VR/XR has created amazing fantasy worlds for individuals and gaming. I am not a gamer. I live in the real world and have lots of things to do in the here and now. I have often daydreamed about a killer VR/XR enterprise app (yea I know, nerd alert) that could help me connect with people and get stuff done. The founders of Morpheus XR and I have geeked out on this shared vision for hours. I am excited to be joining a great group of leading angels as the last check in this first round of funding.
Morpheus XR: A VR based platform for team connection.
Like many of you, I am burnt out on Zoom. The world in 2D is simply not as engaging as 3D with real humans. And we know remote work is here to stay. In fact, in many ways, remote work has broken down geographies and opened up new opportunities to work with the best people anywhere in the world. Despite the valiant attempts of Zoom happy hours, trivial pursuit, etc., I still come away from those events with a very shallow feeling. The question for many of us is how to create deeper personal connections during remote interactions. This problem is amplified in the enterprise where employee engagement and satisfaction was already a problem before the pandemic and remote have raised new challenges for corporate culture. A thought occurred to me: “How could meetings and events be 10x better than Zoom?”
I am not a gamer and was not an early adopter of VR. My first deep dive into VR was with Tripp (we invested) when the CEO told me it was 30-50% better at raising HRV (getting you to calm down) than Headspace. Oh, something I already do that can be done BETTER on the new platform? Ok.
I first met Jeffrey Chernick from Morpheus XR a couple of months ago just days after he started the company. We had mutual friends from Burning Man. He and others from Morpheus were part of the team the build Burning Man in VR in 2020. We bonded over frustration with Zoom and the upgraded experiences in a place like Burning Man. “I think we can provide an upgraded connection and culture experience for the enterprise in VR,” he said. “Ok, so why hasn’t anyone done it?” I asked. He noted a number of barriers and how Morpheus was going to reduce friction in enterprise VR adoption including:
Access to Headsets. While anyone can buy a headset, they are not standard corporate equipment today. Like the early days of Blackberry’s and laptops, most employees are waiting for the company to provide them. For a whole team to benefit from a VR experience, they all need headsets, not just the gamers that happen to have one already. For a sales team to do a VR presentation to the client, the client needs a headset. Morpheus handles this by operating its own headset rental business. The price of the headset rental is bundled into the application costs.
VR Expertise. Very few enterprises have the in-house resources to build VR applications and manage VR experiences, especially at scale. Most corporate helpdesks would not know how to set up a user on an Oculus headset. Morpheus provides concierge user onboarding and full app development and event management turn-key.
Branding. Enterprises want the VR experience to reflect their brand and culture. Setting up in someone else’s world doesn’t allow them to control the brand experience. Morpheus creates a virtual HeadQuarters with conference rooms, event halls, and whatever the company wants that are in line with their brand.
Controls and scale. Existing VR platforms were built around individual experience. The largest VR room is about a big as the smallest Zoom room. Basic access control, user validation, compliance and management reporting, and other standard enterprise features are largely missing. Morpheus has built these enterprise features as apps on existing platforms and is building its own Enterprise First platform VHQ.
The problem was pretty clear. Employee engagement already at low levels tanked even further during the pandemic. Our band-aid of Zoom has soured for many. With the prediction that up to 1/3 of employees staying fully remote from 2021 going forward, everyone was scrambling for new solutions.
While very early, traction is well above average for companies this young. The company has some initial traction with teams at Facebook. They also have headsets going to a dozen other companies including Google, Signal Brands, RideAmigos, Commvault, and others. They are eating their own dog food and having many first meetings in VR (sending the headset ahead of time) with a close rate much higher than Zoom. They added some very high leverage investors including Dave Gaspar, Founder of Gather.io, Andy Dunn, Founder of Bonobos, Fisher Capital (One of the larges NYC real estate developers), Ari Zweiman hedge fund manager at 683 Capital Partners, Jason Rimokh, founder of Signal Brands (Guess, NineWest, etc.) and more from Facebook, Microsoft and others.
Turns out, their approach has been able to break VR into enterprises you would expect had already adopted it. I mean Facebook? They own Oculus! Morpheus provided a smooth concierge onramp including the headsets for these teams within a corporate event budget they already had. Since their solution is turn-key within an existing budget, the sales traction has been greater than I usually see in this stage and is accelerating. They have established early counter positioning power as an upgraded Zoom experience for teams.
As they deliver value today to the enterprise, Morpheus has to work around the limitations of existing platforms. These customer requirements are being fed directly to their development team that is hard at work on their Enterprise First platform VHQ. They are building all the features they learn their early customers want into the new platform to which they will port all users. If they are able to establish a critical mass in the Enterprise, they may be able to leverage the network effects, scale, and switching cost power to make their platform the standard for enterprise VR. CTO, Anselm Hook has build VR platforms before with @XeroxParc, @Mozilla, and @makerlab. They have platform ambitions and it is early with good traction.
I have rarely seen this level of execution and adoption this early. The team is executing very well and the customers are responding. We are very excited to be one of the last checks into this round.
Why I am Investing
I invest in passionate driven founders who have a unique way to crack a big nut. Employee engagement in a remote world is a big nut. I have been impressed with the team’s early execution on all fronts (investors, product, customers, platform, etc.). I am excited to start using the platform to meet you all in VR.
Trends I am betting on
XR becomes an enterprise tool. Sometimes new technology starts in the enterprise and filters out (Blackberry). More recently the trend has been for consumer tools to be integrated into the enterprise after enterprise features were added (smartphone, personal laptops). The enterprise is currently managing remote connections with 2D technology (Zoom, phone). XR offers an upgraded connection experience that will help enterprises achieve their employee and customer engagement goals. The move to the cloud has given enterprises confidence to partner with technology companies for significant portions of their infrastructure. I am betting that enterprises will continue to partner with experts in new technology platforms (XR) to achieve their goals at scale.
The magic of human connection wins. The pandemic suddenly took away the opportunity for human connection outside our family from most of us. It is often not until something is taken away that you realize its value. The new normal is going to include much more remote connections. How to make those connections as authentic as possible is a challenge XR is uniquely positioned to meet. I am betting that people valuing the magic of connection will adopt technologies that enable that connection. Even if they are not “gamers” or “early adopters.”
Why this deal is Incisive
Morpheus XR ranks very highly in key areas of our Meta Themes.
Software Eats Everything. Email and messaging ate the phone and physical mail. Zoom ate the in person meeting. I am betting VR will eat Zoom. The VR software enables upgraded remote experiences that are many times not even available in the real world. In that sense it can be an upgrade to physical meetings. Why have an in person meeting if the VR meeting is BETTER?
Great Founders figure shit out. The Morpheus team has gotten more traction between day one and day 90 than any company I have seen recently. They figured out a product major companies would buy in large quantities in the first 30 days. They have both deep product experience as well as market connections to generate revenue. Between the management are 9 company formations. This is a very high level of experience and execution that is not common in very early-stage companies. These are the right founders to figure it out.
Disruptive innovation creates new markets. VR has been around for a very long time, but the enterprise had not adopted it. Morpheus is bringing innovations which could unlock enterprise demand for VR. This will be a whole new market segment for VR.
Platforms Win. The current VR platforms were built for individual gaming, not the enterprise. The company that brings to market an enterprise VR platform will lead adoption in that market segment. Morpheus is currently leading in this niche and will deliver its enterprise platform. Platforms become valuable when the value created for the platform members exceeds the cost of the platform itself. This has already tipped for things like cloud computing. Morpheus is using its early customers to drive platform requirements. If they are able to reach scale and attract app developers and integrations the platform could be very valuable.
Invest with other smart people. I have seen a trend recently of CEOs raising from high leverage individuals versus venture funds. This is very smart because individuals tend to engage much more deeply. I would rather have 10 highly engage individuals versus one seed fund that assigns a junior associate to the board. This has been the strategy Morpheus has taken. Investors have already delivered customers, lead lists, and business development which is evident in the quick traction. I am very excited to be part of this group of very smart people.
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