M&A Alert—June 16, 2017
Samsung acquires social VR platform VRB for $5.5 million.
Author: Eric Xu, John Ascher-Roberts, Steve Payne
Transaction Size: $5.5mm
On June 16, 2017, Techcrunch broke news that Samsung Electronics Co., Ltd. (SSNLF) acquired the social 360-degree VR content platform VRB for $5.5 million. According to VRB’s AngelList, the acquisition took place without announcement on April 17, 2017.
VRB is a social VR platform that allows users to create and share virtual experiences. The startup offers two products: VRB Home, an iOS and Android app that allows users to personalize and share a VR space resembling a home, and VRBFoto, an Oculus Store app for the Gear VR that allows users to share spherical photos. For developers, VRB provides a service toolkit that includes an extensible avatar creator, headset-to-mobile broadcasting tool, and persistent backend system to help users create virtual words. Competitors include AltspaceVR, Facebook Spaces, Linden Lab’s Sansar, vTime, and CoSpaces.
Christopher Paretti, CEO, and Chris Kairalla, CTO, founded the New York-based company in August 2015. VRB raised an undisclosed amount of funding from Samsung NEXT, Samsung’s accelerator program, where VRB was a resident.
Founded in 1969, Samsung Electronics produces a wide range of electronic components for major manufacturers including Apple, Sony, and HTC as well as consumer electronics such as smartphones, tablets, televisions, computers. In the VR space, Samsung produces the Gear VR, a mobile VR headset that uses a Samsung smartphone to display images. The Gear VR headset is powered by Facebook’s Oculus, connecting Gear VR users to the Oculus App ecosystem that includes games, video, virtual spaces, and other entertainment. Samsung announced an upgraded Gear VR with a controller in April 2017 and the 360-degree Gear 360 camera in May 2017. Samsung also offers Samsung VR, a library of 360-degree videos. Samsung Electronics has a market capitalization of $296 billion and 2016 revenue of $178 billion.
Samsung acquired VRB for $5.5 million according to Techcrunch.
Comparable transactions include Google’s acquisition of Owlchemy Labs in May 2017 (undisclosed), Magic Leap’s acquisition of FuzzyCube Software in April 2017 (undisclosed), Zenimax’s acquisition of Escalation Studios in February 2017 (undisclosed), and Skydance’s acquisition of The Workshop Entertainment in May 2016 (undisclosed).
VRB marks Samsung’s first acquisition of a VR content creation startup, allowing them to expand Samsung VR content beyond video. The social aspect of VRB’s offerings can help Samsung VR attract customers through more engaging, sharable, and customizable content exclusive to their platform, which would also drive sales of the Gear VR. The acquisition directly complements Samsung’s hardware development, with the Gear 360 designed to take spherical photos shared in VRBFoto and the Gear VR headset working with VRB Home. As a startup in the Samsung NEXT accelerator program since mid-2016, VRB has received development guidance and investment for their products from Samsung. This relationship makes integration of VRB into Samsung’s VR team more efficient and more likely to align with their vision than acquiring a non-affiliated startup.
Architect Partners’ Observations
Competitors in the VR space continue to buy and build technology and content to establish their respective platform’s dominance, with platforms including Google’s Android OS and Daydream Initiative, Facebook’s Oculus, HTC’s Vive and Viveport, and Sony’s PlayStation VR. While the VR space underperformed market expectations in 2016, reaching $2.7 billion in revenue compared to Techcrunch’s predictions of $3.8 billion, the past year was foundational for the industry, with major product launches and falling price-points making VR hardware more attainable for casual enthusiasts. This transaction is a classic example of a platform vendor acquiring features to expand and differentiate their platform and illustrates the importance of engaging content to driving hardware adoption.