One startup is doing what Magic Leap should've done from the start
"Magic Leap has sucked a lot of funding out of the room." AR startup Mira has shifted from consumer to business customers, and it seems to have found its audience.
There was a time, not so long ago, when it seemed as if the future of computing lay in augmented reality — an evolution that was just around the corner. We were going to play games with virtual characters flying around our living rooms, catch up with distant friends appearing as holograms in front of us, and replace the office desktop with a pair of connected glasses.
Magic Leap, the most prominent AR startup of the time, was on its way to raising more than $3 billion in funding over a decade from firms like Google, Warner Bros., Alibaba and AT&T. After years of secrecy, it released its first headset in 2018. But it was not well-received by customers. Last month, founder Rony Abowitz announced he would be stepping down as CEO, while the company pivoted to enterprise offerings.
It's a common outcome with consumer product startups. The old aphorism in tech — "hardware is hard" — underlines the belief that the opportunity to invest in making physical goods is often outweighed by the difficulty of getting people to buy something new. For many startups, the model has unfolded the same way: come up with an idea, secure funding to turn it into a reality, realize it's much harder to build at scale than you thought, run out of cash, fold.
That could well have been the fate of Mira, an AR headset startup founded in 2017, which aimed to bring low-cost augmented reality games and experiences to regular people. But the company came to realize the steep pitch of the mountain it was climbing and switched things up, adopting a focus on business applications that may well have secured the company's long-term success. It's a path that other companies wishing to jump head-first into consumer products would do well to heed.
Before they were co-founders, they were classmates. Benjamin Taft, Montana Reed and Matt Stern met in 2016 as undergraduates at USC, as part of an innovation program run by music moguls and Beats By Dre partners Jimmy Iovine and Dr. Dre. One of the classes centered around making technology more human, Taft said, and captured the students' interests at around the same time that the Kickstarter campaign for the original Oculus Rift was kicking off.
The young men had some experience in the virtual reality industry. Stern had worked at Sony on PSVR, and Taft had been at Daqri, an AR headset company that recently suffered its own spectacular collapse. They became enamored with the technology and its potential.
The group decided they wanted to get into augmented reality, still a burgeoning field at the time. They pooled their money to buy a Microsoft HoloLens developer kit, which then cost $5,000. "If we weren't working on AR," Taft explained, "we weren't working on the future," While they enjoyed using the HoloLens, they found it too cumbersome and expensive for students and developers who wanted to build AR applications. They figured that what the market was lacking was an accessible AR device. So they hacked together $100 worth of smartphone parts they bought off Alibaba, 3D-printed a headset around an iPhone, and chopped apart a plastic fishbowl to make the lens.
Still in contact with Iovine, the nascent team showed him a demo on their Frankenstein's monster of a machine, playing a Bruce Springsteen concert in AR (Iovine had been Springsteen's producer early in his career). He liked it enough to put them in touch with Sequoia Capital, which saw sufficient potential in the early demos to lead their seed round.
The group turned their hacky demo into a production headset in 2017, which is when I was first shown a demo. The technology worked well, allowing me to play games with the co-founders on a table in front of us, using my own phone strapped into a Mira headset. But there was a downside: Wearing the gear sort of made you look like Dark Helmet from "Spaceballs."
This reporter wearing a Mira headset in 2017.Photo: Mike Murphy/Protocol
This may well have factored into why the company failed to find much of a consumer audience. But really, Mira was looking to find developers interested in creating applications in which aesthetics wouldn't matter as much. After all, who cares what you look like if you're in your own living room playing with friends? What they hadn't considered, not yet, was that one one of those situations might revolve around using AR to make workplaces safer.
An unexpected pivot
But that's exactly what one company on the other side of the world was thinking. A group from Australian company Orica, one of the biggest manufacturers of explosives in the world, sent Mira an email showing the team that they'd taken one of Mira's developer kits and jury-rigged it into a helmet. "It was like their fishbowl moment," Taft said. Orica was using it to replace a paper-based safety checklist process the company traditionally relied on for workers packing explosives. "Operators show up to work with a pit in their stomach," Taft said, "because if they mess up, their wives and kids won't see them again."
Using those paper checklists, an Orica engineer who had a problem and needed help might have waited hours for a call — or days if someone with the necessary expertise needed to come out. With an AR system, the thinking went, workers could move through their processes knowing exactly where each item in their checklist was. If there was a problem, a colleague could call into the headset and show them exactly what they needed to do.
Orica reached out to see if Mira could make a more ruggedized version of its headset, plus software for its safety checklist. The explosives company had tried to digitize in the past, but devices like tablets and laptops aren't exactly designed for people wearing gloves or other protective equipment. Something worn on your face, incorporating a protective lens, would leave engineers' hands free to safely complete their work.
Mira's original prototype for an enterprise-focused helmet.Photo: Courtesy of Mira
So Mira got out the arts-and-crafts supplies again. The team bought a climbing helmet and used a hot-glue gun to affix a camera and the rest of its tech to it. The team hard-coded one of Orica's checklists into its existing app (which runs on iOS), and with the company's blessing spent two weeks in the Western Australia desert at an Orica office near a mining facility, testing what they'd built. It helped them to understand the engineers' workflows and what they needed most to get things done.
The headsets brought a more abstract benefit: peace of mind. Workers began to feel safer in their operating environments, as they trusted their colleagues were completing the checklists. "You can fake a [paper] checklist, but you can't fake Mira," Taft said. Operators took it upon themselves to teach other employees how to use the headsets and responded to the devices enthusiastically. "It wasn't like corporate throwing an iPad at them," Taft said.
After two weeks of tests, Mira presented their results to Orica. The company was satisfied enough to sponsor Mira taking six months to develop a full enterprise model of its headset. The team made a dustproof, waterproof headset with a long-life battery and tinted lenses so it could be used outdoors. But the hardware was only half of the equation: Mira took all of the safety workflows that Orica had had on paper and digitized them. The startup also built a web-based system, so anyone in the company could log in and easily build new safety workflows as needed.
Mira ran a 90-day pilot over the summer of 2019 with its enterprise-grade software and hardware, completing 1,000 run-throughs of its software with 90 operators. According to Taft, Orica's compliance success rate for safety checklists jumped from about 40% to around 90% when using Mira. Late last month, the company kicked off a global rollout of the technology in 30 countries across six continents. "We invited a different voice into the conversation of what AR can do," Taft said.
Hands-on, high stress
Mira's long-term vision is still to create consumer-friendly devices, but its experiences in the enterprise world have changed the founders' thinking on how to get there. Starting with consumers — who need the simplest, easiest-to-use and often cheapest devices — is a Herculean effort. Stern noted that other consumer AR devices like the one made by Meta, which shuttered in 2019, aim to replace the computer. "That's an insanely large problem to tackle," he said.
Instead, Mira plans to forge ahead with new business partners in a bid to refine the technology. The company is looking into other hands-on, high-stress industries that face similar struggles as Orica, such as oil and gas, consumer-goods production and heavy-industry manufacturing.
The goal, Taft said, is to show the value of AR in niche areas and grow from there. Some of the earliest adopters of technology like email, personal computers and BlackBerrys were business users, said Tuong Nguyen, a senior analyst at Gartner. Accountants needed calculators and tabulation software found on early PCs, leading businesses to buy them. The use cases piled up, and now we all carry supercomputers in our pockets. Mira's pivot to enterprise "makes sense," Nguyen said, given that conquering a few verticals is a less daunting task than taking on the multifaceted consumer market.
Mira sells dozens of its enterprise devices for the price of a single Microsoft HoloLens. When asked about their current financial health, the founders said: "We are generating a very comfortable amount of revenue for a company of our size."
The team realized early on that they didn't want to follow the often unsuccessful model of taking a ton of VC funding and using it to subsidize hardware costs and grow rapidly while trying to figure out the business model. "The hardware doesn't scale out of the lab in a lot of cases," Taft said. Mira has obtained $6.5 million in funding since its inception, about 42 times less than Daqri and roughly 461 times less than Magic Leap. (The team said they're now in the process of raising additional funds.)
Mira's second-generation headset in use at Orica. Photo: Courtesy of Mira
Since Magic Leap's CEO stepped down, the company has attempted to right the ship by finding an enterprise audience. But Magic Leap may struggle, according to Mira, as the proprietary hardware and software will be difficult to sell to IT and procurement departments that are looking to simplify and secure their companies' workflows. Mira's product, on the other hand, runs on iOS. "We're the anti-Magic Leap," Taft said.
That being said, Nguyen argues AR platforms are such a dramatic step-change for companies that they may not shy away from integrating new hardware and software — as long as the value is there. "One of the issues here," Nguyen said, "is change management." He offered an analogy: "You've been using this shoe to hammer this nail. Well, I just invented something that does this better, and you'll really need this thing called a hammer to help you be more effective and efficient."
Like most companies, Mira is riding out the coronavirus outbreak primarily from home offices, and Stern said the pandemic was driving more interest in hands-free products, especially in manufacturing and fulfillment. "COVID-19 is accelerating digital transformation that we didn't expect," Taft said.
The company's goal is to grow as the world opens back up. The team recently brought on a new VP of engineering, Peter Molettiere, who held the same role at Fitbit, to help build new products. "Magic Leap has sucked a lot of funding out of the room," Taft said, "but our customers really need what we're building."
There are big challenges ahead. No one knows when the world will fully open, or how deep the recession will be. Major tech companies could jump into the same market; Apple, for one, has long been rumored to be working on an AR headset, and anything it produces eventually bleeds from the consumer to the enterprise market. The broader concern is that many companies simply won't buy into AR.
For now, Mira is looking ahead optimistically. The founders aren't beholden to large tranches of venture capital to stay alive, they said, and are getting the sort of case studies under their belt that encourage bigger customers. Now they'll have to show that what they have is more than just digital smoke and mirrors. "We are absolutely betting," Stern said, "that there will be a paradigm shift in the ways that people do work moving forward."
This post has been updated with the correct spelling of Peter Molettiere’s name.
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