General
October 12, 2021
6 minutes read

AR Startup Magic Leap Is Back, With $500M In Funding

Not too long ago, there was a hot-cake startup that left VCs frothing at their mouths. This startup was building…

Not too long ago, there was a hot-cake startup that left VCs frothing at their mouths. This startup was building augmented reality (AR) headsets that promised to upend the industry. It was able to raise $3bn on the backs of its hype, but when it delivered its first product, people were greatly unimpressed. Problems came, its CEO stepped down, and the startup faded out of view….It was Magic Leap.

However, Magic Leap has jerked back into the public sphere with a new milestone. The startup has announced $500mn in fresh funding that’ll be used to put final touches to its second-generation product. It appears that investors are still hopeful of the company delivering its promise despite its earlier woes.

The investors that provided the fresh funding weren’t named. Notably, it’s not a funding round that warrants a celebration because it heavily diluted the stakes of earlier investors. The new funding valued Magic Leap at $2bn post-money, the company said, which is less than the $3bn in cash it had previously raised and way down from its peak valuation of $6.7bn in 2019.

Essentially, earlier Magic Leap investors have seen the value of their holdings slump down with the new round, and to remain so except there’s a turnaround, or magic, that leaps the company into greater heights.

Magic Leap is currently working on its second-generation AR headset, Magic Leap 2, and it’s obvious that the new funding will help because hardware development ain’t cheap. The company plans to release it for general purchase by next year and says some select customers already have their hands on it through an early access program, so it seems the product’s development cycle is already at the final stages.

It’ll be no good if Magic Leap’s 2nd-gen product unveiling goes like the first that left many unimpressed, so we’ll assume the company is really working on something better. While much hasn’t been disclosed about it, Magic Leap has hinted at new features like dimming and an increased field of view, things we expect.

Magic Leap is led by Peggy Johnson, a former Microsoft executive who replaced founder Rony Abovitz in the CEO role last year. It’s on her to try to make a turnaround at the company as it contests against several well-funded rivals, including her former employer.

Remember that Microsoft this year got a $22bn contract to supply its HoloLens AR headsets to the US Army. Magic Leap was among the bidders for that contract but lost to the tech giant.