This VC says China will drive VR adoption worldwide

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Everything you’ve heard about VR in China is probably true.

As of Q1 2017, China comes behind the US and Japan as the third largest market for virtual reality. But with a population of 1.4 billion mobile-first consumers and a centralized government that’s heavily investing in VR and AR, China is destined to become the first country to reach mass adoption.

Ten years from now, the Chinese tech scene will change massively. But what is happening now and what will happen in the interim? What can global markets learn from VR/AR adoption in the East?

I talked to Ryan Wang of Outpost Capital, a Beijing and San Francisco-based VC focused on VR, AR, blockchain, and the future of exponential technologies. Wang has driven deep into the China VR scene, traveling to more than 20 cities to find out more about how people are adapting and using VR. Here are his thoughts on some of the biggest topics on VR in China.

When the VR boom in China started

The VR boom started with manufacturing companies in Shenzhen producing cardboard headsets roughly around Q3 2016. When the Oculus SDK came out in 2016, manufacturers set their attention to shipping out a similar product. Throughout that year, VR became the hottest sector for investments, and startups were flocking to make content, later switching to B2B space.

Investors in China also participated in 36 deals, totaling US$1.2 billion in disclosed funding in the VR and AR fields. Although 90 percent of China’s VR startups shut shop late 2016, figures show that the industry is expected to expand more than four times in 2017, as more major players enter the industry and new content drives growth.

“We are looking at a fully booming VR ecosystem in China,” Wang said.

VR arcades as the main driver of adoption

There are over 10,000 VR arcades, but many are operating at a loss. There’s no distribution system for content, they lack quality software, there are currently no standards for games, and the lines that went down the block aren’t there anymore.

The biggest problem at this point is that there are no real users.

But this is just the beginning. Some of the top companies in the VR arcade space are working together to set up a dedicated distribution channel to import high-quality foreign content to VR arcades in China, creating an opportunity for creative talent around the world.

“The biggest challenge for the industry is not that we don’t have a big enough installation base. Right now, we have 5 million plus headsets out there. That’s not a big number, but at the same time, that’s not a small number. The biggest problem at this point is that there are no real users,” Wang said.

At this point, the average Vive (a VR system) user spends five hours in VR a week. By the end of 2017, VR arcades may be the reason users start spending two to three hours in VR every day. These early adopters will start building the VR society from the inside out and will most likely come from Chinese VR arcades, giving hope to the industry.

“Although the data doesn’t look very good right now, I think [it is] still a great opportunity,” Wang said.

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