Magic Leap Raises $461M from Saudis

https://www.bloomberg.com/news/articles/2018-03-07/magic-leap-raises-461-million-from-saudis

by adventured • 8 years ago

87 117 8 years ago

bloomberg.com

econner• 8 years ago

Thought it was going to be Softbank, no it actually is the Saudis directly.

seanmcdirmid• 8 years ago

Does SoftBank often act as a proxy for the saudis?

trimbo• 8 years ago

The Vision fund is about half Saudi money

http://money.cnn.com/2017/05/21/technology/saudi-softbank-te...

luka-birsa• 8 years ago

Looking from afar it really looks like Magic Leap is the largest money laundering vehicle that everybody is using. It's either that or the tech is so freaking groundbreaking that it is literally going to melt brains.

Given my age, the cynic is winning.

skellera2• 8 years ago

Apparently their tech is pretty awesome but getting it down to portable is what’s taking so long.

That might be a rumor but it’d make sense for how much money they’re pulling in.

patrickaljord2• 8 years ago

I think any kind of AR glasses that do not look like regular glasses are going to be a tough sell to the general public at least. I think we're still years away from this kind of tech though. I mean if it were possible today Apple would be all over it. Can Magic Leap pull it off before Apple if it is at all possible to do it in the next 5 to 10 years? I'm doubtful.

ModernMech2• 8 years ago

The typical life-cycle in tech is to make something awesome, even if it's big at first, and then shrink it down. If it's really awesome, no one will care that it's big. Waiting until something is small before unleashing it seems to me like they don't actually have anything at all.

walrus0113• 8 years ago

Given my age, I would bet that it is great technology, but also that they are spending money ridiculously. Most likely outcome is probably something like what happened to the Iridium satellite network from 1996-2002:

a) massive profligate spending

b) great tech, but not much money from customers

c) bankruptcy and acquisition by a new corporation formed to acquire the assets of the defunct company, new acquisition-corp renames itself to magic leap.

d) new company which has acquired everything for pennies on the dollar proceeds to become successful and profitable.

iooi• 8 years ago

Magic Leap has raised more than $2.3 billion to date, and has been valued at above $6 billion.

How can you raise that much money without shipping a product? Or better question, why do you need raise that much money in the first place?

walrus0113• 8 years ago

I wonder if given the bulky size of the thing, the tech might be great, but it's just too early. For those people who are old enough to have been working in the tech industry in the dotcom 1.0 boom days, the business model proposed by the epic failure of Webvan was later validated by Amazon/Prime Now.

https://en.wikipedia.org/wiki/Webvan

Look at all that money down the drain.

velominati3• 8 years ago

It's possible. The Apple Newton is a great case study of a good idea that was too early. And the inability to minitiarize it sufficiently to fit in a pocket was one reason for it's failure. A few years later the Palm Pilot was much more successful because it could fit in your pocket, especially the baggy jeans that were fashionable in the late 90's.

Webvan's model hasn't yet been validated. The local delivery startups and offerings are still losing lots of money. If anyone can make it work it will be Amazing, but it has yet to be validated as a profitable business.

quasse• 8 years ago

"The company raised an additional $375 million in an initial public offering in November 1999 that valued the company at more than $4.8 billion.[14] Up to that time, the company had reported cumulative revenue of $395,000 and cumulative net losses of more than $50 million.[15]"

That's astonishing.

wmeredith• 8 years ago

Timing is... everything.

Holomakerbot7• 8 years ago

Only a couple weeks to find out. They have multiple presentations slated for GDC, the largest gaming developer conference.

vernie4• 8 years ago

I expect that they'll do what they do at every conference: show video of a celebrity wearing and reacting to the product.

batmansmk• 8 years ago

Would you give 400M without trying the product?

ggg9990• 8 years ago

It always depends on how great the product is. If you had a credible approach to improving power plant efficiency by 5% you could raise ten times as much investment before shipping a product as long as you were privately hitting your development milestones.

wand3r• 8 years ago

How can you raise that much money without shipping a product?

Some businesses and technologies are extremely capital intensive and funding can/should/is provided on achieving benchmarks instead of a cohesive product. This is different than shipping an MVP and improving it which in some industries is not possible. YC for example funds hardsci fusion reactor companies and SA talks about how they iterate really fast during the YC period to produce some tangible benchmark which is obviously much less than a full-fledged product but much more than some nebulous "concept".

So yes, it makes sense that certain industries receive larger than average investment relative to other industries at similar product stages. While I myself am extremely skeptical of Magic Leap, their technology and the likelihood investors aren't participating in some sunk-cost fallacy investment thesis there is a non-cyncial view: MagicLeap has been showing significant achievement along both technological and production benchmarks privately to investors and they are confident that the technology & manufacturing improvements warrant continued investment.

I think the amount of capital raised pre-validation is insane as it isn't simply larger than average it is orders of magnitude larger...

edanm3• 8 years ago

How? You convince people it's worth the investment.

Why? You're building something that requires massive upfront capitilization.

People here act like this kind of money is unprecedented. How much many goes into building infrastructure? How much money do investors put into building a new building? Large construction projects routinely raise 10s or even 100s of millions of dollars.

Sure, if you're funding a building you're "buying" a "product" that is much better understood and has a higher chance of success (but can also fail!). But it also has a much lower chance of getting you very high returns. All that startups like Magic Leap do is take both of these numbers to the extreme: very small chance of success, but at being a 100-billion-dollar company. Some investors like this tradeoff, and they tend to be pretty savvy and educated. This also tends to be a small part of their portfolio. I think we shouldn't assume we know better than them, just because we read some stuff on the internet.

velominati3• 8 years ago

This is great evidence of the greater fool theory: https://en.wikipedia.org/wiki/Greater_fool_theory

I’ve heard some second hand anecdotes about Magic. Apparently they have one big technology advance, which is that they’ve solved the eye tracking and vertigo challenges of AR. These are hard and not to be underestimated. However the company is supposedly a mess internally - with huge management and political issues. This isn’t surprising - I’ve been in a number of early stage startups and by default they are a mess. Add on top of that billions of dollars of funding and no customers or sales to anchor the company to reality, and its easy to see how AR can become “Alternative Reality”! Further evidence - their recently released headset photos were renderings, not actual products. I genuinely hope that I’m wrong - I’d love for the amazing demo videos they’ve released to congeal into real mass market products.

Does anyone else have good data on Magic?

ModernMech2• 8 years ago

Not any good data, but I've had recruiters tell me that they don't pay very well (in SV terms), instead opting to sell employees on large options packages that will be "worth millions one day". It's a typical SV story, but one I wouldn't expect from a company that's valued at billions of dollars. That kind of behavior seems shady to me, so I wouldn't even consider working there.

walrus0113• 8 years ago

not to excuse significantly lower pay from magic leap, but their compensation might be calculated based on their office location in Plantation, Florida which I presume has significantly lower real estate (rental or purchase) costs than the bay area.

actual take home after rent or mortgage each month might be greater than something in mountain view.

https://en.wikipedia.org/wiki/Plantation,_Florida

spending 20 seconds looking at zillow for that city I see what looks like some fairly decent 3BD/2BA detached homes for $300,000. which would be a pipe dream in seattle, vancouver or bay area.

Holomakerbot7• 8 years ago

Here’s some actual data: https://www.glassdoor.com/Salary/Magic-Leap-Salaries-E799754...

JumpCrisscross2• 8 years ago

opting to sell employees on large options packages that will be "worth millions one day"

They're also notorious for refusing to allow employees to sell their shares, even if nothing in the original agreement prohibits a compliant transfer.

mbesto• 8 years ago

However the company is supposedly a mess internally - with huge management and political issues.

This typically happens when there is high pressure to deliver, but you have zero revenues. So, it wouldn't surprise me.

jcfrei• 8 years ago

Link to previous HN discussions regarding Magic Leap's tech: https://news.ycombinator.com/item?id=16088516 and https://news.ycombinator.com/item?id=13653537

dogma1138• 8 years ago

Well life imitates art http://www.imdb.com/title/tt2980210/

JumpCrisscross2• 8 years ago

A Hologram for the King (2016): "A failed American sales rep looks to recoup his losses by traveling to Saudi Arabia and selling his company's product to a wealthy monarch."

http://www.imdb.com/title/tt2980210/

52-6F-62• 8 years ago

I recommend that film. I actually want to rewatch it now...

gregwtmtno2• 8 years ago

Is there any way to short these guys or otherwise get exposure to a value decline?

velominati3• 8 years ago

+1. The inability to invest against startups and other privately held companies seems like a big economic inefficiency. It would be a counter force to these sorts of nose bleed valuations.

robbiemitchell• 8 years ago

Yes, fund a competitor.

edanm3• 8 years ago

That's absolutely not the same thing.

Shorting a company will bet specifically against that company, in a way that both:

1. Gives you monetary gain if that specific company/stock decreases in value.

2. Puts pressure on the stock to be lower value.

Thus it acts as a correcting mechanism to the market, since just by the fact that a lot of people who have an incentive to make a correct bet on a stock declining, upon placing that bet, help correct the price downwards.

Funding a competitor doesn't act anything like that, and specifically probably doesn't give you a great monetary reward, since most startups fail (thus most competitors will fail).

igloofoo3• 8 years ago

Changing the world one murdered-by-starvation Yemeni at a time.

How do you accept funding from oppressive, dictatorial, mysoginist regimes and then claim to “make the world a better place”?

Sigh. The political implications are so ironically cringe-worthy

igloofoo3• 8 years ago

Why the downvotes? Can we not discuss the implications of “progress at all costs”?

jingleheimer• 8 years ago

I too would like an explanation on why I was flagged.

ahtu123• 8 years ago

But but but they're our allies! There's definitely some selective enforcement of our ideals. As long as it doesn't get in the way of military or business it's fine. This is the country that financed 9/11. It's not "racist" to be skeptical of Saudi Arabia.

maxxxxx8• 8 years ago

They buy a lot of expensive weapons so they are an ally.

godzillabrennus• 8 years ago

How many Iraqi civilians died from the USA led invasion?

What nation has the highest level of incarceration in the world?

In Saudi Arabia their regime is hereditary but in the USA we elect our leaders.

Who should we be angry at?

igloofoo3• 8 years ago

We should elect better leaders and avoid getting in bed with such regimes.

“Be the change you want to see in the world”

“Practice what you preach”

From a previous article

“Most people do not share the belief that a process must be morally pure before its results can be celebrated; they can be jubilant about the Falcon Heavy and question Tesla’s treatment of its workers at the same time, without the one invalidating the other. “

jbob2000• 8 years ago

There is no such thing as clean money. Everything we've built in the west was done on stolen land, on the backs of slaves and migrants. So whether it's $450mil that came off the backs of Yemenis or $450mil that came off the backs of natives and mexicans - it's all the same.

walrus0113• 8 years ago

saying "we did terrible things in the past" does not excuse us from the responsibility to, present tense, refuse to become complicit in ongoing atrocities.

riku_iki• 8 years ago

Changing the world one murdered-by-starvation Yemeni at a time.

I don't think they want to change the world, just multiply money.

smnscu• 8 years ago

I won a magi leap at a hackathon a long time ago, and while it was a cute device and fairly well working, it was pretty much useless so I ended up selling it. I wonder what will be different this time, especially given the internal turmoil of the company, and the ludicrous amount of funding they received.

edit: Thanks, I was indeed thinking about Leap Motion. Which makes it even weirder, did these people truly never put anything on the market yet?

edit2: people love giving out downvotes. please, the more the merrier

gfodor• 8 years ago

Your device is probably a Leap Motion tracker, totally different company.

dthul• 8 years ago

You probably think about Leap Motion.

Zelphyr• 8 years ago

Regardless of whether Magic Leap is a Theranos level scam (and I personally think it is), this is additional evidence that there are massive amounts of investment money available out there.

gaius• 8 years ago

... if you aren’t too worried about the source

jamisteven2• 8 years ago

A scam? Do explain!

tnoue0i9nt• 8 years ago

I used to work with people who now work there. I can say for sure that they are both good at what they do and good people. If it is a scam, the employees I know there don't appear to think so.

Also, Theranos was lying to the general public about very important health issues that affect your daily life. So far, Magic Leap hasn't released a single product. Even if they do, at worst it will be a computer that isn't as good at playing games as they claimed it would be. Not really even in the same league as Theranos.

webkike• 8 years ago

I also know people who work there. Very talented engineers. I find it highly unlikely that they have been duped. And even if they are, they're sure as shit still making money out of the deal.

maxxxxx8• 8 years ago

"If it is a scam, the employees I know there don't appear to think so."

How many people knew that Enron is a scam? I bet 99% of people there were hard working intelligent people who had no idea. Same for Theranos.

IshKebab2• 8 years ago

It's unlikely to be a total scam like Theranos, given that third parties have tried it and didn't go "omg this is shit". But it definitely seems to be a Faraday Future level of over-promising, growing way to fast and burning through all your money with nothing to show.

michaelbuckbee• 8 years ago

Theranos' tech plain didn't work. If you're looking for a historical analogy that fits better, I'd suggest Segway.

There's a number of parallels with Magic Leap. Both have engineering founders. Both founders made their first big money in medical tech (Kamen with stents and Abovitz with Mako Surgical).

Where things got away from Segway was on the PR + Hype front and that seems where Magic Leap is at as well. Magic Leap is going to ship something this year, it will likely be "ok" but not brilliant and then after a few iterations and a half dozen years it may well be a device on a similar trajectory to how we use mobile phones.

That's why all the money is going to these companies, the thought is that the patents and expertise is going to lay the foundation for what replaces mobile phones and what's a $500 million dollar bet against a 5 Trillion a year industry.

cinquemb• 8 years ago

…going to lay the foundation for what replaces mobile phones

I having a hard time seeing how this technology (and AR glasses/devices in general, at least what we hear of it) is going to be more of utility in the future than the billions of people with cheap smartphones are today.

I think brain(neural) computer interfaces (transmitters/sensors) have a better chance of leaping over the smartphone than anything coming from this, and currently have utility to some of the most physically marginalized people on the planet, which is a lot more than magic can say for its product.

philip1209• 8 years ago

A16Z investor Benedict Evans's Twitter reply today to a skeptic:

Frontier hardware tech is expensive. And, the investors have actually seen the tech. As will you, pretty soon ;)

source: https://twitter.com/BenedictEvans/status/971404194300141568

dalbasal2• 8 years ago

The magic leap demos that have raised all this cash, it might be the most successful demo in history.

petervandijck• 8 years ago

Not quite yet https://www.youtube.com/watch?v=yJDv-zdhzMY

untog• 8 years ago

I dislike replies like these because they don't really add anything to the conversation - of course investors liked the demos! They wouldn't have invested otherwise. But this would hardly be the first instance of investors being distracted by flashy demos that cover up deep set problems.

Ultimately, we'll all just have to wait and find out.

vernie4• 8 years ago

I guess you also get a pamphlet on the Rony Abovitz "tell, don't show" approach to PR when you invest.

jamisteven2• 8 years ago

There is no doubt the technology is incredible and awe inspiring. However, zero shipped products, taking in tons of outside money, leaks galore and internal turmoil including one employee stealing 1M from the company through recruitment fees, this place has all the right tech but is making all the wrong moves, its valuation is pure speculation at this point. There will come a point where their investors demand a product shipped, that point will come soon and I hope they have this battery issue fixed by then.

jorgemf2• 8 years ago

I think this is just incredible. Let's suppose they have an incredible technology and that works (which it is not true at this time because they don't have any product out yet). How do they justify the product adoption which such high valuation? (with patents of products they also don't have any idea if the people will want them?).

Even it is the best technology ever, if not enough people buy it the company will go down very quickly.

deltron3030• 8 years ago

They could pivot into being an OEM. Marketing doesn't seem to be their strength, it only got a bit better recently after they outsourced their branding to a bigger agency.

I suspect that they spend a lot for content, because growing organically is almost impossible if you target entertainment with an rumored $2k price point. Nobody would buy that if the're only a few apps, even if they're unlinke anything else.

Then, as the next step they'd need to provide a good developer experience. Needing a PC for a device that aspires to disrupt the industry and replace other devices, won't cut it. It would need to run on the device.

jorgemf2• 8 years ago

an OEM of a technology that noone wants to use?

I hope the content is really good and worth the experience, otherwise this is useless. But I am still afraid that if they have to create their own content it might not make sense as a business, why people wouldn't be interested in created content for the next audiovisual platform?

I don't think the PC is the problem here.

maxxxxx8• 8 years ago

Has there ever been a company that sucked up huge amounts of investment, made vague and questionable claims over many years and then came out with tech that backed their claims? From my casual observation this type of company immediately fizzles out as soon as they take something to the market and people see the real product.

walrus0113• 8 years ago

In telecom, Iridium spent close to a billion dollars but did actually succeed in building a truly worldwide (pole to pole) handheld satellite phone network which also supported SMS and low-data-rate M2M.

Then went bankrupt and was acquired. The tech was revolutionary at the time, 18 years ago (handheld phone size vs. 10 kilogram fat briefcase sized inmarsat terminal that didn't work above 60 degrees latitude), the revenue just wasn't there.

maxxxxx8• 8 years ago

I didn't follow Iridium closely but as far as I know it didn't have this secrecy around them. The tech was well understood. Unlike Magic Leap where there are still rumors about what they are actually doing.

cryptoz• 8 years ago

Their old website shows all the lies.

https://web.archive.org/web/20150402084910/http://www.magicl...

It promises a product far more futuristic and advanced than they are delivering this year: https://www.magicleap.com/

Holomakerbot7• 8 years ago

Nothing you showed demonstrates anything close to a "lie".

edshiro• 8 years ago

When will we have a _real_ product? And what is the company's strategy? I mean they are trying to bring something new to the market (read something much more mainstream than Google Glass), and aside from the fact that the hardware is not ready, I doubt they have reached an affordable enough price level for general public adoption nor developed killer apps yet.

My only thinking here is that they expect to be acquired by Google/Amazon/Netflix/Apple et al for the team and promising tech, as they know they'll never make the revenue to justify the billions they ate in funding.

Holomakerbot7• 8 years ago

Their strategy is to get devs on board first with their creator edition launching this year. SDK in two weeks at GDC.

decision_tree• 8 years ago

I really can't understand the hatred directed towards Magic Leap. All we know at this point in time is a) those who have experienced the technology are impressed (but obviously bound to NDA) and b) ML has raised near-unprecedented amounts of money for a company with no product on sale (2.3MM by CB[1]). To think Google and Alibaba, not to mention other big funders, are so wrong in their large contributions is serious - such a mistake is historic. I'm not suggesting they will deliver, only that all we can say is we don't know.

[1]https://www.crunchbase.com/organization/magic-leap

wolfcode2• 8 years ago

Maybe you would better understand if you read technical source like: https://www.kguttag.com/2018/02/22/magic-leap-one-tunnel-vis...

They sell dreams. Unfortunately they got social proof - "quickly, other already gave us a lot of money, you should too!". There is already existing HoloLens tech which you can already buy.

edanm3• 8 years ago

This assumes a very high level of naivety by the people funding the company, who at least theoretically, should be, or have access to, technical experts that can study the technology for themselves.

We're not talking about people raising money from the general public or using heavy-handed sales tactics. We're talking about billionaires funding this thing - I'm not going to cry if they lose money on a bad investment (unless there is outright fraud involved).

Magic Leap Raises $461M from Saudis

Related Stories