Fasten Your Headsets – Entering the Nordic Virtual Reality

Exploring what’s going on in the Nordic Virtual Reality (VR) space, we found that the unlikely hub of Nordic VR is an old office building that used to belong to accounting firm KPMG in the center of Stockholm. But let’s start at the beginning.

In previous blog posts we explored Artificial Intelligence and found that in this booming sector, the data-rich are getting richer (Google, Facebook and others). While the american tech giants are reaping the benefits from big data, algorithms machine learning, the Nordics is a rather scattered region when it comes to AI. Turning to Virtual Reality, we see a market that is even more in its early infancy. Also here, VR is happening all around the Nordics, but more at an experimental stage and indeed it looks like an industry still in the making. But it’s buzzing with energy.

VR is promising in the Nordics, and we’ll tell you why we think so. While we don’t have truly data-rich tech giants here, as in Silicon Valley, to give us an edge in Artificial Intelligence, we have something else that might position us at the very front in Virtual Reality: the gaming industry, which is a Nordic world-class sector. Virtual Reality is quickly evolving in both new and established gaming companies, and the Nordic region is making its virtual mark globally. But this time, the movement is not likely to be driven from the US, but rather from Asia and especially China. This is where the consumer markets are growing, and for Nordic Tech, VR will be an opportunity and enabler to build new strong Asian relations, as we once did in Silicon Valley.

First we get down to basics. What is Virtual Reality (VR), really? According to Wikipedia VR is simply “computer technologies that use software to generate the realistic images, sounds and other sensations that replicate a real environment (or create an imaginary setting), and simulate a user’s physical presence in this environment.”

To make it a little more complex, there are (at least) three different kinds of “imaginary realities” today, all offering a its own take on the virtuality:

 

Virtual Reality (VR) – you are “immersed” in a digital world that shuts out the real world

Company example: Resolution Games  

Devices and software: Oculus Rift, HTC Vive, Samsung VR Gear, Sony PlayStation VR

The hype: Is 360 video without headsets the real killer app?

 

Augmented Reality (AR) – you see digital content in the real physical world around you

Company example: Niantic Labs (maker of Pokemon Go)

Devices and software: Smartphones, Pokemon Go

The hype: Apple bought Israeli 3D sensor company PrimeSense for $360 million

 

Mixed Reality (MR) – you are in a hybrid world that is both real and virtual

Company example: Magic Leap

Devices and software: HoloLens (Microsoft), Structure Sensor (Occipital)

The hype: Magic Leap has raised $1.4 billion in capital from top VCs

 

Mixed Reality is set to become the next big thing, as it is a mix of both AR and VR, and more advanced than Virtual Reality because it combines several different technologies including optics, sensors, and computing power.

Yes, we have experienced VR, AR and little bit of MR – and it’s indeed spectacular to suddenly find yourself in outer space, climbing on floating sea monsters. VR is a much hyped market with basically all major technology players like Facebook, Google, Samsung, Amazon, Sony, HTC and Microsoft quickly entering the virtual industry. Interestingly, Apple has not yet made a move or announced any plans, but there are many rumors. According to Digi-Capital, a corporate finance firm in Palo Alto, the Virtual and Augmented Reality market will be worth $120 billion by 2020.

To find out what’s going on in the Nordics, we walked over to Embassy, a co-sharing office space next to Sheraton hotel in Stockholm, overlooking the water, the royal castle, the parliament and the Swedish government. It used to be the Stockholm office of accounting group KPMG, but when they moved out, the building was turned into a cheap space for startups, that have quickly moved in. One of the first was VR Sverige, an online publication about virtual reality in the Nordics. With them, several VR-startups fast followed, virtually turning the old building to an actual VR-hub in the Nordics.

We met with Joel Ring, Niklas Johansson and Johan Hägerström, the co-founders of VR Sverige, the Nordics’ largest website about VR, to take the pulse on Nordic landscape. VR Sverige’s ambition is to be the Nordic hub for everything VR and AR related, they arrange events, demo days and meetups.

They are also planning to launch a global VR-hub, project name: Immersively. The name originates from “immersive technologies”, that you are actually “immersed” in virtual reality. The idea behind Immersively is to be a global hub for the industry, that spans from USA to Asia. China is today the fastest growing consumer market, driven by huge VR arcades, as hardware is still too expensive for the average buyer. As a rule of thumb, Silicon Valley drives the VR/AR innovation, while Asia drives the user consumption. In between these two giant markets, we have the Nordics, delivering many virtual parts in the global ecosystem.

So, what is happening in the Nordics? Just as we discovered with the Artificial Intelligence sector, the Virtual Reality space is rather fragmented across the Nordics. But there is virtual life and activity.

Sweden

Stockholm and spaces like Embassy has turned into an unofficial Nordic hub for the virtual reality community, hosting a number of exciting VR-startups. There is of course a Stockholm VR Meetup. In his guide to the VR scene in Stockholm, Joseph Michael (the city’s head of startups) lists several exciting startups, including virtual reality studio Resolution Games (co-funded by Candy Crush developer Tony Palm) who recently got an $6M investment from Google Ventures (GV).

Finland

Florida-based Magic Leap recently set up office in Helsinki to gain access to Finland’s gaming-driven pool of VR and AR talent. While there is no common Finnish VR-initiative, the established gaming industry, the Nokia heritage and an edge in optics, has quickly put Finland and its fast growing VR-industry at the virtual frontline.  

Norway

There seems to be a strong will to speed things up in Norway, and especially in Trondheim which has emerged as the leading digital hotspot and startup community, driven by Lars Iversen the CEO at Technoport. VR Sverige is also helping to setup VR Norge.   

Danmark

Copenhagen is on the move. Always business-minded, the Danes have for example launched Khora, a virtual reality production house, and Labster, a pioneer in advanced interactive lab simulations for universities. There are also events and activities under the #VrAr360 hasttag.

Iceland

There is a growing VR community in Reykjavik, based on the success of the Icelandic virtual space games developer CCP Games.

Which are the emerging Virtual Reality companies and where do they come from? According to VR Sverige there are essentially three ways the VR-companies are started. Either new companies and products are launched by the established game developers (like Dice and Starbreeze), or from people leaving the big companies to found new VR startups (like Resolution Games or Hatrabbit), or by completely new teams (like SVRVIVE Studios). At Embassy in Stockholm there is a bunch of interesting companies, for example Logtown, Fast Travel Games, Univrses and BoldArc. Another interesting company is Rayvr.     

Interestingly, in the fast VR development, the listed and established eye-tracking company Tobii can play a new role. The reason is that graphics in virtual worlds puts extreme demands on computer processing power, making foveated rendering important. There is a need for technology that focus image quality where you look (and reduce it outside you focal zone).

One sign that Virtual Reality is a new area is the confusion about the terminology, like VR, AR, MR and 360 Video. You can also view it from different perspectives like Consumer Products (“VR goggles”), as Media Content (“360 Video”) or from an Academic view (“Virtual Worlds”). The team at VR Sverige says it might be better just to call it immersive technologies, since you are “immersed” in a new reality. In any case, they think that the current technologies VR and AR will merge to one, and find more and general applications.

We also met with Johan Svärd, chairman and one of the owners of virtual game developers SVRVIVE Studios and Logtown Studios. SVRVIVE Studios first product “The Deus Helix” is a mystery game in which you are abducted from your earthly life to join an alien agent workforce. You must unearth clues to save the universe, as well as yourself. We tried it, and looked for clues with our virtual hands in a dark and unfriendly virtual reality. Very exciting!

The strategy is built on a few success factors, besides a compelling game. First, SVRVIVE Studios has fast development cycles and launched the game only six months after starting the company. Secondly, it’s made for HTC Vive, a headset developed by HTC and Valve, a globally used hardware. Thirdly, the game is distributed on Steam, an international platform (owned by Valve) and a community with over 65 million players around the world. SVRVIVE Studios, with only 15 employees, most of them developers, is now expanding to both a new platform (Ocolus Rift and Facebook) and making a push into Asia and China, where the biggest consumer markets are, and where most players play VR games in big arcades.

Johan Svärd says that the VR market is still in a very early stage, the primary segment being hardcore gamers. There are few market figures. SVRVIVE Studios is now looking to raise more capital, and would ideally like to have a combination of Nordic and Chinese investors.

It’s striking that there are many signs of the US gradually becoming a less attractive market for Nordic startups. Sure, the US is still the largest market in most technology sectors, but Asia might have the most long-term future potential. And Asian markets are also looking increasingly less risky, compared to the currently tumultuous US market. In these times of post truths and alternative facts, the alternate reality of VR, AR and MR might come natural. Everything is becoming virtual.

To summarise, we think there is a real opportunity in Nordic virtual reality, we’re well positioned thanks to our established gaming industry and international networks and there is already a strong and growing community of startups and entrepreneurs. Even though the Nordic VR industry, as well as the global market, is still in its early days, technologies like VR, AR and MR are likely to find many users and applications outside gaming, and we expect to see more of virtual education, healthcare and e-commerce. Fasten your headsets. 

Image: The companies at Embassy in Stockholm