But while the Invoke story has been widely publicized, the funding winter in the startup space is catching up with metaverse startups faster than in other sectors.
Mint spoke to another co-founder from Delhi, who left his Metaverse-themed firm last month following differences with another co-founder and main investor. In that case, the Metaverse firm was made part of a larger events platform, according to the person.
Metaverse firms trying to cash in on the web3 craze since last October have started losing investors’ minds. According to founders, venture capital firms and analysts, the industry is starting to see metaverse startups as riskier investments, and therefore, not looking to invest in them, given the current funding squeeze due to global inflation and impending recession.
Another founder, who runs a funded startup focusing on non-fungible tokens (NFTs), and plans to build a virtual platform around it, said investors were reluctant to agree to the idea of a Metaverse product. Even if they are willing to look into crypto and NFT ventures. “It’s more difficult to sell that idea to them,” he said.
Social media giant Facebook’s rebrand to Meta last October gave a lot of augmented reality (AR) and virtual reality (VR) startups a second chance, but most of them ended long before that, industry insiders said. they were finished.
“We have looked closely at the metaverse (space) over the past 10-12 months. We are of the view that the technology backed is as relevant as it is and, to be here to stay, the business models in this area are not yet strong enough, Rajesh Sehgal, Managing Partner, Equineity Investments said. As a result, Equineity has no investment in this space. “What it is, Metaverse is a high risk, high return type of game. So, people would have allocated a very small portion of what they have for this space,” he said.
Sehgal also said that the demand for such investments is likely to decline commensurate with the decline in overall risk appetite.
Another person, who has invested in some of the biggest startups in the country, said that to get distribution, these startups first need a platform, which doesn’t exist yet.
“Companies pivot based on discussion. So, we’ve seen a bunch of AR/VR companies become metaverse companies over the past two years. It’s just a nice rebranding,” he said.
Further, the investor said that the total addressable market for such startups is currently only in lakhs and is insufficient to actually make any investment. Research firm International Data Corporation (IDC) said in a report this March that only 11.2 million AR/VR headsets were sold worldwide in 2021, up 92% from the previous year.
“How much capital can you invest to get all those customers, right? You can’t spend $100 million to build a product that will be used by 8 million customers,” said the investor, adding that it made the most of VC has been kicked out of the metaverse space. “You could always argue that there will be 8 billion VR headsets sold in the next five years, but of course, we’ll see that in the next five years. Today, the data doesn’t support that,” he said.
“For Facebook or Microsoft to support a certain technology and business model that is new there is a fractional amount of financial or operational risk. I see those companies more as campaigners trying to do something for the ecosystem.” are doing,” Sehgal said, noting that $100 million may not make much of a difference for the US technology giant as a small firm, for which it is a question of life and death.
It’s not just investors though. A survey by researcher Gartner earlier this month said that while CEOs are interested in technologies like artificial intelligence (AI), 63% of them didn’t see the metaverse as a technology applicable to their businesses.
That said, not everyone is giving up on these startups just yet and there is still hope for the ones with the best products. Some said that Facebook, Microsoft etc. will eventually acquire even smaller firms, and resilient ones may find returns there.
For example, investment platform LetsVenture, which last month invested in industrial metaverse platform Fabrik, said it will continue to invest in startups in the region.
Nakul Saxena, Head of Fund Strategy and Investor Relations at LetsVenture, said, “While we see the Indian market shaping up to a number of products and features in the past and even in the present scenario, India is certainly the first to embrace the Metaverse concept. Shaping will help.”