If you read VRFocus regularly – and we hope that you do – you’ll like as not be familiar with stories about how company A, which related to virtual reality (VR), augmented reality (AR), etcetera, has just complete a funding round or something similar. In a lot of cases, quite possibly the majority how they have acquired the funding boils down into two camps: one single investment or investors “led by company B”. But what makes immersive technology an interesting prospect for a business that specialises in investment? How much do they know about the market and the way development is going? After all, it’s not a question we really ever ask investors: why?

So, when one such investment company, Intel Capital, emailed us interested in maybe contributing in some way on a future guest piece we said ‘okay, tell us what has you interested in VR/AR’. So, they sat down and had a chat about it.

What follows is a roundtable discussion between Intel Capital investment directors Stephen Saltzman and Tammi Smorynski. With Ameet Bhansali, Intel Capital’s Vice President and Managing Director for New Technologies asking the questions and acting as moderator.

Ameet Bhansali: If I brought your grandmothers into the room, how would you explain AR and VR to them?

Stephen Saltzman: In AR, you’re adding information to the world around you. For consumers, think Pokémon Go. For companies, imagine a map that guides your drivers through a warehouse in the most efficient way possible.

Tammi Smorynski: VR is a full-on simulation of something: performing surgery, walking through a city, or touring the solar system. You’re not adding information to your world; you’re in a completely different one.

AB: How would you describe yourself – AR/VR booster, skeptic, or something else?

TS: I started out a little skeptical about VR, because I’m one of those people who can’t even play Pokémon Go in a car without getting sick. But as I’ve seen the possibilities, I’ve become more excited. There’s a great capability for education and training, for example. And safety: you can stop a person from doing something dangerous, flash a warning.

SS: I would say I’m a booster because I’m a skeptic. Sure, the technology is bright and shiny, but is it useful? I got a great answer after talking to the head of neurosurgery at a major research hospital. I heard about improved outcomes across 368 brain surgeries using VR-assisted navigation – and how they generated millions in new insurance reimbursements.

It was easy to see a lot of other compelling business cases where VR can help people who have to think in 3D.

AB: So how far away are we from seeing AR and VR make major inroads?

SS: The inroads are already made. We have pilot projects across entertainment, manufacturing, and eSports. We have groups developing new tools and interoperability standards. None of this would be happening if people didn’t see a big opportunity, including investors.

AB: For instance?

SS: Many industries depend on expensive specialists to help field technicians; they literally ride along in a truck to a remote site. With AR-assisted remote viewing, a specialist can virtually peer over a technician’s shoulder to help fix an engine, printing press, or wind turbine, then move on to the next job. That’s a huge productivity boost.

TS: It’s also an experience our industry knows how to deliver. Remember, AR is a lighter technical lift than VR because you’re moving a small amount of information. A Pikachu or turbine blade only appears when you get near it – that’s a small data load and something we already know how to handle.

But where it really gets interesting for me is new AR viewing devices.

AB: Such as?

TS: Think about people wearing AR sunglasses. As they go about their day, they get information on where to find a coffee shop, or they read a discreet review of the shop. These are byte-sized messages only they can see. Even if I personally don’t like wearing glasses, when AR adds enough value, I’ll get them.

AB: If these glasses for AR turn out to be stylish, consumers will adopt them quickly. And if that happens, I would think enterprises would have to integrate them.

SS: Yes. Just like bring-your-own-device forced IT departments to relent on iPhones and Android devices. Long-term, we see headsets that look like Oakley sunglasses and can shift between reality modes depending on the application.

AB: We’ve talked a bit about AR. What about the market for VR? The current expectations seem to be a bit muted.

TS: On the hardware side, there are at least three challenges. First, the devices are clunky. If you want to get to a self-contained, lightweight device, you need sufficient computing power in the headset – not a tethered backpack, belt pack, or PC.

Second, since it’s a simulation and you don’t have access to the outside world, you have to track your actual position. Otherwise you’ll keep running into walls and tripping over coffee tables.

The third challenge is how you display information. The simplest way is to put a screen in front of your eyes – what’s called a stereoscopic display. On the other extreme is a true hologram, which gives you the feeling of a 3D object. Stereoscopic displays are here today; holograms are years away.

SS: Essentially, the first generation of consumer VR headsets was good enough to critique. The second wave is making the experience better. Faster and fatter wireless connections are getting rid of annoying cable bundles. And full system prices are dropping to about $1,000, which is a magical threshold for consumer products.

First-year VR headset sales in 2016 almost equaled first-year iPhone sales, in terms of units. That number doubled in 2017 and should double again in 2018.

AB: What about content?

SS: On the consumer side, blockbuster titles have started shipping, more are in the pipeline, and VR theme parks and arcades are popping up. In gaming, the Oculus Rift and the HTC Vive have been out long enough that developers can create high-impact videogames, not just cool five-minute experiences. As a result, VR eSports are now a thing.

TS:The long-term challenge will be to create content so people come back. Consumers will be fickle about VR content similar to how they are about online videogames.

AB: And on the enterprise side?

SS: Just as early TV producers needed time to move beyond filming plays and radio shows, enterprise experts had to play with AR and VR to understand what it could do. After that, they needed great tools. On the AR side, Apple and Google gave us ARKit and ARCore. Unity and Epic developed real-time videogame engines. And platforms like Sansar let creative teams create immersive worlds without programming.

But businesses also will need to put existing data on those goggles. And one promising segment for independent software vendors is to bridge the gap between legacy systems and VR devices. That’s why we’re seeing the big consulting and system-integration firms build practices in AR and VR.

AB: In that light, let’s talk about the business opportunity: where does it reside for established companies like Intel?

SS: In VR, the opportunity for companies of all sizes is to make 3D-related tasks easier. Think of an architect doing a virtual building walk-through with her client, with the ability to see the actual reflections and light patterns that will occur throughout the year.

TS: The volume of information from these experiences will drive data center growth; a VR data stream requires seven times the bandwidth of a traditional one. That puts a premium on edge computing and will accelerate the rollout of 5G networking. For Intel, that means more silicon in more places. It also means big opportunities in data analytics and computer vision systems – areas where Intel plays but is hardly alone.

AB: How do startups figure into this scenario?

SS: If you think about innovation that arrives up year after year, it’s from the startups that get the attention of major players. For example, our portfolio company InContext Solutions uses eye-tracking technology to help retailers make smarter – and quicker – decisions, by putting real customers in VR simulations and analyzing their eye movements to redesign store layouts.

AB: I always like to ask this question: what haven’t we talked about that’s important to understand?

TS: Steve Jobs said when you develop something it’s all about the user experience. He was right. My first VR experience made me nauseous – it was the fast panning. You have to make these systems for the lowest common denominator, like me, so it’s a great experience all the time.

SS: Ultimately AR and VR are not point products or solutions. They’re enabling technologies that will continue to evolve over time and along a continuum.

AB: OK, last question: if I popped by your house, what AR/VR toys would I find?

SS: In part because I truly love VR – and in part because I’m embarrassingly uncoordinated with a traditional gamepad – you’ll find a Rift and a Vive; I plan to upgrade to the Vive Pro as soon as it ships. My only AR toy is my iPhone X.

TS: : I’m a total laggard when it comes to adoption. I was the last person to get a smart phone. I’ve thought about getting the VR stuff, but I’m waiting for it to mature. Goggle people: call me, let’s talk.