Mark Rabkin recently told us that “VR has superpowers” and enables remote teams to “feel like they’re really tighter”. Meta isn’t the only

Meta’s efforts to attract business customers include the launch of Facebook Workrooms, a collaboration platform where professionals could meet each other in VR. The project is still in beta. However, Meta has been busy elsewhere. In April, the Menlo Park-headquartered company announced the trial of new money-making tools for metaverse creators on its adjacent gaming platform Horizon Worlds.

Other corporate colossuses have followed suit. Microsoft, Disney, Amazon, NVIDIA, Epic Games and Roblox Corporation are just some of the companies that have announced metaverse initiatives. And it’s not just companies tapping into the sector.

Earlier this year, South Korea doubled down on its ambitions to become a metaverse superpower by upping the nation’s $200bn sovereign wealth fund’s investment into Silicon Valley startups. The country’s Ministry of Science kicked off 2021 by announcing plans to invest $7.5bn into digital technologies in 2022, with almost 9% devoted to South Korea’s metaverse industry and cloud services.

All these initiatives are great news for VR companies as they will create a demand for headsets and software solutions.

“Big companies are starting to adopt VR for task-specific uses,” says Guha. “Accenture, in October 2021, acquired 60,000 Oculus Quest 2 VR headsets for onboarding new hires in its Nth Floor, metaverse platform. These initiatives are evidence that enterprises are gaining confidence in VR.

“On the consumer front, VR metaverses are focused on gaming, ecommerce, social media, and live events. These metaverses could potentially improve VR’s appeal to consumers, provided the companies develop compelling experiences that entice consumers for adoption. However, mainstream adoption is anticipated to be held back until their devices are comfortable for long-term use and network latency issues are addressed.”

In other words, there is an opportunities for VR startups like Remio to come in and offer corporates new solutions. “The metaverse buzz has led to more interest in Remio from customers and partners,” van der Westhuizen says.

Remio VR
Remio founders Jos van der Westhuizen and Derrick van Schalkwyk (Credit: Remio)

Remio raising a round is a sign of the changing VR industry

van der Westhuizen and van Schalkwyk came up with the idea for Remio when they were running their other startup Kristalic, an artificial intelligence-powered voice recorder. Like many business leaders, the pandemic changed how they worked. Predominantly, it made it really hard to create a team spirit. Anyone who tried to set up friendly game of Among Us during the health crisis can understand their frustration

“We struggled for hours to get the team in the same spaces in VR and realised that the current set of games and experiences don’t cater for business teams,” van der Westhuizen says. “That’s what seeded the idea and when we decided to stop Kristalic it was clear that we had a burning passion to build this VR product for remote teams.”

The result was Remio, a VR platform where business leaders can organise meetings and virtual team building exercises.

“The HQ houses the standard set of VR collaboration tools such as board rooms, conference rooms, whiteboards, and breakout rooms,” van der Westhuizen says. “More importantly, there are rooms where teams can enjoy casual social activities such as corn hole, barVR, basketball, escape rooms, and paintball. These team-based activities are the core focus of Remio. We bring teams together to have fun and goof around, something you cannot currently do as a remote team.”

VR evangelists are singing the praises of the technology, envisioning a time when flatscreen Zoom calls are abandoned in favour of colourful 3D meetings in the metaverse. But will VR ever replace video chats? Not everyone are convinced of that.

“Not unless we can wear a device that is completely unobtrusive and is a major improvement on the experience of just having a video call,” says Gauhman. “Sitting with a bulky nausea-inflicting bucket on your head is not fun.”

However, van der Westhuizen disagrees, arguing that VR has three benefits over video calls. Firstly, he suggests that the “spatial audio and 3D environment give people a sense of presence akin to being in the same physical space.” This leads to his second reason, which is that people can move around and will hear the people closet to them, making it easy to “have multiple different side conversations simply by walking a few meters away from the main group in VR.” He also suggests that it would create a way to engage with coworkers in a “natural” way.

“You can interact with people at a level close to what we consider natural, for example, pass them a ball, shoot their basketball with your bow and arrow mid flight, high-five them, hug them, and even crowd surf if you really want to – interactions you cannot do over Zoom or even most non-VR games,” he says.

Will the VR revolution happen this time around?

The Remio founders are certainly confident about their own VR platform. However, Given decades of broken promises, it would be easy to be sceptical about the notion that the VR revolution is finally happening.

“Both VR hardware and software have evolved significantly in recent years, but issues like latency, high prices, privacy concerns, and a dearth of compelling content prevent widespread adoption,” Guha says.

But thing are admittedly changing. More people are buying headsets. Research firm Omdia estimates that 12.5 million headsets were sold worldwide in 2021. There’s also several companies innovating in the sector. Innovation doesn’t mean adoption, though. And getting regular Joes on the street to buy and strap into new headsets still seem some ways off.

“The metaverse will change people’s reluctance to buy VR headsets only if there is a social critical mass,” says Jared Ficklin, chief creative technologist and founding partner at product design consultancy argodesign. “But I don’t see that happening soon. It is a novel experience but the ergonomics and interoperability are still issues.”

This article originally appeared in Verdict.

GlobalData is the parent company of Verdict and its sister publications.