So it appears Magic Leap is looking for even more money. This would be on top of the ~$1.4 billion already thrown at the company. That amount is already unprecedented so talk of further investment is nothing short of astonishing. The thing that got me interested in the company in the first place was the ludicrous amount of investment they had raised from such interesting and respected sources. Piling more on top of this is just wild.
If they are able to raise this money, this is great news for Magic Leap. They have already gone through a small PR firestorm last year when an article from The Information (paywall) cast doubt on some of the more ambitious speculation surrounding the company. Many people and even publications have held this up as evidence that Magic Leap is in big trouble. This largely stems from the sort of cynicism and entitlement that is rife across the internet and does not accurately reflect the article in The Information. I have already spoken about my distaste for this towards the end of this article so I won’t bore you with it again. Regardless of why, and regardless of its baselessness, public sentiment is against the company. Given that climate and the amount already sunk into the company, a raise by Magic Leap at this point is all the more impressive and promising for their inevitable release.
Magic Leap reportedly had a demo to their board (who, as a reminder, are their investors) in February. While we don’t know what happened in that meeting, we can only assume it went well if they are willing to up more investment. You have to think the likes of Google and Alibaba would take a particularly critical eye at this stage and given the public pressure on the company. Passing this tests speaks volumes.
Why do they need more money?
More money means that Magic Leap must be doing something right but they would only do another raise if they needed more money. What have they spent $1.4 billion on? That is a massive sum. Karl Guttag has rightly pointed out that Avegant has been able to develop similar technology to Magic Leap with significantly less investment. I don’t want to minimize what Avegant has accomplished as it sounds impressive but it is not a product. It is a prototype. Presumably it is a prototype similar to what Magic Leap has likely had for some time now, perhaps as far back as 2015.
Building a product, not a prototype, at scale is hard. And expensive. It is particular hard and expensive when you decide to build not only the product but the factory that makes the product. This is almost unheard of. Not even Apple exerts this sort of control over its supply chain. It becomes even harder and more expensive when you spearhead a large portion of the content creation in house. Only Nintendo can claim to do something similar. Meanwhile, you are still maintaining a massive R&D effort to continue to build on the first iteration of the product and think towards the future. These sorts of R&D labs are what Google and Microsoft are known for. While all of this is ongoing, you have to engage with other companies to form a developer ecosystem (which appears to be happening behind closed doors rather than in the open) so that the content you produce is supplemented by 3rd parties. This is all expensive.
Magic Leap is trying to be the best of Apple, Google, Microsoft and Nintendo all in one package and they are trying to do it pre-revenue. So yes, they need more money. And yes, what Avegant did is impressive but that part of the product is the “cheap” part. Don’t confuse this with the easy part. It still requires a monumental engineering effort. But the expensive bit, the bit Magic Leap is currently in the middle of, is making that engineering effort into a compelling product people want to actually buy. This is why Magic Leap has spent its money and this is why Magic Leap is raising. It is damn fascinating that it looks like they might be getting what they ask for.