David Haynes, one of the founding team at music streaming company Soundcloud, has teamed up with Petri Rajahalme, an XR industry veteran, to launch a €25m fund specialising in metaverse investments.
FOV Ventures, which has so far secured €16.5m of its €25m target, is looking to back some 25-30 metaverse startups at the seed and pre-seed stage. The metaverse, an immersive shared virtual world where people gather to play games, socialise and work, has been tipped as the next big thing.
Interest around the metaverse has spiked since last year when Mark Zuckerberg declared it would be the future direction for Meta (renamed from Facebook for that very reason) while Epic, maker of the online multiplayer game Fortnite, raised a $1bn funding round. While many VCs have said they want to invest in metaverse technology, there are still few specialist funds on either side of the Atlantic.
“We've been looking at this for five or six years — we started talking about the metaverse as spatial computing, and investors didn’t understand what that meant,” Haynes tells Sifted. “All of a sudden in Q3 and Q4 of last year, everyone including CNN was covering it, and Mark Zuckerberg renamed his entire company to Meta, it obviously helped a lot.”
The limited partners backing the fund are a mix of larger institutions, family offices, VCs wanting exposure to the metaverse and individual investors who have made their money in the gaming industry, Rajahalme and Haynes say.
The fund will be one of just a handful in Europe to be explicitly focused on metaverse investments. Luxembourg-based Hiro Capital recently announced a $340m to invest in seed and early rounds in categories like esports, creator platforms and the metaverse.
FOV’s €25m fund is relatively modest, but Haynes said a specialist investor could do a lot with a smaller sum.
FOV will invest in three different types of metaverse companies: those that are creating games and experiences in the metaverse, including NFTs, digital fashion, shopping and concerts. So-called “camera commerce” — using augmented reality as part of the shopping experience — is expected to influence some $36bn worth of retail purchases by 2024, according to a report by ARtilery Intelligence, an AR research group. FOV has already started making small investments in virtual fashion and NFT goods marketplaces.
They are also looking at startups in the enterprise metaverse — either virtual meetings or digital twins for factories. Satya Nadella has made this a key focus for Microsoft, and there will be opportunities for European companies providing tools for meetings, training and factories. The third area for investment will be startups creating the “tools” for the metaverse: the platforms, avatars, sound effects and backdrops.
FOV will not invest in cryptocurrencies and NFTs — although these are seen by some people as an essential building block of the metaverse.
Haynes and Rajahalme acknowledge that the hype surrounding the metaverse has its pros and cons. On the one hand, it has made it easier for them to raise their fund. But heightened expectations could also mean disappointment. One of the biggest risks, Haynes says, is timing.
“It’s knowing which are the areas that are going to happen immediately versus those that will take longer to play out. We’d invest in a developer tool for people to build AR experiences, but we probably wouldn't invest in a company that really relied on consumer AR glasses to come to the market.”