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Why are people still giving Magic Leap money?

If Magic Leap fails, the skeptics will at least have to admire the AR startup’s keen ability to raise vast amounts of capital.

The company announced today that it has locked down another $280 million in a deal with Japan’s largest mobile operator, Docomo. The deal brings the company’s ever-swelling total cash raised to $2.6 billion. The deal follows an investment from AT&T last year also focused on the company’s cloud ambitions.

“DOCOMO aims to co-create advanced MR services and expand the XR market by leveraging open innovation and combining innovative technologies such as Spatial Computing provided by Magic Leap with DOCOMO’s assets including our 5G network and 70 million membership base,” Docomo CEO Kazuhiro Yoshizawa said in a press release.

This new money arrives as the company devotes more attention to the “Magicverse,” its plan for a spatially mapped digital infrastructure layer that can be a foundational step for cloud AR experiences. Magic Leap probably makes more sense as a cloud platform play over a hardware play, given where the market is, but it really isn’t clear what their advantages are compared to cloud incumbents like Microsoft, Amazon or Google with teams also focused on AR/VR.

Sure, they’ve partnered with these telecoms for 5G, but it’s unclear what those high-profile-conscious couplings do for Magic Leap if their hardware hopes (and the broader market they fit into) are far, far less-realized than 5G tech even is.

The company has just sunk so much money into its hardware, and their business there might not end up looking markedly different than Facebook’s Oculus (i.e. a slowly filling money pit) if the startup continues in its ambitions as a consumer company. The company’s sole product, the Magic Leap One, retails for $2,295.

Magic Leap and other AR startups have a rough 2019 ahead of them

In the early days, the hardware Magic Leap was pursuing was unprecedented, but reality got in the way. Now, the differences between what they’ve built and what competitors like Microsoft have are minimal, though while the HoloLens is largely a forward-thinking enterprise vehicle for Microsoft’s Azure cloud services, Magic Leap is stuck courting VR game developers to devote time and money to building artistic mini-games for a platform with a sliver of the users of the already niche virtual reality market.

Magic Leap tried to win a $480 million AR military contract, but it was awarded to Microsoft.

Facebook devoted hundreds of millions to funding game development grants; surely there’s a better place for Magic Leap to put investor cash than directly into content plays, but there aren’t many shortcuts to scaling a wholly consumer release without getting this infrastructure in place first.

What pays the bills in the meantime? I guess Docomo, this time.



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