
Magic Leap Could Be Looking at an $8B Valuation - JumpCrisscross
https://backchannel.com/magic-leap-could-be-looking-at-an-8-billion-valuation-28eaa0294ad1
======
nneonneo
I was, at one point, very excited about this company, to the point where I
recommended a colleague join the company (she thankfully did not). I strongly
believe there's only so much vaporware that the general public will accept,
and Magic Leap has definitely overstayed that period.

If they aren't more honest about their _current_ progress and more realistic
with their near-future plans, they'll end up cratering their reputation with
the public before they even have anything off the ground. At that point, it
might not matter how many billions they have in the bank if they ruin their
reputation to do so.

Worse, if they don't get in front of their persistent vaporware problem, they
could find themselves in the dust by the time they do come out with a product.
Microsoft has already released their first version of the HoloLens, and is
said to be working on their next version at full steam. By the time Magic Leap
comes out, Microsoft might already have a compelling ecosystem and device
portfolio. Other companies are joining suit.

It'd be nice if Magic Leap showed the public the same thing they're showing
these investors - clearly, their demo is convincing some supposedly smart
people to pour lots of money in, so why can't they show the public?

~~~
ChuckMcM
Pretty much. This is pretty much a classic analysis of execution risk. The
company spends so much time in development that the market passes them by. One
of my favorite poster children for this is Plastic Logic.

I have no direct knowledge of anything that Magic Leap is doing so I can only
speculate. My speculation is that they have raised too much money, and as a
result they lost their edge. People are naturally more productive when a
deadline is looming, especially if it is an existential one, and startups
typically have a limited amount of cash before they have to raise more or die.
But sometimes startups get enough money that they can operate for years before
they die, and then their delivery deadlines seem to ooze out to years.

It can happen easily enough, if you have to deliver next year, and your
schedule it tight, then you start narrowing the scope of your delivery. That
naturally prunes the things that are less critical to your success from the
delivery and focuses the team on the critical bits. If your delivery is in two
years, there often is pressure for some "quick wins" which are features which
are not critical to the product but easily completed to show progress. As a
result you make lots of progress on things which are not part of the critical
path. It can make an engineering team feel good ("Hey, look at all this stuff
we got done!") but it pushes off the question of whether or not they can even
_do_ the critical bit.

One unexpected side effect of this I saw in a company I advised was that the
group working on the critical bits were penalized in terms of recognition for
not getting more done (even though their part of the problem was much harder)
and some key members of the group left, putting the critical pieces in still
more jeopardy.

What I'm trying to say is that taking a big funding round is exceptionally
risky for people who haven't managed through the sorts of ups and downs a
startup has to weather. Magic leap took in a _lot_ of money early on. That
sets the stage for disaster. Not that the problem will actualize; People go
out sailing on the San Francisco Bay without enough life vests for the people
on board every day and that situation only occasionally intersects with an
event that results in the loss of life. But once you've left the dock without
enough vests, you have just increased the importance of the competence and
abilities of your crew without necessarily realizing it. So to with startups
that take too much money, they increase the importance of having a management
team with exceptionally good discipline.

We will get to see how it turns out for Magic Leap.

~~~
kken
>One of my favorite poster children for this is Plastic Logic.

Basically the entire organic transistor community has a solution in search of
a problem. Not really an issue limited to Plastic Logic.

~~~
ChuckMcM
Agreed, but PL had an excellent product, the flexible e-ink display, that had
they sold it as a component[1] they could have funded any number of future
products. Instead they felt they had the funding and runway to build the
entire experience and dominate the e-reader market with a more durable, less
expensive, and larger format product.

The interesting bit was that they were not wrong, _if_ they could do all those
things they could have dominated the market. But they had too much money
relative to the market window. As a result they spent way too much time
working through product issues that were completely unrelated to their game
changing display and once full color tablet readers were a competitive threat
they had too much margin pressure to recoup any of their development costs.

[1] And yes, I met with their VP of Marketing/Product Development and
explained this to them when they had time to take the advice, but they did
not.

~~~
kken
I agree, they tried to do more than they should have.

A general issue I see, however, is that the real world need for flexible
displays is far more limited than earlier projections suggested. If you switch
to a rigid display, there is no reason to use an organic transistor back plane
- that's where things start to unravel. PL were not even the first company in
that space. There also were Polymervision and a couple of others.

~~~
ChuckMcM
It is quite difficult to predict exactly the road not taken, I realize that
PL's demise may have been written long before they chose the path they chose.
That said, I could see other markets, markets that have yet to be exploited,
which they might have reached. One was the 'flimsy', a bare bones e-reader so
simple it could be sold very cheaply if its display was built using roll to
roll printing technology. It was the 'e-reader as printer' something that sat
perhaps in a network connected cradle with the 'smarts' and you printed to the
display and then could detach it and take it with you. With a flexible display
you could feed in a new display like you would a sheet of paper, with either a
set of contacts along one edge or the driver in the surface on which the sheet
rested. Lawyers carry around literally pounds of paper for trial, putting all
of those in a dozen e-readers so that you could have all the interesting pages
up to read at the same time. That would be something.

The key though is cost. A slam dunk product would cost what the Boogie board
does ($30) have 200dpi+ resolution and let you write on it with a simple
stylus.

------
acchow
"But wow, the demos! I played a shooting game and designed a universe of stars
and planets that stretched across a living room wall. I watched a boxing match
on the desk in front of me, and saw a friendly droid wave up at me from
beneath it. One scene in particular moved me: a firefly buzzing around the
room. It looked real–there was no pixilation. Its wings were faintly
translucent. I held out my hand and the bug flew down to perch on my index
finger. I had injured this finger in an accident five years ago, and since
then, it has had no sensation. But as the firefly perched on it, even though I
_knew_ it was just a hologram, I felt the slight tickle of its legs. Magic
Leap had tricked my brain into telling me that my finger tingled."

\- [https://www.wired.com/2016/04/went-inside-magic-leaps-
myster...](https://www.wired.com/2016/04/went-inside-magic-leaps-mysterious-
hq-heres-saw/)

Uhhh....right...

~~~
bdrool
I don't find that very hard to believe considering it's sometimes possible to
use something as simple as a mirror to trick the brain into correcting phantom
limb pain:

[https://en.wikipedia.org/wiki/Mirror_box](https://en.wikipedia.org/wiki/Mirror_box)

------
michaelbuckbee
You have to look at this valuation (and things like Facebook's Oculus
investment, etc.) as these big companies trying to figure out what is going to
come after smartphones.

Whatever does is going to print money and own an ecosystem for a couple of
decades. What is that worth?

Today:

Apple's about to cross the $1 trillion cumulative revenue milestone iOS.

Android's generated revenue of $31 Billion [2]

In a world where Apple is suing Qualcomm for $1B over fundamental networking
chips. Even if MagicLeap does nothing but license their patents to all the
other tech players, could they still be worth $8B dollars?

1 - [https://9to5mac.com/2017/01/11/apple-1-trillion-in-
revenue-f...](https://9to5mac.com/2017/01/11/apple-1-trillion-in-revenue-from-
ios/)

2 -
[https://www.bloomberg.com/news/articles/2016-01-21/google-s-...](https://www.bloomberg.com/news/articles/2016-01-21/google-
s-android-generates-31-billion-revenue-oracle-says-ijor8hvt)

~~~
acchow
Apple didn't invent the smartphone. Nvidia didn't invent the GPU. Facebook
didn't invent social networks. Google didn't invent the search engine.

Pioneeering is expensive and usually doesn't pay off as well.

~~~
smacktoward
There's an old saying: "you can always tell the pioneers, they're the ones
with all the arrows in their back."

------
jdoliner
I used to think the company was called Magic Leap because their technology
made images magically leap out at you. I didn't realize it referred to the
magical leaps their valuation would take.

~~~
yeukhon
When I read Magic Leap, my head reads it Major League" all the damn time.

------
jorgemf
$8B Valuation and no product in the market. It sounds crazy for me. Can
somebody put some sense here for me?

~~~
roymurdock
Sure, look at a comparable "AR" company. Snap generated $150M in revenue last
quarter, and is valued at $24B (market cap).

Magic Leap would need to generate $50M quarterly, or $200M annually to sit at
a comparable valuation multiple. Given that the "AR" market will be in the
$billions for yearly revenues, I think this valuation is totally feasible. But
that is still an assumption nonetheless. Facebook, Google, and Microsoft will
play in the mix, but a billion dollar "AR" market will be big enough to
sustain a few large players.

Obviously only time will tell as it's impossible to evaluate what Magic Leap
is actually developing and selling at this point.

PS check out the comments on this thread that got flagged off the front page
earlier today:
[https://news.ycombinator.com/item?id=14343480](https://news.ycombinator.com/item?id=14343480)

~~~
sillysaurus3
The problem is that AR can't make things dark. You can add light, but you
can't take it away without blocking whatever you're looking at.

Whether that's an extremely serious hindrance to the AR movement remains to be
seen. Adding text overlays would be most of the benefit of AR, but there might
be optical reasons why you can't just block out some light and then overlay
text in a readable way.

It might turn out that AR only works well at night, when it's dark.

~~~
tintor
It can make things dark. Have you seen the dimming windows in 787?

~~~
fossuser
That's not good enough to work.

For a more complete answer: [http://blogs.valvesoftware.com/abrash/why-you-
wont-see-hard-...](http://blogs.valvesoftware.com/abrash/why-you-wont-see-
hard-ar-anytime-soon/)

------
jboggan
I went to a VR talk by Ted Schilowitz last week (futurist at 20th Century Fox,
formerly of RED Camera) and he was raving about Magic Leap's tech. He said it
was actually as good in person as the demos would suggest. I was surprised to
hear this because I had previously come to the conclusion this was just a
visual Juicero.

~~~
johansch
Possible explanations:

a) They gave him some stock

b) He doesn't really understand VR/AR at all

I spent an hour or so going through the about 1000 people listed as working at
Magic Leap on Linkedin the other month. I had a wow moment back then. So many
deeply unqualified people for something like this. I think the number whose
_subject areas_ could even be relevant to the development of the tech was like
at most 20. Out of about a thousand.

Why not have a peek yourself?

[https://www.linkedin.com/search/results/people/?facetCurrent...](https://www.linkedin.com/search/results/people/?facetCurrentCompany=%5B%223098033%22%5D)

(I see 1062 people at the moment.)

The profiles of the rest of the people seemed like they were hired to create
cool demos. So many graphics designers, motion designers, PR people, marketing
people etc etc.

~~~
jboggan
a) Quite possible. I think he had an NDA with them. b) No, I think he gets
VR/AR, he had some interesting points and claimed to spend his entire workday
with various VR/AR devices (lots of early prototypes)

Your analysis of Magic Leap's employees is really interesting though, how
complete do you think it was? I mean they must have more than 20 engineers
working on it, what percentages did the employees break down into in terms of
engineering, design/visual arts, office staff, etc.?

~~~
johansch
I didn't create a detailed breakup by field. The number of about 20 (very
rough number) that I mentioned was for the number of hardware/optics people.

There are a shitload of VFX/HR people/people managers though.

~~~
DonHopkins
I have heard from someone I trust who worked there, that the office is very
crowded, noisy and chaotic, and it's difficult to get any work done because
there are so many people chattering and having phone calls and meetings. The
term "turkey farm" came to mind.

------
onion2k
I've played with a Mircosoft Hololens dev kit and, even though it's clearly a
first version (field of view is tiny, relatively low res, etc), the potential
applications for a second or third generation version are _immense_. It's not
hard to imagine AR headsets replacing monitors entirely with a short period of
time. That's a _big_ market. If Magic Leap have something better they could
well be on to something that justifies a crazy valuation.

------
sytelus
TLDR; This seems to be the only new information in the article:

 _I asked a few folks, and discovered that the company is raising funds again.
The D round, I’m told, isn’t locked up yet, but it will value Magic Leap at
$6–8 billion. Once again, the Chinese e-commerce giant Alibaba will lead.
(Alibaba’s executive chairman Joe Tsai sits on the board along with Google’s
Sundar Pichai.)_

~~~
SimbaOnSteroids
I wonder what exactly they're showing to these investors. We as the public
know nothing, but people keep poring in money.

~~~
DonHopkins
My theory is that they built a swimming pool with a thin surface that looked
like a wooden high school gym floor, then bought a real whale to jump up
through it. And they bread tiny little elephants, and children with really big
hands, and combined them together.

[https://www.magicleap.com](https://www.magicleap.com)

~~~
schoen
> tiny little elephants

Tiny little lighter-than-air elephants.

~~~
SimbaOnSteroids
I mean if they had the a semi working prototype of a device that was the
HoloLens but more like a pair of RayBans then I could completely see investors
just throwing money into the furnace with them but are they stuck on the sunk
cost fallacy? What the hells happening in Ft. Lauderdale

------
pg_bot
The amount of money this company has raised without putting a product to
market is unprecedented. The track record for startups raising tons of money
pre-launch is spotty to say the least. At what point does potential have to
face reality?

~~~
monk_e_boy
I can't understand what they think the market is going to be. I very much
doubt they will make money from the hardware (they'd need to shift a serious
number of units), they will want to make money from the software (just like
PS4, XBOX, Nintendo)

But without the product in developers hands, software is going to take years
to create. Look at VR, devs have had VR kits for, what? three years or so and
still content is thin on the ground. Nothing compelling with a consumer buzz
like Zelda or Halo did for the consoles.

I want AR to be a thing. I don't think this cloak and dagger secrecy is doing
them any favours. They can't possibly live up to the hype.

------
skdotdan
Either "the emperor has no clothes" or they are starting a revolution only
comparable with the multi-touch one. No middle point here.

~~~
criddell
The hype reminds me of the run-up to the launch of the Segway.

------
tschellenbach
You can argue that this will fail, but I love it how they are trying to go for
something big.

~~~
ebbv
That kind of thinking can be used to justify just about anything. That's
nonsensical. The issue I have is that they seem to be deliberately misleading
investors based on what has leaked out. They are certainly trying to mislead
the public with their claims.

~~~
ericd
Investors get to try it out. They're not trying to mislead investors via
leaks.

------
netrap
I'd rather buy Craigslist. At least they make 600M+ profit yoy.....

~~~
sh87
Thats why they ain't up for sale!

------
iblaine
Technical Illusions is in this space and they seem to be going after a
realistic goal. TI has a product that projects an image by reflecting off of
material. They have working demos. Magic Leap seems to be creating AR by
projecting a pixel onto your eye. That is a much harder problem that results
in low field of visibility, low resolution, and short depth of field...at
least from what I have been able to read.

------
Fuzzwah
I don't know if the $8bn figure is rational, but listening to Graeme Devine
talk about about magic leap's vision for the future of mixed reality gives me
an idea how they're managing to part people from their fat investment dollars.

[https://www.youtube.com/watch?v=4SNdrEGSVUY&t=1h39m32s](https://www.youtube.com/watch?v=4SNdrEGSVUY&t=1h39m32s)

------
ebbv
An $8 Billion valuation on a company that:

    
    
        - Has no products.
        - Has done no public, verifiable demos of real tech even.
        - Has no verified technical innovations even as far as I know.
    

Something is seriously, seriously wrong in the valley^H^H^H^H^H^H tech
investment world.

Edit: Clarification since Magic Leap isn't a valley start up.

~~~
AndrewKemendo
The ML HQ is in FL, and their investments are overwhelmingly from corporate
venture. Other than an office on the peninsula, and Sundar on the board there
is nothing Silicon Valley about them.

~~~
ebbv
Ok I will reword; there's something very wrong in the tech investment world.
I'll edit the post.

------
powera
At some point people will stop pouring cash into this money hole.

------
dabeeeenster
Benedict Evans has tweeted glowingly a few times about Magic Leap, following
product demos. I sceptical but I trust his opinion, regardless of the fact
that he works for a16z

~~~
objclxt
I'm sure a lot of Theranos investors had good things to say about the demos
they got from them.

------
cpt_snowcrash
Has anyone tried developing anything for Hololens? Want to know how was the
experience and how do you see the application ecosystem moving there

~~~
ChicagoBoy11
[Disclaimer: This is based on playing with developing for the Hololens for all
of 3 days]

Until we have some absolute killer -- and I really mean killer -- APIs for
image recognition and AI, their use is going to be rather limited. It is
telling that the vast majority of demos that they have used to demonstrate
Hololens would actually be more compelling as VR experiences. Navigating the
solar system, the human body, or the silly shooting game they used to demo it
a few years ago are all fine uses of the technology, but they don't in any way
meaningfully interact with the world around you -- which is ultimately the
value add with AR as opposed to VR.

When I used it, all I could get as a developer was a mesh with the surfaces
that the Hololens had recognized in the environment. That is really good for
properly occluding objects and allowing things to appear in real space; it is
insufficient if your goal is to actually meaningfully interact with the world.
I don't just need to know there's a wall there; knowing that it has a TV in
the middle of it is important if I want to build an experience to accompany a
live sports broadcast. This technology will really shine when we can, with
incredible speak and accuracy, put a Hololens on and instantly know that its
in a living room, and that the object in front is a coffee table, and there's
a picture frame on it, etc.

We do have a lot of this capability already available, but to me the key leap
that is missing is a way of accessing and using all of that in a coherent and
easy way as a dev.

~~~
roymurdock
Check out PTC ThingWorx Studio. They're working on 3D CAD recognition and
tracking tech for industrial and enterprise use cases. One of the more
advanced products on the mkt based on my research (I think they're still in
private beta though).

------
arcanus
Are (sales > 0)?

~~~
drcross
currently (products < 0)

~~~
ythn
How does one generate a negative number of products?

~~~
BuildTheRobots
At least an amount of people would say that the demos are a sham - that'd be
one way of generating negative products.

~~~
klearvue
Apologies for correcting but it's "a number of people", not "an amount".
"People" are countable.

~~~
BuildTheRobots
Pedantry at it's best, but I can honestly say that I've learnt something :)

[http://dictionary.cambridge.org/grammar/british-
grammar/amou...](http://dictionary.cambridge.org/grammar/british-
grammar/amount-of-number-of-or-quantity-of)

------
thecrumb
They make nice bubbles... :)

------
sanguy
Tech doesn't work. Tech can't work. It is all hype and a dream. Just like
Theranos.

Those who invest deserve what comes with it....

------
wellboy
2nd Theranos, Clinkle, Color

------
milquetoastaf
This company is a laundering scheme for millionaires

------
tanilama
Mind blowing

