New VC Firm May Be First To Focus Exclusively On VR And Augmented Reality

Virtual reality and augmented reality have finally arrived in consumer form, and together are predicted to be a $150 billion industry by 2020. So it’s no surprise that investors want a piece of the action.

Now, what might be the first venture capital firm devoted entirely to VR and AR has launched. Today, San Francisco-based Presence Capital pulled back the wraps on the first $10 million early-stage VR and AR fund.

It said its initial investments included video game maker Harmonix—of Rock Band fame—as well as cinematic VR content maker Baobab and Waygo, which developed technology to automatically translate Asian languages to English, and more.

The firm was started by Phil Chen, the founder of HTC’s Vive virtual reality project, as well as serial entrepreneurs and investors Amitt Mahajan and Paul Bragiel. Mahajan co-created the monster hit Zynga game FarmVille.

Asked why he wanted to start a VC firm around VR and AR, Chen told Fast Company that there were two main reasons. The first, he said, is that “we believe VR then AR to be the next personal computing platform. Having been at the forefront of the PC-to-mobile platform shift, we’re seeing similar signs of the platform/paradigm shift towards VR.”

Secondly, Chen said, VR and AR hardware is already “ahead of the software and content, but we also know for this ecosystem to really take off, [there] needs to be…robust software and content volume and variety.”

Other firms, of course, have invested in VR and AR projects. One, Rothenberg Ventures, has started an all-VR accelerator, known as River.

Chen said, however, there’s plenty of room for more investors in the space. At the same time, he said, Presence Capital is well positioned to take a leadership role in the space, in particular because VR and AR are the core purpose of the firm’s fund.

“We’re able to provide both depth—because of our experience—and also breadth, because of our focus in the category,” Chen said, “which are quite different from one-off VC investments with bigger checks and incubators that go deep with their class of picks. We see ourselves as playing a strategic part in a healthy ecosystem.”

For his part, Mahajan said that the biggest challenge to being successful with the fund is “finding exceptional entrepreneurs and CEOs that have vision and persistence. Persistence and grit are especially important in this case because the market for VR has yet to develop.”

Mahajan noted that he and his partners are also looking for teams that can demonstrate “technical acumen and an understanding of why VR is the platform for their idea to exist on.”

He also said that competition from other firms, including Rothenberg Ventures, is a good thing for the VR and AR industries.

“A healthy investment ecosystem is needed to foster innovation and creativity,” Mahajan said.