Do you believe that XR is the future of modern entertainment? Composed of a blend of AR, MR, VR, and spatial computing, XR is a major frontier for big tech. Meta has spent $40B on Reality Labs, and Apple has launched the world’s first “spatial computer” this past month. But is it a fit for entertainment and games?

Join your host, Alexandra Takei, Director at Ruckus GamesTaylor Hurst, Principal at Konvoy Ventures, and Julian Park, CEO and Co-Founder of Bezi, in an exhaustive discussion about XR and its subcomponents, company players and their competitive advantages across integrated chips, software, and hardware, gaming content being built for XR devices, debates around the the future of VR, and the underwritten priors that have to be permissible in order for the space to succeed. 


Windwalk

We’d also like to thank Windwalk for making this episode possible! Windwalk builds digital communities and the technologies necessary to accelerate them through their flagship software, Harbor. To learn more, simply head to https://www.harbor.gg/


This transcript is machine-generated, and we apologize for any errors.

Alex: What's up everyone. Welcome to the Naavik gaming podcast. I'm your host Alex Takei. And this is of course the interview and insight segment. So Meta said happy birthday to itself on Sunday, February 4th. And the company is cooking. Meta reported a lights out quarter, sending shares up more than 20%, adding 196 billion to the company's value.

The largest one-day gain in wall street history, the social media ecosystem across Facebook, Instagram, WhatsApp, and others helped to pump out 163 billion in operating profit this past quarter. And of course, what is Meta doing with it? Reality labs and most companies could never burn. Think of burning a 40 bill for three years developing a new product.

But then again, most companies also don't have a business that's turned out 160 billion of operating profit in a quarter to fund that investment. And while virtual reality has yet to become the actual reality for many meta own platform users. There's already some fierce competition. The Apple Vision Pro arrived in stores across the country this month.

And as of recording had pre orders of around 200K and currently an unknown number of units sold at this point in time. It's also prompting a wave of YouTube videos, talking through all it's interesting capabilities and the pros and cons, as well as some hilarious consumer videos of people wearing it outside on trains and in their homes.

Apple calls this a revolutionary spatial computer that blends digital content with the real world. It retails for a hefty 3,500, but claims to enable experiences never had before in the headset world. Neither a virtual reality headset nor AR overlay, a lot of folks in games are wondering how this new device may impact the world of entertainment.

So I'm starting out with Meta and Apple and big tech stuff today, because although it's our mission to talk about XR's role in gaming across development and content, It's important to remember that although the attempt to make an entertainment experience can prompt the creation of technology, something like graphics cards, so content spurring tech technology and its rapid adoption can also spur on content creators.

So content spurring so tech spurring content, and so smartphone adoption in the late two thousands prompted an entirely new segment of the gaming market, but we've had VR headsets from multitude of companies, Oculus, Microsoft, Sony, litany of others, and will the Apple vision pro be different?

And what do we actually foresee the XR gaming market in the coming years, looking like given Apple's new entrance, what technological inflection points have we hit that are reforecasting our baseline expectations. And so today are we talking about XR and gaming. In order to do so, I've brought on some experts in the space.

My first guest is Taylor Hearst, principal at Convoy Ventures, and an occasional panelist on our roundtables. Taylor has been following the XR scene very closely, and I'm excited to have him share his thoughts on the space. Welcome.

Taylor: Great to be here.

Alex: Yay. And so my next guest is Julian Park. Julian is the CEO of Bezi, a spatial design company that he describes as 3d Figma.

Julian used to work on the Oculus OS back at Meta and is going to be helping us understand the tooling side of XR and games. Welcome to the pod.

Julian: Yeah. Thanks for having me.

Alex: All right. So before we kick off, I'd like to hear a little bit more about your backgrounds. Taylor, we'll have you go first. Tell us a little bit about Convoy and your investment thesis around XR.

Taylor: Absolutely. So yeah, Convoy is a early stage gaming fund focused on pre seed, seed, and series A. The major difference between us and I would say other gaming funds is we are actually not content investors. So we do believe ourselves to be technology investors at heart, but obviously with a major focus in games.

We are on our third fund here. It's a 150 million fund and based in Denver, investing globally. And obviously I think. This point in Convoy's life cycle, we are continuing to monitor and invest in the XR space, everything from new hardware shifts or different platform opportunities for publishers or game distribution.

We truly view this as that next stage in, in gaming going from, I would say traditional gaming on either consoles or PC to a more immersive experience that is going to hopefully bring the new generation of gamers to a new medium of game content and accessibility.

Alex: Awesome. Yeah. And I'm really excited to talk about your guys's thesis around immersive experience.

One of our topics that we're going to get to today is a little bit of a VR future of VR debate. And so I'm ready to talk about immersion and whether or not it's really important. And so Julian, I'd love to hear from you next. Tell us a bit about your background and your journey to founding Bezi.

Julian: Yeah.

So I'm Julian, a co-founder and CEO of Bezi. It's a collaborative 3D design tool. And as Alex mentioned, it's, I think it's easily understood as like Figma for 3D. So what that means is it's on the web. So it's just, it's like a browser app that you can just access and open and start creating 3D scenes. And a lot of what we see are.

Largely interactive. So not just like sculpting 3d models or assets, but like using these assets to create these games or these apps that you would then visualize and experience on headsets. So previously, a lot of it was obviously the meta quests. But I think with the Apple vision OS coming out a lot of I'm foreseeing a lot of different companies and apps and teams trying to develop for the space.

I'm super excited. For that. And yeah, we'll be a background. I previously worked at Oculus back when it was like, doctors go. So Samsung gear VR, but way before the quest really started and we're just figuring out like how the OS worked. Because I think in the beginning we just had like flat 2d rectangle of like blocks that people will play around with when you put on the headset and like to like actually open games and apps.

But our team was tasked with like, all right, how do we go from that to an actual OS that feels more intuitive, that feels more user friendly that I can actually open different apps and it's like a cohesive system and that's, that's where I really worked a lot with like designers and engineers. I come from an engineering background.

A lot of PMs. And I think that during that time, just to give you some background on how busy got started, the designers would use tools like Figma to iterate on how these apps and the OS would look. But it's obviously a 2d canvas, a 2d page. So people would ask, how do I visualize this in 3d? And then the only answer to that really was like, Oh, I would have to work with a game engine developer, like in unity or unreal to like really script out in C sharp, like this interactive prototype.

And that was just a way complicated process to like compile and package and sideload it on quests and stuff like that. What Bethesda does is it takes that like convoluted multi week process to a couple hours.

Alex: Nice. Yeah, that's awesome. I'm super excited to hear a little bit more about how that's going to impact game development.

And also, yeah, I'm just thinking back to a Palmer Lukey, like Time Magazine cover. And so it sounds like you're working on Oculus when there's like the millions of cords and the battery walking around tripping over the wires. And so it's fascinating to see like how far the space has come. Okay.

So great to hear about your backgrounds. Really excited to kick off the topic. And so the way that we're going to start today is talking a little bit about XR and its sub components. XR is a, obviously a term that is used to summarize a couple of categories. VR, so virtual reality, AR, augmented reality, MR, mixed reality.

There's a new trendy word, spatial computing and Taylor, since you're our market expert, I would love for you to talk a little bit about the definition of these four things. So VR. ar MR. And spatial computing.

Taylor: Absolutely. I think I generally try to almost rebuck them to where we look at this as how are VR and AR related and how is like mixed reality and spatial computing re related to each other?

And I look at AR and VR and how they work. I think that the simplest way to look at this is how do you augment reality versus how do you replace reality? And when it comes to augmented reality, the initial goal here is to augment my day to day life. I'm still interacting with that physical world with digital assets or digital experiences just augmented into that actual experience itself.

When it comes to virtual reality, it's about completely replacing it. It's about immersing yourself. Into a completely new digital world or experience and essentially taking yourself out of the real world and being in something completely different. And then you have the spatial computing and mixed reality side of this.

And spatial computing, I think, is more about like, how do we create an environment to allow for computing to interact with our physical world? And then you have the mixed reality side of this, which I feel like it's a combination of being almost able to go back and forth between AR and VR. And I think a lot of these have tons of overlap.

On them. But there's this almost just, you can look at it as like a, how immersed do you want to be in a digital experience? Almost it's like paradigm of. I need to be able to still interact with my, my, my physical world. I need to put on glasses, but yes, I do want to have that extended monitor or screen that I interact with day to day.

And then you get to the completely other side of this, where I want to be in a completely different world. And then everything falls within this in different ways that I think allows you to create different types of experiences that are built specifically for what you need in that moment.

And it does make it confusing. Cause I think this is also why we have tons of different devices now that are all. Built for specific areas of this market, and that's where it's creating a ton of different players and ton of different opportunities, whether it's I'm an enterprise client or I am a consumer, I want this to be for bill for productivity, or I want this to build for games and that's really the way I look at this is.

Am I trying to just create a better experience and augment what I do on a day to day basis in my physical world? Or do I just want to completely immerse myself into a completely different experience and world?

Alex: Right. And that also seems, as you're saying, to be relatively influential to the quote thing that you wear on your head, where for an immersive sense in the VR world, where we're replacing reality, you're wearing something like quite intensive, like a supercomputer on your face, which is why.

We talk about the battery life, we talk about the, I get dizzy or I get nauseous. And then there's AR, which is a little bit lighter because you're not leaning so much on the computing. You're still looking through that lens to see your own world. And so it sounds like you talked a little bit about there's this Really expansive categories that kind of sometimes all blend together, Julian, maybe from your perspective, you've been watching this space also from for a long time with your experience on Oculus, what are the two biggest changes that you have seen happen over the XR space so far, maybe over the past five to 10 years?

Julian: I think the, just in terms of the technology and sort of the hardware aspect, I think that the first thing that really changed was the shift from like PC to mobile VR. And I think this was, it's a good strategy because it's, I think that's where. It also allowed like 6DOF to also come in where it wasn't in the beginning, believe it or not, VR was this like 3DOF, DOF being degrees of freedom, like experience where you didn't really track like physical space movement.

And now we're taking for granted this sort of 6 degrees of freedom. You're like looking around, you're moving around your room with like full sort of visual rendering on top. So I think. Those 2 kind of things change from a hardware perspective, I think the sort of the high level transition that we're going through is that.

It's going from, it's transitioning from like a gaming console type of device to more like a computing device. And I think we see that already with the use cases that Meta, for example, put out around, like initially it was all like games like AAA, like indie games or stuff like that they could play.

But clearly with Apple's announcement, it's more about computing and productivity and workspaces and even like media consumption. Sure. But that's still leaning towards entertainment and stuff. So I think there's a lot that we're seeing happen, which kind of reminds me of how like the original PC, like Macintosh or the original kind of iPhone or a lot of these kinds of things, like evolving and use cases and like following the hardware form factor alongside that.

I think that's, it's going to happen again with this device.

Alex: Yeah, interesting. So to summarily put, there's two changes that you've observed was the shift from PC to mobile, the technological inflection point there, just being the power of the mobile device, allowing VR to move off being anchored to a rig somewhere like the way that Oculus used to be.

And also this like realization, I can't wait to talk about this in the VR portion that. Games for VR is not the thing that may spur the adoption and people are moving towards this productivity space for general wise computing rather than entertainment. And those are your two. Taylor, do you have any different thoughts?

Taylor: No, I think I would generally actually agree with Julian on the majority of these points. It's, it is interesting to view this as gaming was really just a, I would say a wedge. It was the easiest use case, I think, for VR when it came to trying to get that initial cohort of users to, to adopt a completely new type of product.

And Now we have that ability and we're obviously seeing a lot of companies meta with the quest pro or apple with their division pro to expand what those use cases can be within these immersive experiences. But gaming seems to always find its way as like an initial use case for a lot of different products and a lot of different opportunities in different markets, whether it's even, you could even look at like the AI space today and say a lot of the GPU innovation was how do I make my games.

Look better and how do I make my computers more powerful so that I can do larger scale experiences and now it's moved into, wow, these are actually extremely powerful. And now they have a completely different use case. It's actually even much bigger than gaming. And I think we're going to see a very similar process continue to play out within the general XR space is that, yeah, let's try to get people to play games, make it fun, make these new technologies actually enjoyable to use.

And then we'll actually find something that's Probably a little bit more productive to everyone's day to day lives, and that's just going to completely change the way people are going to have to build these devices.

Alex: Yeah, makes a lot of sense. And I think actually this is a good opportunity to start talking about the technology baseline.

Who are the players here and what are their competitive advantages without going necessarily into the consideration of games specifically yet, what are these technologies? Unlocking in terms of what you're able to do. And so we talked a little bit about in the intro, what Meta and the reality labs supposed to be, what the Apple vision pro is supposed to be.

And maybe Taylor, this bouncing this back to you, but who are the actual players in the hardware space and why are they going to win their category and whatever they're wanting their technology to do, whether or not that's for games or for productivity?

Taylor: Yeah, absolutely. And so the way I think I can look at this is There's a software players as a hardware players.

And there's like the integrated chip players. They all play massive roles and they all have extreme competitive advantages here. I think the easiest one to look at first, because it's not as competitive today would be the like integrated chip side of this is like your Qualcomm's of the world building the snapdragon chip set.

It's powers. The majority of headsets out there, Apple partners with them, not only for their iPhone, but also for the vision pro itself and their competitive advantage is honestly just their IP. It is, as of today, it is the best. It is not a. It's a chip that's specifically built for this. You're not going to use this in your computer.

You're not going to use this in your phone, even though you could use it in your phone for some AR capabilities. But I think we can go into that debate as well of is mobile actually even a good ecosystem for AR, but then you also have your, this. This cohort of headset developers, everyone from Sony to, to Meta, to Apple, to HTC magically, and they all have different, I would say opportunities in this space.

Alex: Yeah, just raise another jet round to, to continue to expand what they're doing.

Taylor: Yeah, but in the competitive advantages here are essentially like, who are they building for? You have like your Vive that is going to find itself more in like that enterprise. That enterprise market, like a lot of employee training company, or a lot of companies will use their headsets for employee training.

It's not the great, not the greatest headset for consumers. Then you'll have Oculus that's building that like, Hey, we built the quest to and the quest pro, which do offer slightly different experiences, but are still built for consumers. It's either yeah, I want to play VR games. So I'm going to use that quest to, or I'm going to, or I do want to have more of a mixed reality experience as a consumer.

So I'm going to use that, the quest pro. You have obviously PlayStation or sorry. So you have Sony, which with their PSVR to focus really solely on, I want to, we, this is the game ecosystem. It's our next medium of entertainment. And obviously you have to be a PlayStation user to use their headset.

And then you have magic loop as well, which. The way I view it is they are still building for consumers. I don't know if it's ever going to get to that point, but what I think is really interesting here is then you do have this interesting, I think there's like issue that's happening in the back end where everyone wanted to build their own operating systems.

I know Julian would have great experiences meta. I know they ended up having to shut down their operating system team and move over to Android. You have PlayStation with the Orbis operating system. You have magically tried to build their own operating system with a, with Luma, but they've all now shifted back to back over to Android, which is.

Essentially making them just pure hardware providers. Now you have Apple with the Vision OS, their competitive advantage is always their ecosystem. It is purpose built for developers and consumers alike. It is what makes them so valuable. It's why their brand is where it is today. No one else gets to use that.

And that will always be their competitive advantages. And if you mean to the mobile game developers, it's like, yeah, it's just two different ecosystems. It's. Apple and Google being iOS and Android. And then you can go to that next layer, which is who's just providing software. And then you have like your Niantic and Google with ARCore.

And I think it's also always good to highlight Google's geospatial, which is part of ARCore allowing for location based experiences. They have one of the largest databases for for like immersive maps, obviously through Google maps. And then you have Niantic on the light chip SDK side. And I think. The competitive product being white ships virtual positioning system, which is going to be core for creating more AR experiences.

And these are just going to be more integrated into different headsets. So you have this massive market of tons of R and D going into the space, but it really comes down to who's going to win the IC side, integrated chip side, who's going to win the hardware side, and then who's going to win the software side.

And I think we're still really seeing that play out, but I really fall into it. So who's going to build that best consumer device. And. Hard to bet against, honestly, either Meta or Apple in any of these cases. And then Google just has the benefit of, we already have Android. Everyone needs an operating system for their new headset.

Android's not technically built for AR, but there's a lot of value and a lot of developers building to create a Android, AOSP version of Android for specifically AR.

Alex: Who do you think Julian and Taylor right now, if you had to bet on a headset? For mass adoption over the next five years. Who would it be and why?

Taylor: I'll actually let you go first on this one.

Julian: No, I think we have a couple of data points to look at from the world so far. We look like with mobile, we know how iOS is the dominant in certain countries. And then Android's actually in terms of number, just like. Outsizing it globally. I think that there's a lot. I don't think there will be like a singular company or product that's serving the whole world.

I do see it as what Taylor mentioned, like just a spectrum or the sort of distribution depending on sort of tiers and use cases of devices. So my bet, I don't think this would be a hot take, but my bet is that Apple is going to be premium, high end, visual fidelity, that kind of world. And then that is going to own the volume of it.

Taylor: But yeah I wish I could provide a counter argument to Julian, but I just fully agree on this as well. Like Apple, and I think Apple strategy here is just, is so powerful to why they're going to be a major player in this space, which is V1 of the vision This is just get into the hands of early adopters.

Let's get into people that actually want to test this stuff. Not the people that like, they're not selling this as a consumer product that has expectations to be used by tens of millions of people all day, every day. That's just not where it's at today, but getting something as powerful as the vision pro in the hands of developers with a very open ecosystem.

And by open, I honestly just more mean a lack of saturation. When you look at the iPhone, just 1. 8 million apps on it. You look at the. The vision pro, I think they just announced they're going to pass four or 500, but these apps are purpose built for the vision pro and getting this into the hands of developers is going to be so important for them to continue to increase adoption going forward.

I just think the strategy makes sense and it's going to work. And I would say, I think Julian's also right with this. It's it's not going to be the same thing that happened in mobile, where it's Apple and Google. It's going to. It's probably going to be Apple and Meta is going to have that lower end device that when it's easier to swallow the price point while it's not going to be as powerful or probably as just tech technologically impressive as the vision pro, it's going to be much more easily adopted by consumers.

And I think. Their strategy also makes sense from a games perspective. Let's just get people in it. It's the same, essentially the same cost as a game console already. We can get, we'll obviously get to the content debate later, but those are going to be at, yeah, I would say if I'm making a prediction just today, like those are the two players in here, I think it's a really hard thing for another startup to come into this space and gain market share, like magically is going to struggle with this even with all the money they have.

It's just, it does not compare to Apple and Meadows bank.

Alex: Yeah. I'm bummed that nobody said the Google cardboard.

Julian: I do think another interesting angle could be the Google glass angle where like more like prioritizing the form factor first. So it just looks like glasses, but you've got some certain like digital content overlay or something like that.

Coming from that angle could be interesting, but it's just so difficult. To get that to hit the right spot in terms of like use case, cost, distribution, content, all these things. That's fine.

Taylor: Yeah. And I think it's also fair to highlight like Pico here, and I actually completely forgot to mention them in the previous segment or previous section of this talk.

They're going to have the ability to probably enter those Eastern markets a lot easier than Apple and Meta will be able to. It's just, they have that presence there. We're already seeing Apple having trademark issues with the Apple vision pro trying to go into China. And if I remember correctly, I think it's Tencent actually technically owns that.

That trademark in China. So there are like, there's already concerns there. And I just think that's just not a market that it is a market that is always going to have the earliest adopters. The East seems to always do extremely well, whether it's in general competing or even gaming. Pico is probably going to have a good opportunity there, but I also do know that TikTok or ByteDance has laid off or at least cut back on cut back their Pico budget at this stage, but they're still heavily investing in that.

And they'll have a pretty easy time directly selling to that market. I see.

Alex: Yeah. And I think I really appreciate the perspective on like how we, what we think the competitive advantages are also the separation between the chips and the software and the hardware. But Julian, I know that you mentioned you have an engineering background and I wanted to ask you from working on a headset from the OS side, if you're making a feature set for AR, VR, and MR devices, what do they mostly all contain?

And what do they Tech and skills differentiate them across haptics, battery life, controllers, eye tracking, gyroscopes. These are all like catchy buzzwords that like I as more from the consumer side, I'm like, Oh, like I would evaluate my headset this way. But tell us a little bit more about that actual part from the engineering of the actual components in the hardware themselves.

Julian: I want to use a metaphor with like our laptop OS screens, where I see AR as like floating windows. If you view your desktop background as like the real world.

Alex: Yeah. Iron floating windows. Iron man.

Julian: Yeah, the dirty floating windows, like on your desktop right now, like with the browser or it's this overlay on top.

And I see VR as a full screen mode. So let's say you're watching Netflix or a YouTube video and you want to go full screen, take over the whole screen. That's like the immersive equivalent, like when you're in VR. My take is that eventually, like the long term asymptote is that we're going to end up with a device that can go between these modes.

Like house, but then it would have the hardware capabilities to create those shades and give you that immersive VR experience, but also lift them up and make it feel like AR glasses. That's my kind of view on that. I think that's why from that perspective, from a software perspective, it just means the software just has to do it all in terms of detecting through machine learning, like your surroundings and computer vision and like being able to have.

Super optimized compute powers that it fits from a physical perspective, but also not burning up your face, but also having like audio capabilities, but having a software and an ecosystem around it, and then having a software that's like efficient enough, but user intuitive, I think that's the North star that like, like everyone is trying to aim towards.

It's going to take time. That's not an easy feat. That what, once it happens, it's like a huge moment for humanity. Cause now we feel like the world is our computer. That's like a separate point.

Alex: Yeah, no, I see the point. Cause it's like all of some of those things that I've listed, right? Some headsets contain those, some headsets do not.

And you're talking about maybe what the iPhone did, where it's like this bringing of a super device, which was combined the telephone with the TV screen with the gaming device. And so then it's just this like all integrated one big headset. Yeah.

Julian: Yeah. I think that's what's going to happen because I remember like years ago, but when I was carrying both my phone and my iPod, like in my pockets, And I think at that time it was obvious.

I was like, okay, I want to listen to music and I want to call people. Like eventually it converged into one device. And I think I just feel from a consumer behavior to people don't want multiple things to take care of. It just needs to be one sort of single point. And I think that's, what's going to happen.

Alex: Yeah. And I think this is also a good touching point to start talking about. Okay. That's maybe the North star. We want to be able to text and call and. I want a full screen mode. I want a window myself mode to talk about what's been done with XR and what it's going to be done with it in the future.

And what are the new experiences that we can create on potentially a super device. Before we dive into gaming content, I want to know what XR is mostly being used for today. I'm fairly confident it's not for gaming. There seems to be a lot of use for it in training, in the medical world, athletes, productivity ahead of.

Entertainment content. And so Taylor, I would love to hear from you. Do you know anything about the split of hours spent doing X certain behavior on headsets and how are you thinking about XR as it's being used today?

Taylor: It would have to come down to the, like the specific headsets in itself. And so if we're going to take gaming out of this, we would, you would move into like that what are people using?

the HoloLens for, or the HTC Vive. And those are like based on our research and our understanding of that market and talking to some enterprises that use these is, no, it is employee training. This is extremely important to them. I think we could even go into the defense industry here when it comes to it, like Microsoft's partnerships with the DoD.

Like this is like, they're providing AR devices specifically for wartime experiences. And there's this entire market that I feel like people aren't really looking at. Cause it's like, you're just like, I think about VR games. And when you look at the XR space, this is used, yeah, across. Medical fields, and we've seen things from how do you almost retain patients better by being able to explain what surgery is going to look like or what the entire procedure is going to look like in VR?

What are we actually going to be doing in this space where doctors going in and initially like doing a test run of a surgery before they actually go in and actually being able to, Use the patient's physical scans or I'm sorry, digital scans to actually go in and say, Hey, this is actually what's going to happen.

This is what it's going to look like when we get in there. Let's work through this. Let's understand like what the complexities are there. And then you have companies like Walmart coming in and saying Hey, we have to train hundreds of thousands of employees on either completely new hires or understanding new responsibilities and how we're going to go through that like customer service pipeline.

And then. You have massive opportunities in the oil and gas space of I would, we just need to be able to better understand how we're going to fix things remotely or being when we fix things today, a lot of times you get on a call with somebody and they say, Hey, do you, like, where is, do you see a red button?

Is it on? And then, but now it's, Hey, put the headset on. I'm going to talk you through this. I'm going to actually see exactly what you're doing. And I'm going to be able to actually like. Pinpoint things that you're going to be able to see within this digital or this augmented world exactly what you need to do.

It's not me talking over a phone and hoping I'm, I can, you're explaining this to me correctly. It's no, I'm going to, I'm basically going to see what you're seeing, and then I'm going to be able to show you exactly what you need to do in this space. And then you also go to like just the general productivity space.

And I think that's where. I would argue the majority of hours spent is within the vision pro. This is, I need, I want to expand my screens. I want to right now I'm sitting here and I have one screen up with, I think the majority of us believe I can't be productive with only one screen. I have to have multiple things up at a time, but I also don't have the, either the physical space.

To do it, or the capital to, to purchase 15 screens, but now I can do this. And I think some of the cooler things I've seen in the vision pro is like, Hey, I want to, I'm working, I have dinner being cooked. I have my, my, my family's to do list. I w I'm watching TV as well. And. This is being done all through the vision pro at once, instead of I have four tabs up on my phone, like I, or I have Netflix up.

I'm scrolling back and forth between that. I'm going back to my recipe. Then I'm going back to my emails. And so I do believe right now, if you just, if you honestly, if you just remove the Oculus out of the market. I believe the vast majority is being leveraged outside of games, but there are just tons of markets and I wouldn't want to pontificate too much on what those hours spent look like.

Because I would say, I think it's probably over overstated around like this, like employee training and enterprise use cases, just because there's such a large cohort of users that these are cohort of employees that need to be able to use these and then on the defense side, it's. You're looking more at a lot of privacy stuff and a lot of things that is not going to be public.

And this has been used for decades already. And all we're doing now is increasing that, that technology, a technology floor to be able to even do more stuff within those spaces.

Alex: Yeah. And I think that makes a ton of sense. And it's good to just get some grounding though. Okay, like what is the headsets being used for?

And it doesn't mean that it can't be used for gaming. When, with a, when iPhone came out, you're mostly using it to. Communicate. You're literally using it to call, to text, and to send emails, right? And that's a productivity device. And it evolved into a gaming device over time. So I think like now it's it's time to go there and talk about XR and games, right?

We've got some good grounding on the tech, the hardware, the players, right? And Right now we are seeing a funding into this content sector, specifically for games, whether it's for tooling or for content side. Xscape Entertainment being an example of this, raising a 4. 25 million seed round for a party up social mixed reality game.

Basically, it's like you play your game at home in With your friends using like the environments that are in your house as part of the gameplay. And so I want to talk a little bit about what are the common genres that are being built in XR games, right? Is it like eggscape or is it like Niantic's Pokemon Go?

We obviously have to talk about Pokemon Go. Maybe, Taylor and Julian, if you guys have any hard opinions on the genres that you think are going to be the most successful or any kind of market leaders now narrowing down to the tiny market of games within XR, what do you think?

Julian: Yeah, I think the key here will be immersion, right?

Because that is core differentiator factor from playing a desktop game or a mobile game. And so I think from an immersion perspective, obviously there's the I see it as one end of the spectrum being like AAA photorealistic games, where you're just like really in a world, you're like in awe the whole time playing it, right?

You're like running through forests and you're like, whoa, what's going on? I think that's one end of the spectrum in terms of immersion. I think there's the other side of it, like the mixed reality game you mentioned, where it feels like I'm home with a good group of friends who are like on the other side of the world, but we're like sitting next to each other, playing like a board game on the table.

I think there's like that kind of experience that's also coming out with like social with different networks involved. But I think there's. That's how I see it. It's I see the super immersive games that I would want to play because I want to be in that world. And I'm like running around trying not to die and being chased by dinosaurs or something.

And then the other end, which is like, Hey, I want to be with friends. And I want to play like a chill board game, maybe Catan or something like that, but with some friends.

Taylor: Got it. Yeah, I think, I would say I definitely, like, I love the idea of how do we make board games more immersive? Like the tabletop role playing side of this.

I think like those games really work out because they're games that are already based off of how deep does your imagination go? And what does that breadth look like? And can we almost create these experiences around like a D& D campaign where it's not just us talking about it and all of us picturing it.

It's, no, I'm going to, we've actually built an experience that as we go through this, that we actually get to watch the battles that are happening, or we get to watch our characters go through these different worlds. And the other side of this, which, I know is going to be somewhat of a hot take here, but it's all within this umbrella of like location based experiences.

And I think when most people think of LBEs, they're like, Oh, you're going to go somewhere and you're going to play VR. You're going to laser tag VR. But the way I look at this is like eggscape is I think a perfect example of LBEs. I can go to your house and I can, we can create through like procedural generation, our own survival game.

That's based off of what your game look based off what your house looks like or based off what the room looks like. And then. Go back to my house and it's completely different. And that's something we haven't really had that opportunity to experience. This is when you play Fortnite, it's technically the same map outside of some general RNG around like where different things are being dropped or like where potential, where the battle bus is going to drop everybody off this time.

But the map doesn't really change as much. And you do have games that have explored this different, this procedural generation and things like Valheim, for example, where doing SNES or Minecraft, obviously like when you, you create a new experience, like it's. Different than your friends.

There's no one, one stop shop or one rule to get to the end of it. It's, I can't watch your YouTube video of you playing Valheim and be like, Oh, that's where that's where that sword is. Or that's where those materials are. Because my role might look completely different. And I think AR has this ability to.

Really shaped this space in a different way. And I think, so you're going to, it's, I think it will all fall under this umbrella of LB, but then you have yeah, your survival type of games. I've even seen really compelling, like FPS types of games of what would it like, intruders come into your house and yeah it's already mapped out your entire house.

And you have to run through your own house to like, get away from them or find them. And. But I think that's what's one of the cooler things that can happen. And then even with eggscape, there's great opportunities here for like enterprises or businesses to get into this. You come to our store and we have our own version of eggscape and it's a great way to get people in the doors there.

And we've created our own version of it that you can only play when you're here. It's not a public map. You can't do this at your house. But when you're here, It's set up based off the layout of our place. And I think malls will do this as a new way to get people in the door. Cause obviously that's malls are basically just, big physical advertisements, walk through, see a hundred stores and hopefully you go into one of them.

And that's why there's, that's why that real estate is, or at least used to be very valuable. And so it's like, how do we get people to come back to these places? How do we get people out of their houses and stop doing things online? And Pokemon go, I think did this initially. Which was, yeah there was that time period where you'd show up on that corner when everyone would hear about this rare Pokemon that might be there.

And there'd be 50 of you or a hundred of you just sitting there, everyone trying to get it. And I think that's what I think AR is going to enable is we're gonna get people out there again, doing things. And it's, I don't want to, I'm not going to go outside of the park and play mobile games. I'm just going to do that in my own house, but where they are, I might have to.

And so I think that's what's, I think a lot of this is going to look like different versions of LBEs that we haven't really thought about before. That it can be much more compelling than just going to another VR. Location that allows you to play laser tag with a VR headset on.

Alex: Yeah. And it's actually, it's really interesting that you say that.

And I hadn't really thought about it like that. This difference of the mixed reality games or AR games, basically allowing players to experience different maps. Because in the same way that we talk about like games, having really strong localization for the point of having personalization for the point of having connection, not only does this obviously enable you to go to your friend's house and play an entirely different version or.

But it also is, I'm in Shanghai, or I'm in Belgium, or I'm in New York City, and this experience is completely different every time. And the developer is not building that map. And so it's a lot less development resources to create and give the player a new experience. The player is outsourcing. That work is being outsourced to the player and the location itself, which I think is Actually like really interesting and I definitely played some Pokemon Go and it was hilarious.

I never played any games like Ingress or anything like that. But I think that this kind of the separation between the VR intense world of the immersion world and the AR world is really important because I think in the VR world, you have an incredibly high development costs to make that. I think Julian, you've said it like triple a high fidelity experience, but in the MRAR world, those things are a little bit like lighter.

And I think there's a lot You know, personally, again, and I don't want to get to our VR debate yet, but I think there's a lot of potential in the VR AR space because of the things that you say, and because when you build out that PNL for a development studio, those numbers could potentially turn out to be a Y positive and yeah.

Thanks. Maybe that's obviously going to be incentivizing developers to actually build for that platform. Do you want to talk about VR and the last part of our segment here, but we talked a little bit about the content consumer side, but Julian, I'd like to hear about your perspective on how you think you can help devs get there.

How are games created point. And you talked a little bit about in our kickoff about not only building gameplay assets in 3d, but gameplay logic without code. And so. Tell me a little bit about why you think about Bezi as an alternative platform to design games versus Unity. Why are you convinced developers need this?

What jobs do they need? Need to be done.

Julian: I see as he has this player in a broader sort of transition that's happening in the creative industry in general, which is the center of gravity shifting from more production to the ideation or like the earlier phase of the pipeline. And I think it's happening for several reasons.

One being somewhat like the commoditization of the implementation of the production software. So it's common for like different games to use the same game engine and have like very similar sort of game logic or game plays or implementation code, but be very different in like art style or characters or assets or as a general sort of Community or all those things.

And I think that the differentiation factor is shifting up the chain in terms of like ideation and like gameplay design and like more around what we commonly call creativity around like imagining different worlds and characters. So I think on that note, we've also seen this by the way, with 2d stuff, like 2d art, right?

Like illustrations. In the past, it's been like pixel by pixel painting or illustration, but now you're generating all these images or art that is focusing the differentiation factor on the ideation speech. And with something like Bezi, what it allows you to do is it has. This sort of infinite spatial canvas in front of you that is the easiest way to get your ideas in your mind into the visual reality.

And I think what that allows, because of our state machine and, like, all the interactive animations that you can also add on top of that. Like a playground version of the game, and it also handles like source control with all the 3D assets that you would actually use and you can iterate without having to use like Dropbox, Google Drive links everywhere and stuff like that.

But I think it offers this like source of truth for the design, like how Figma has. Offered a source of truth for a lot of app designs for a lot of companies today that I think then can be exported into a game engine that engineers can then really optimize and implement and stuff like that. So that's how I view the content development pipeline evolving into over the next several years for a lot of companies just trying to create content for these new platforms with these new capabilities and wanting to use these things.

Not everyone in the team might know, I know how to code. Which is then a different way to approach the problem from more of a design angle. That's how I view it.

Alex: I see. Okay, if I wanted to be a game designer or a studio that wanted to build an AR, VR, MR game, I would need a way during the pre production and creation ideation process to visualize what I'm going to create in 3D.

Before moving to a game engine. And so you see yourself very much as that pre production creative ideation process before moving into actual development.

Julian: Yeah. And I think the important factor here as well is that with, because it's all in the back on the web browser, it allows you to immediately visualize what you just designed or created on the browser through the browser on the headset.

And so you're cloud syncing your 3d content, your 3d scene and the game play in this environment. Directly inside the headset before you even compile anything or before you ship any package. And so I think that's bringing up chain, like the iteration process, right? So that when you're more aligned as a team on the iteration process, then you can ship it off to like engineers.

So I really built it up.

Alex: Yeah, very cool. And yeah, I think, cause again, like you have to marry both sides of the tools that enable the creators to create what they want to create, given if they want to make an Xscape or a VR game, et cetera. And now obviously getting some grounding on the kinds of gaming content that's being made.

I do want to pivot to our VR debate. And so Taylor, the other day, you said something very bullish about VR. You said something to the tune of, I believe it's going to replace the PlayStation five and other consoles. Please explain and defend your position about why you think VR is going to supplant the mainstream gaming console.

Taylor: I would view it more. I don't want to say it will completely Replace him. But I view this as that next medium of consumption and that's the way I think it has to go. I truly believe this. I don't think you can look at VR as. A computing platform, the same way you would look at the Vision Pro, this is to me, and the way I view this is it's a game console at its core, it will have other applications on it, but the general use case here will be, this is for games, this is for playing, it's for fun, I think like socialization goes into that, things like Rec Room or VR Chat will be important to that as well, where, obviously Horizon Worlds, like this, there will be those types of Platforms that are, or I would say just more applications that are part of that ecosystem.

But at the end of the day, this is a game console and that's how you have to look at it. And that's why we don't, I would say a convoy spend as much time in the VR space. It's just cause that's how I view it. This is, I truly think there's for our funds thesis, there's not truly like an investable opportunity here because we don't do content, but VR really just, it's going, like when we've moved across different mediums, it's been new gameplay has been.

Been created. I think when you look at like a PGS or or like simulation games, like they, they work very well on the web. I think simulation games also in, in the, and A RPG games also work very well on, on mobile. But then you go into console and it's like, no, this is focused on like, it's a different input method.

I have it, I'm holding a controller in my hand and I'm probably going to focus this more on, and I would, and actually I would look at cons as like, this is just. The perfect ecosystem for just playing games. And I think just VR is going to follow that route clear, like almost to a T. This is, we're going to, Meta is going to continue to invest in an app lab and continue to invest in more games because that's how you win.

That's why PlayStation and Microsoft and Nintendo are here is because They have the best content. That is why you go into each one of these ecosystems. You don't, you're not going into them for anything besides really the games that you can play within those ecosystems, because that's what they're built for.

I would never send emails on my X Box. I would never, I don't want to use zoom on my X Box. Like I rarely go to the browser on my X Box for really anything. It's that's why that operating system is usually not very built out for these experiences, but it's built perfectly for playing games. And I think VR is very similar to this where success will be dependent on the content that's available in these ecosystems and specifically games content.

And it'll just be another medium. You will have your, you'll have your switch for your handheld device, or you'll have your, or your mobile phone, obviously, which you can look at as handheld as well. You'll have your PC for, you'll have your. Games and also far more. This is, we all probably work on the same computer as we play games on, and then you'll have Xbox or you'll have a PlayStation and then you'll have a VR headset.

They will all offer different types of games that you're playing, whether it's on the go, whether it's extremely hardcore, whether it's immersive and they will be, but they had to be purpose built for those ecosystems. And that's why I think we are, we'll just continue to look more and more like a game console.

It's just, you're going to, the vision pro will be their more general use case, Hardware vision pro will be the, hopefully at some point, the everyday device that you use all day. And then VR, I put on when I want to play extremely immersive games.

Alex: Julian, any perspectives to add to that?

Julian: No, not really. I think it depends on how we define VR.

I think going back to the idea I had around like all these VR, MRX, like all these things can combine into one device. I think that is a possible outcome where VPR just happens to be like a mode. Yeah. Of this sort of glassware. And then you do just enter into this mode where you can also play teams immersively and be involved in the game console experience today.

Yeah. I don't know. I don't know how exactly that'll play out.

Taylor: Okay. Yeah. And I would want to add to this that, and I think it's a cop out answer, but I feel like it's fair to say, which is just VR really is. It's just going to, it's going to enable those truly immersive experiences. Cause I also don't want to say it's only going to have games like just the X Box has, I have access to my prime account, my Amazon prime or Hulu or Netflix.

I watch things on, it's a, it's an entertainment system at its core, but obviously I bought, you buy it for the games itself, but then the Oculus will have its immersive sports watching, but whatever that is, like I want to sit courtside, you'll be able to do that. But I just do not think that will be the reason why people are buying it.

They're going to buy it for the games itself. Yeah. What's your take on it, Alex?

Alex: My take. Okay, here we go. Here's my take. I'm the opposite. I think VR is, I could not be more bearish about VR. So first of all, I've been following companies like Magic Leaves since 20, since 2013. I actually worked on some potential Oculus partnerships at Activision Blizzard.

That's obviously to no surprise to anybody, right? Because the driving force is the fact that there is no content on the VR devices that is driving the compelling adoption of hardware. And so it's this little chicken and egg situation developing for the platform is too expensive. The install base of the platform is too low to be a creative to a studio.

And so therefore no studios are incentivized to build for the platform. And we continue to also lack the expertise and design engineering, the technical capabilities. To actually build compelling content for the, for that kind of genre. And that experience, this is very similar to how in China, for example, if you want to make money in games, you have to build for mobile, right?

Which is why the PC and the console expertise in China is so low, because if you wanted to bake, if you wanted to make games and you wanted to make money, you would never make them for console and PC. And therefore Tencent netties. All of these big Chinese companies need to partner with studios in the West to gain console and PC expertise because they don't have it.

Inherently within the own borders of their own country. And so I think for myself, we've seen, VR being just around the corner for decades, right? It's people have been doing VR and games for kind of a while. And I think the quest ecosystem, I think it's 20 million North of just North of 20 million units or something like that.

It's not horrible, right? But the retention in VR products is so low. And so therefore you can't have this tale of monetization that you might have in a League of Legends, a Call of Duty, et cetera. And I actually am a little bit, and this is more towards maybe like behavior, but I'm not convinced that people really want immersion.

We talked about Taylor, you gave that awesome example of cooking while having your recipe up while on your phone, while watching TV, while also doing work with the Apple Vision Pro. And I think people want to multitask. I actually don't think they want to be locked into a certain experience. And if they do want to be locked into it, they want to be locked into it for two to three hours.

And that is 10 99. And that's it. And then VR is dead. There's I take,

Taylor: Yeah, what I would, yeah, what I would add there is this is why I think Meta has one of the biggest opportunities to be like, to be the blizzard or, the Activision blizzard of VR, because I think you're completely right about this.

There's not a lot of incentive for developers to make that jump. This is that's their livelihood. They have to, they're going to build games for an ecosystem that has the most users to where they're going to be able to monetize the best. And one fundraising is extremely hard for content studios within the VR space.

So there's this, there is this massive opportunity. If VR is going to ever be widely adopted from a game's perspective for someone to be. That publisher, whether it's, you could be that look like Tencent or like Activision, Blizzard, we're just, we're going to start acquiring studios. We're going to start funding them to build projects that they would never be able to have the capital or manpower or time to do.

And so I, this is one of the issues I think it's had is it's almost indie developers, in a sense of everyone. Like they're trying to build, like they're trying to build experiences, but they don't have the, they don't have the capital to do it. And then they're taking that risk on an ecosystem that like you're saying is.

Relatively small. It's not only small, but the gosh the underlying user metrics are just generally terrible. Yeah. And so like the games that ended up being successful or I'm going to buy this game for 20. And I know there's eight hours of gameplay. Like I think shell games is a great example of a, like the ideal VR developer today.

They know they build experiences. I have no problem paying 20 to play. Play that experience and I'm going to finish it in 10 hours. It's linear. It's, and it's just, and that makes sense for me. I can sit down also, so I'm not going to get sick and I can just play those games. And so I would love to see meta take some of that big R and D budget that they're spending on actually building out the technology to say, Hey, we're going to put 500 million into we're going to, we're going to spend it on studios.

We're going to see if. Better content from the top developers can actually encourage people to adopt this new medium.

Alex: Yeah, I could not agree more, or it's something a little bit more like gimmicky and party couch co op, like a Beat Saber, which is like a fun party game, but that's not a creation of new habitual habits and spend, right?

And it's the biggest conundrum that the VR space has, is creating the habitual behavior. That gaming drives most of its tail revenues on and think that's what makes it really challenging for me to get excited about the future of the space, but we're wrapping up on the top of our episode and so a final concluding question for you guys, we did and you can't talk about VR.

So this is you can't answer this question. In the way that we just in anything that we just talked about, but I want to hear a little bit about what your biggest consternation is. You're both clearly very committed to the XR space, but I want to tell you what you think the number one hurdle is or something that you've what would have to happen that would totally derail your belief in the space.

Basically, like an under underwriting prior that hasn't been proven yet that if it were to be proven false, You would lose conviction in XR and Julian, how about you go first and Taylor can close us off.

Julian: I'm biased. I like, I spend all my days and nights just thinking about these things and trying to like counter, like all these things.

Alex: And exactly, this is the founder of fear.

Julian: This is right. What could go wrong?

Alex: So you have a huge, you have a huge list.

Julian: Yeah, there is a list for sure. I think it's, I don't know. I think it's, it's difficult to pinpoint like a single unexpected variable that would suddenly remove the need for an immersive computer or like a spatial computer. I think this is where like computing has always been leading towards is I actually see these 2D screens in front of us as a hack, like a stepping stone until we get to a computer that.

Can display information for the whole world around us so that these two of the windows can float around us. So maybe if like humans, maybe there's like a huge privacy fear or like humans realize, Oh, I really don't want my like apple, maybe apple has a huge privacy crisis. I don't know. And then if I don't want that thing on my face, maybe, I don't know what could happen.

Alex: Okay. That one's pretty good. All right. So nobody wants to wear the headsets. Because of some sort of fear of big tech, data mining, data safety. They're tracking, they're actually tracking me through there. We go. That's a pretty good one.

Taylor: All right. Yeah. I think to even layer onto that point, which is not the direction I was going to initially go, but there, there could be serious regulatory.

Tailwinds that, that pushes in a different direction because these devices are in theory always recording that's part of this. And it needs to know what's in front of you to then show you where, when you think of like a slam algorithm for anchoring assets, part of that is the camera has to be recording to know that I anchored this over here, so when I see it again, it's over here and now there's always things like the IMU and the gyroscope, like things that go into that as well, but.

This could be a bigger issue of, Hey, we don't want people sitting with a headset on all day long, continually recording their day to day life or these big tech companies always getting the data and these recordings of everything that's going on in the world. And I think you could see some issues around regulations that could really step, push us back or slow us down that it's as we, you want the technology to keep moving forward, but if regulation pulls it back, that could be a serious issue.

And then I think. The other thing you, I think we are always continually watching are these just these R and D budgets is these are still companies that have to, that are beholden to their shareholders. And while I think companies like Meta and Apple are fantastic allocators of capital, I think that's clear based on where those companies are today relative to when they went public.

This is like, How they spend their money is directly related to where the future of technology is going. And, but they're not going to do it just for the good of the consumer. Like just because I want a headset, they have to also make money in this space. And them pulling back any investment will have downstream effects on going from, these public companies to PE opportunities, then to like VC funding.

This if they stop, everyone else is stopping. No one's investing in, no one's investing in the future of XR. If none of these larger companies are going to be also investing in this space themselves, because the majority of us are either building products or investing in companies that are going to better enabled by the ecosystems that these larger companies create.

And so I think continuing to watch that is, is going to be extremely important. And we want to continue to see capital flowing into these spaces. So people feel just like we're talking about with VR. They do believe that. It's worthwhile from a ROI perspective to spend my time and capital building for these different ecosystems and that I would say general macro trends are what's really going to drive at least my view on this space, whether it's public or in private R& D spending or potential regulatory concerns that I think are like, I think not talked about enough.

This is we don't. Our iPhone's in our pocket, and even when we're walking down the street using it, it's pointed down. I'm like, I'm not up recording everybody at all times. When I put a headset on, a core part of that technology is the camera's recording sound, or the microphone recording sound, or the camera recording video.

Alex: Yeah, these are some really good points. I'm glad I asked this question. Very interesting and a good way to conclude. Guys, it was such a pleasure to have you guys on. There's clearly so much opportunity, so much excitement, and so many unknowns actually about this space. And I think it's really awesome to be talking about it live with you guys here today.

We usually conclude our episodes by having you guys share some of your contact information in the case that anybody in our audience wants to get in touch with you, either just to debate you or to they're interested in Bezi or they're interested in Convoy, how can they get in touch with you? Maybe Taylor? Have you go first?

Taylor: Yeah, absolutely. Yeah. So I would, I have no issue with anybody having my email address. I'd love for anybody to, to reach out. I have no, I love to debate. I love to learn more things. So if anybody wants to get in contact with me based on this podcast or the newsletters we've written or any of the companies we've invested in, my email is Taylor at convoy dot VC.

Pretty straightforward. Always happy to have conversations here. And then if we have a larger team here, if anybody would like to reach out to, they're all on LinkedIn. Again, Transcribed All of our contact information is on our website. And yeah, if you're an early stage founder, would happily would love to chat with you and learn more about what you're building.

Julian: Yeah. Yeah. My email's [email protected]. I think if you want to learn more about Bezi that, we have a discord server that you can join. I have a bunch of YouTube tutorials and stuff like that. I'm also open to connecting with people on LinkedIn. Just search for my name. I'll be there.

Alex: Nice as always friends. Okay. That's the end of our episode. Please feel free to hit me up at [email protected] if you’ve got any feedback or ideas. And with that, we're out and I will be seeing you guys next time. Thanks for coming on Taylor and Julian.

Taylor: Awesome. Thank you.

Julian: Thank you.

If you enjoyed today's episode, whether on YouTube or your favorite podcast app, make sure to like, subscribe, comment, or give a five-star review. And if you wanna reach out or provide feedback, shoot us a note at [email protected] or find us on Twitter and LinkedIn. Plus, if you wanna learn more about what Naavik has to offer, make sure to check out our website www.naavik.co. There, you can sign up for the number one games industry newsletter, Naavik Digest, or contact us to learn about our wide-ranging consulting and advisory services.

Again, that is www.naavik.co. Thanks for listening and we'll catch you in the next episode.