Today Penrose Studios announced they’ve raised $8.5 Million in what they’re calling the largest institutional seed round in augmented reality and virtual reality to date. The round was led by Accelerate-IT Ventures (AITV), with participation from TransLink Capital, Suffolk Equity, 8 Angel, and a number of other angel investors. I spoke with Penrose founder Eugene Chung about the raise yesterday.
A former VC himself, Chung chalks the raise up to four key tenants: a phenomenal team, great products, excitement around the market, and sure, a business plan.
What do investors care about most? According to Eugene Chung, first it’s team, team, and team. In that order. Above all else, he credits this round to his kick ass team. Chung founded Penrose in the second quarter of 2015, officially incorporating in Q3 with a handful of employees. That team is now 20 strong. He describes them proudly as a collection of engineers, artists, hackers and storyteller dedicated to virtual and augmented reality. Many have been working in VR for years, and some for decades. All of them are encouraged to approach their jobs like children who ask before they tell.
In addition to the staff, Penrose announced an addition to their board of advisors. Brad Allen, executive chairman of NextVR, will join as a strategic advisor. He joins director, screenwriter and producer Roman Coppola, who advises the studio on the creative side.
The second thing Chung credits are the products Penrose is working on. We saw two of them, The Rose and I and Allumette, at Sundance earlier this year. They are both very promising first looks at cinematic storytelling in VR. We’re excited to see the full length premier of Allumette at Tribeca this year.
In addition to these experiences, the team has a handful of other projects they’re working on, including their own native creation tool. This is something many companies are working on, including Epic Games, Oculus, and Unity. We still haven’t seen Penrose’s tool, but Eugene said it was one of the demos that fueled this early stage investment.
One of the reasons investors were ready to hop on board is that a lot of people are generally very excited about AR and VR right now. Golman Sachs, the Wall Street Journal, Digi-Capital, and Piper Jaffray, have all chimed in with forecasts, some as high as $150 billion by 2020.
Chung pointed out that’s 50% larger than the entire US advertising market. But unlike advertising, which is dominated by old money, VR and AR are anyone’s game. This round is Penrose’s first big step in becoming one of its giants.
Chung admitted that business plans were a lower priority for investors. His exact words were that “a smart team in a great market will figure out the right business model.” When it comes to monetizing content, Eugene mentioned how many people are trying to follow the film model as it stands today. But he believes a better analog is to look back to the early 20th century when new businesses like Nickelodeons were emerging. “The subscription model could take off,” he said, “be we are not there now.”
What Penrose’s version of a Nickelodeon will be I can’t tell you. For now, they are embracing the industry’s early stages and the ability it gives them to experiment with a number of different business models. This seed should give them plenty of freedom to experiment over the next year or two.
Most important to Chung is that the Penrose team maintains the philosophy that brought them where they are today; to remember that wherever they came from, whichever crafts they think they’ve mastered, everyone needs to remember how little they know and let VR tell them who’s boss.