You can get better loan terms (such as the interest rate) if your loan is secured. If you are going to get a secured loan, the default is that it's secured by 'all assets', which includes IP. In order to perfect a security interest in IP, you need to make this type of filing -- and a lender will be especially sure to do so when making a secured loan to this type of company because the company likely has little other assets of value with which to secure the loan.
What makes it "news" is that Magic Leap was able to raise $2.6 Billion without having to resort to using the I.P. as collateral. It usually does not make the previous investors happy and you usually resort to this when you can't raise money any other way. It is also a one-trick-pony in that you can't do it again and future potential investors know that the I.P. is already gone if the company goes bust.
They just announced a $280M investment from NTT Docomo, but base on my and other people's estimates, Magic Leap was running out of money while burning through about $600M/year so that only bought them about 5 months of runway.
Are they building factories or something?
1600 employees. Billions raised. Big hype, but what actually shipped is similar to a three-year-old Hololens.
Do you have any specifics? Who were the friends-and-family hires at Magic Leap?
And it was those very people that were selling their round A. Very competent people they were... :)
It also shipped in 2018 and has yet to file an S-1 for a public offering.
Typically, once execution risk has been retired (i.e. you are shipping a product), and market risk (or fit) has been retired (i.e. you're getting more demand than you can fill) then you pour in money and grow the company.
So they have been shipping for a year and don't have enough sales to be operationally cash flow positive, and they don't have a good enough story to convince investors that they can get to market success, and they need cash to continue operations.
No, what this note/observation makes clear is that it's that time where either they figure out some problem where their technology has the most value, or they end up selling off the chairs and desks and try to return something to their investors after JP Morgan sells their IP to cover their last loan.
Odds are its about to follow DAQRI into the bin.
* Didn't read the patents themselves, but Oculus, Hololens and others are doing just fine without them. So, hard to imagine they have too much auction value.
Amazing collateral chain these days… anything to keep origination pipelines up, hopefully JPM can securitize enough of this and offload it to a yield chasing pension or something.
Maybe the employees can sell what hasn't been collateralized yet on platforms like: https://softbankfiresale.com/
Ownership does not transfer to the secured lender as a result of this filing.
Do you have any evidence for that idea, or are you just making things up?
You can read more about patent security agreements here:
If I go to the park, pick up a rock, and then go to a bank and say there is diamonds inside worth $1m, and they lend against that then I have made $1m. If you lend against collateral, you are making a bet on the collateral being worth $X. JP Morgan have no idea what the IP is worth.
And btw, what is Magic Leap? They have got billions from investors with no product, they have now got billions from JPM with no product...either they have some of the most valuable patents known to man or this is an almighty scam (to be honest, I always hope it is the former because you have to be an abhorrent human being to pull off the latter...but that never is the case).
Sometimes massive libraries of patents are useful (I presume this is why google kept Motorola's patents when they sold the company off) simply because they can be brandished as a counter-weapon when a large company is threatened in a patent battle. But think of it as a sandbag: one grain of sand is negligible and few companies have more than a handful.
This looks pretty strange.
You sometimes see secured lenders forego this type of filing since it’s a bit of a pain in the ass, but for a company like magic leap, you would definitely want to do it since that’s where most of the value is.
It’s hard to say more without knowing the terms of the loan. Perhaps they are struggling to raise more equity and had to resort to debt on bad terms, or perhaps it just made sense to raise debt instead of equity and they could do so on favorable terms.
For a company that has no consumer product and has no revenue, to have this many employees is quite shocking to me.
Doing what? They've sold a few thousand glasses, and have done a fair amount of R&D. But $2.4 billion? That's 12,000 engineer years.
They're a hedge bet made by VCs who don't want their LPs asking "why didn't you bet on the obvious market leader?" if AR blows up.
They cannot do anything but fail.
Ended up in NYC, and now, Washington D.C.
Don’t think a single company can save the tech economy of a state that doesn’t seem to think its worth the investment. That being said, I love Florida and it would be awesome to build out a tech sector down there.
Computer science and math were addressed explicitly
Highlights of CS/HB 7071 include:
- Establishing the “Florida Pathways to Career Opportunities Grant Program,” which provides competitive grants to eligible institutions to create or expand apprenticeship and pre-apprenticeship programs.
- Requiring a reverse transfer between Florida universities and colleges to award an associate in arts degree to students who have completed necessary requirements.
- Requiring career centers and Florida College System institutions to establish regional career pathways guaranteeing college credit toward an aligned associate degree program for eligible students who graduate with a certificate from a career center.
- Establishing the “Last Mile Scholarship Program,” that will pay for eligible individuals to finish their first associate or baccalaureate degree.
- Creating increased opportunities for students to take high quality computer science courses in high school by allowing students to count one course as either a require science or required math credit.
- Codifying Governor DeSantis’ required audit of career and technical education, from Executive Order 19-31, as an annual requirement to ensure high quality pathways for students.
But who knows what they have up their sleeve for v2...
Is it possible for ML to be viable at all? Assuming they manage to make $1000 profit eventually per device, they will need to sell at least half million devices each year. It seems militery usage probably won't be able to fund this alone as the size of US militery is just 1.5M. In US, 40M iPhones are sold each year and one can think of largest possible market for $2000 devices is likely around 5M to 10M per year. So 10% of that is certainly possible if there was a compelling experience device.
Their most expensive product only costs $3,290.
Let me provide the real facts, instead of your baseless speculations:
Microsoft and Magic Leap were competing on a Army contract. Microsoft won. The contract is $480 million for 100k units. That's $4800 per unit. 4 figures, not 5. The Hololens 1 costed $5000/unit COTS.
Magic Leap's cost proposal couldn't have been far off.
That's why the military ends up buying hammers for $1000 when you could pick up a higher quality one for $10 from your local hardware store.
You are showing your ignorance again: the DoD doesn't make decisions like these based on monetary value alone. Technical merit was likely the deciding factor.
You as founder are most likely going to be the one trying to sell your IP if your startup fails and your debt guys will essentially give you a commission to do so.
Just anecdotal but JP Morgan appear to be involved in quite a few shitty deals this cycle. I know they are going hard in syndicated loans, which is very hot right now, wonder what we will find out when the tide goes out.
I have up the capacity, but when the cite hits #1 on Hacker News (as it is right now), it looks like the traffic is still overwhelming. It probably does not help that I put the larger associated document for people to download (I was going to put a link up but the link was not working in the Chrome browser).
It certainly wasn't a toy with a couple half-baked demos and no actual apps. There was a healthy third party hardware and software developer ecosystem. A lot of people (including me!) wanted to see it work, and it was frustrating to have Jobs kill it right when it was getting traction.
Raised $2.6 Billion
I'd be willing to bet that it's more like a few thousand at most. Does anyone here know anyone with a Magic Leap One (maybe yes, since this is Hacker News, but still...)?
Both these things continue to point toward the hype machine over mass market/sales/consumer consumption
That's because they were advertising a fully immersive experience. In reality, they did what Microsoft has done with HoloLens anyways, just worse.
The way i naively imagine startups work is that they identify a market, develop a product for that market, then sell the product to the market.
So where have the AR startups gone wrong? Did they not actually identify a market? Does the market turn out not to exist? Have they not been able to develop a product that adequatly fits the market? Are they unable to sell a perfectly good product to the market for some reason?
- Hard problem, immature technology that barely works as yet.
- Correct strategy would be vertical markets that have a particular need of the product, would pay enough per unit to pay for the R&D, would put it in the hands of professionals who can be trained to work around the inevitable bugs.
- Company instead unwisely aims straight for the consumer market.
And ML still goes on.
We know its technologically impossible yet people still go on like its something.
But the sad thing is, it's hard to say the actual value of the patents, to ML nothing but as a troll maybe a fair bit.
I want in on it. Capex for R&D is prohibitive.
I suspect many smaller tech firms are similar.
Created by a risk junkie, funded mostly by governments hoping to mix profit with prestige, and ultimately likely to implode as part of the next tech bust.
Access to a good network. It's not like cash isn't available these days. It's just that you have to treat networking as a full time job and hone the craft just as you would anything technical.
I'm not a lawyer, but I think it was done this way so the I.P. would immediately become J.P. Morgan Chase's in the case of default. We don't have access to the contract between Magic Leap and JP Morgan Chase to know what the exact terms and condition.
Regardless, whereas before Magic Leap was able to raise money without putting up the I.P. as security for a loan.
I walked by their booth at GDC a couple years ago, and tried to struck up a conversation with the representatives. I was essentially shooed away and given a sticker.
Later on that night, an invite to their Magic Leap party was sent to a telegram channel with an open invitation to 'come hang'. The only problem: the invite was sent 10 minutes before it was wrapping up, almost like a "look at our party you aren't invited to".