Column: L.A.'s Video Game Industry Becomes a Safe Haven in Times of Uncertainty

Xinjie Ma
Xinjie Ma is a co-founder of rct studio, a next-generation interactive entertainment company harnessing the latest in AI to offer immersive VR experiences. She jointly founded rct studio with other former members of the Raven Tech team, which was acquired by Baidu in 2017. While at Baidu, Ma headed marketing for the company’s hardware division. Specifically, she assisted with bringing Baidu’s smart speaker to market and achieving best-seller status. Prior to her role at Raven Tech, she served as a brand designer at Studio Output, a digital-first design agency in London. Ms. Ma holds a Bachelor's degree from the University of Arts London. For her work designing consumer technology user interfaces and marketing, she was recognized among the 2020 Forbes 30 Under 30 for both Asia and China.
Column: L.A.'s Video Game Industry Becomes a Safe Haven in Times of Uncertainty

It's hard to believe that residents across vast areas of the U.S. are about to enter their third month of quarantine as a result of COVID-19. With millions of businesses forced into complete shutdown during these unprecedented times, there have been few, if any, positive outlooks for any industry.

But hidden amongst dispirited stories across hospitality, real estate, retail and many other markets, there are glimmers of hope for industries that this crisis may actually be a catalyst for. Gaming is undoubtedly one of the markets seeing an uplift during the pandemic.


Xinjie Ma is a co-founder of rct studio.

According to Verizon, video game internet traffic is up 75%, while 95% of the country shelters at home. Meanwhile, Activision Blizzard, one of the gaming industry's largest holding companies, has seen its stock go up around 10% so far in 2020, while the S&P 500 has dropped around 15%.

Well over half of Americans are gamers and during this crisis, which is taking as much of a mental toll as a physical one, there is no better medium for escaping our current reality. However, the amount of time on consumers' hands is increasing their desire for experiences that extend beyond the status quo.

A rct studio survey of 1,000 U.S. consumers found that right around 1-in-3 people are bored of the same entertainment options during the quarantine and are searching out new virtual experiences as they shelter at home. In this sense, gaming will likely be the gateway during this crisis to new VR experiences. In doing so, it may finally bring VR mainstream. Here's three reasons why I think that will happen.

Today's Needs Are Immersing Consumers in VR for the First Time

While the percentage of VR gamers continues to only hover in single-digit percentages, the crisis has shifted the use of VR technology from a nice-to-try to a need-to-have. Can't access your favorite gym? No worries, you can access a better workout with your Oculus Quest.

With movie theatres shuttered, theme parks closed and concert halls muted, it turns out VR is one of the few technologies that can keep the entertainment industry relevant in these trying times. Our own research shows that the use of AR and VR is up 49% during the pandemic. Additionally, the latest Steam data shows over one million active VR users in March alone.

Through their headsets, consumers can embark on exhilarating journeys that may not even be possible in post-COVID-19 times. Whether it's taking in the sites at Machu Picchu or diving into the action-packed survival horror game Half-Life, the relief experienced through VR right now from societal anxieties is enormous.

And for developers of VR headsets, supply is buckling under this unprecedented demand. Devices like the Oculus Quest — which retails between $399.99 and $499.99 — have become virtually impossible to buy without paying a huge markup. These prices will likely continue to rise the further the quarantine is extended and consumers' appetite for novel forms of entertainment grows.

If interacting with our physical communities continues to be a challenge as we respond to COVID-19, we shouldn't expect any of these VR gaming needs or demands to dwindle. More than 7 in 10 online gamers in the UK and U.S. have noted they feel part of a gaming community. Never has this community been as critical as consumers seek out some connection amid lockdown and separation.

New virtual landscapes will offer even more opportunities for connection that feels human. Next-generation VR environments are already being built with new ways for players to communicate and collectively alter storylines in real-time while they explore virtual worlds.

Technology is Finally Here to Build Lifelike Environments At Scale

The VR industry has already had numerous false starts. Many of these problems can be singularly traced back to not combining proper hardware with engaging content. Getting one right has proved difficult, succeeding with both has been impossible. Furthermore, the promise of immersive VR experiences is limitless choice and opportunity. A new world to escape within.

The problem with the first few generations of VR has been the restraints caused by the sloppy intersection of hardware and software. In a VR environment not too long ago, I walked into a wooden cabin during a summer afternoon in Austria. On the surface, the situation existed. However, if you stared at anything in the cabin for more than 10 seconds, you would start to feel its loss of reality. Not so different than slowly shaking out of a dream. Everything in the room, even the room itself, was modeled in such an inadequate way. The only way to accept the experience as reality was to believe that our world is now only seen in 960X1080.

Fortunately, we're at a point where artificial intelligence advancements can address these issues. Deep and reinforcement learning can lessen the budgets and lengthy timeframes needed for developing vast virtual environments, while also solving limitations of pre-mapped narrative paths that existed in first-generation VR. We can even render these environments in real-time without needing to rewrite any code. Just a few lines of text will do.

While gaming and VR companies have utilized AI in the past to improve gaming, we're just getting to a point where we can train machine learning models to make a sequence of decisions that result in narrative-driven AI. Imagine a not-too-distant VR world where there is no need to script every alternative for each scene in advance. Once the main storylines, character descriptions, motivations, and parameters are mapped, AI can create a seemingly endless number of experiences. And unlike the gaming environments today, every non-player character is powered by its own AI model. VR players can essentially enter into their own Westworld.

Microsoft has been gaining ground with Hololens and AR for the business world.upload.wikimedia.org


FAANG Shows An Increasing Appetite for VR & AR

As they do in almost all aspects of the technology sector, Facebook, Amazon, Apple, Netflix and Google have veto power when it comes to allowing VR to go mainstream given their chokehold on distribution. For much of the past decade, Apple and Google have been resistant to adopting usages of this technology.

Meanwhile Facebook and Microsoft, if we add the sixth biggest player in technology into the mix, have shown the most interest in becoming leaders in the fledgling market. Facebook, of course, is through its efforts with Oculus. Microsoft, on the other hand, has made the most ground with Hololens and AR for the business world.

However, the two perceived leaders in big tech are beginning to see company in VR and that is likely to increase as the crisis spotlights consumer desire for VR experiences. In April, amidst the growing pandemic, Apple has been rumored to be finalizing a deal to acquire NextVR, a virtual-reality video-streaming service for around $100M. Prior to that, details leaked in March, of a controller for an AR/VR headset that Apple may have in the works.

Netflix, the global leader in streaming content into the homes of Americans, has also started to pick up its interest in VR. Its app on the Oculus store, which allows Netflix users to watch certain content in VR. Likewise, Amazon has made VR content available for its Prime Video users with apps available for Oculus and Samsung's Gear VR.

So while Facebook has been carrying the baton for VR over the last few years it has begun to wake up the rest of the major players to virtual possibilities. While the current market downturn may force some of these companies to refocus on core businesses for the short-term, there's little doubt that these leaders also see the opportunity for VR in the new normal that awaits us on the other side of the crisis. If they all jump in the water, the VR floodgates will open.

Xinjie Ma is a co-founder of rct studio, a next-generation interactive entertainment company harnessing the latest in AI to offer immersive VR experiences. She jointly founded rct studio with other former members of the Raven Tech team, which was acquired by Baidu in 2017.

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🏰 Disney's Epic Investment Stands Out Amidst Gaming Industry Layoffs

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

🔦 Spotlight

In the midst of widespread gaming industry layoffs, a glimmer of positive news emerges as Disney announces a significant move: a $1.5 billion investment in Epic Games. 🏰💰🐭

Image Source: Disney

Disney's $1.5 billion investment in Epic Games, disclosed late Wednesday, signals a strategic alignment aimed at expanding the success of "Fortnite." The deal enhances Epic's growth prospects after financial setbacks, including layoffs, and strengthens the partnership between the two companies. With Disney gaining a larger equity stake in Epic, the collaboration will broaden the integration of beloved Disney franchises like Marvel, Star Wars, Pixar, and Avatar into the game, potentially boosting its appeal and longevity. This significant investment underscores Disney's commitment to interactive entertainment and signifies a shift towards games as a primary revenue stream, aligning with the growing trend of digital engagement among younger demographics. Moreover, the potential for crossover sales of physical Disney products within "Fortnite" and the exploration of new content distribution channels are just some of the opportunities arising from this partnership.

For LA tech, the Disney-Epic Games partnership represents a validation of the region's burgeoning tech and gaming ecosystem. The substantial investment in Epic, who maintains a large Los Angeles office with 1,000+ employees (according to LinkedIn), reflects confidence in the LA’s talent pool and innovation potential. Additionally, this partnership between two industry giants fosters an environment for further collaboration, investment, and growth within LA's tech sector. As Disney and Epic Games deepen their ties and explore new avenues for content integration and distribution, it not only elevates the prominence of LA as a tech hub but also stimulates economic growth and job creation in the region. This partnership highlights LA's unique position as a hub where technology and entertainment converge. With its ability to integrate diverse industries, LA is driving innovation and expansion in digital entertainment. 🚀💸🎮

🤝 Venture Deals

LA Companies

  • ProducePay, a financing and marketplace platform for the fresh produce market, raised a $38M Series D led by Syngenta Group Ventures joined by Commonfund, Highgate Private Equity, G2 Venture Partners, Anterra Capital, Astanor Ventures, Endeavor8, Avenue Venture Opportunities, Avenue Sustainable Solutions, and Red Bear Angels. - learn more
  • Blush, an invite-only dating app that drives users to local businesses on dates, raised a $7M Seed Round from individuals like Naval Ravikant. - learn more
  • Mogul, a startup founded last year that provides an overview of an artist's royalty earnings and identifies areas where money is owed but has not yet been collected, raised a $1.9 million seed round from Wonder Ventures, United Talent Agency, AmplifyLA, and Creator Partners. - learn more
  • Avnos, a hybrid direct air capture startup, raised a $36M Series A led by NextEra Energy and joined by Safran Corporate Ventures, Shell Ventures, Envisioning Partners, and Rusheen Capital Management. - learn more
  • AI.fashion, startup whose mission is to help retailers enhance the online shopping experience by providing consumers with virtual try-ons and personalized fashion recommendations, raised a $3.6M Seed Round led by Neo. - learn more
  • Suma Wealth, startup that aims to demystify financial topics and provide culturally relevant content, virtual experiences, and resources to help Latino users navigate financial challenges and opportunities, raised a $2.2M Seed Round . Radicle Impact led, and was joined by Vamos Ventures, OVO fund and the American Heart Association Impact Fund. - learn more
  • 222, a startup that helps users discover their city and meet new people through unique social experiences, raised a $2.5M Seed Round. Investors included 1517 Fund, General Catalyst, Best Nights VC, Scrum Ventures, and Upfront Ventures. - learn more
  • LimaCharlie, a security operations cloud platform, raised a $10.2M Series A led by Sands Capital. - learn more
  • Polycam, an app that uses a smartphone’s sensors to capture 3D scans of objects, raised an $18M Series A co-led by Left Lane Capital and Adjacent, and joined by Adobe Ventures and individuals like Chad Hurley and Shaun Maguire. -learn more.

LA Venture Funds

Actively Raising

  • ReelCall, Inc., an entertainment technology company focused on powerful apps and platforms that help build and maintain the professional network of connections vital to career growth, is raising a $850K Pre-Seed Round. - learn more
  • CZero, a startup building software to decarbonize logistics for logistics businesses and goods business through a vetted marketplace and optimization software. - learn more
  • Couri, a technology startup addressing last-mile delivery issues, is raising a $450K Pre-Seed Round at a $2.2M post money valuation. - learn more
  • Sweetie, a marketplace to help people plan date nights, is raising a $1.5M Pre Seed Round. - learn more
  • StartupStarter, an investment platform that provides real-time data and analytics on startups, is raising an $850K Angel Round. - learn more

If you’re a founder raising money in Los Angeles, give us a shout, and we’d love to include you in the newsletter!

Venture Waves, Climate Tech Wins, and Silicon Beach's Ongoing Evolution

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Anduril Seeks $1.5B in VC Funds

Defense company Anduril Industries Inc., based in Costa Mesa and founded by Palmer Luckey, is seeking to raise $1.5 billion in fresh funds to boost its valuation to $12.5 billion or more, according to sources quoted by The Information. This fundraising effort, if successful, would mark one of the largest venture capital rounds of the year.

Image Source: Anduril

Anduril recently secured a contract to develop and test small unmanned fighter jet prototypes under the Air Force’s Collaborative Combat Aircraft (CCA) program, beating out major defense companies like Boeing, Lockheed Martin, and Northrop Grumman. Alongside General Atomics, Anduril will design, manufacture, and test these aircraft, with a final multibillion-dollar production decision expected in fiscal year 2026. This program aims to deliver at least 1,000 combat aircraft to fly in concert with manned platforms and is part of the Air Force’s Next Generation Air Dominance initiative. Central to Anduril’s success in this contract is the Fury autonomous air vehicle, acquired through the purchase of Blue Force Technologies. This victory underscores Anduril's rapid advancement in the defense sector, aligning with Luckey's vision of building faster and more cost-effective defense assets. - learn more

Los Angeles Ranks Number 1 in Emerging Climate Tech Hub

The 2024 Emerging Climate Tech Hubs Report by Revolution highlights Los Angeles as a burgeoning center for climate tech innovation. LA's growth in this sector is driven by its diverse talent pool, strong research institutions, and a culture of environmental consciousness. The city's unique mix of legacy industries, such as entertainment and aerospace, alongside emerging tech companies, positions it as a pivotal player in the climate tech landscape. This shift reflects a broader trend of decentralized climate tech funding across the U.S., reducing the historical dominance of California's traditional hubs. - learn more

Silicon Beach: Looking Back, Moving Forward

Assessing the overall health of the startup market is challenging, especially as venture capital funding has decreased by an average of 61% from 2021 to 2023 across the top VC markets in the US. Markets with robust ecosystems in AI, SaaS, Biotech, Healthtech, and Fintech appear to be weathering the downturn better than those focused on Consumer and Gaming industries, areas where Los Angeles traditionally excels.

Percent Change In VC Funding By Region

CB Insights

LA Times paints a rather bleak outlook on the Los Angeles tech scene noting venture capital funding in Greater Los Angeles plummeted 73% from 2021 to 2022. Silicon Beach, once a vibrant tech corridor, currently faces high vacancy rates and lacks late-stage financiers, especially in the AI sector. However, there are positive signs, including growth in aerospace startups and increased venture capital investment in early 2024, suggesting a potential rebound for LA's tech ecosystem.

While LA may not be exceeding expectations during this period, its tech ecosystem warrants a nuanced evaluation, given the broader market dynamics and its strong performance in specific sectors. Reach out to us with your thoughts.

🚀 SpaceX gears up for another stellar year, active raises, and more

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Happy Friday Los Angeles! You made it through the first week of 2024!

🔦 Spotlight

Elon Musk may be a divisive (albeit entertaining) figure, but the continued success of SpaceX is pivotal for the aerospace industry in Los Angeles and more broadly around the world.

Image Source: SpaceX webcast

What happened with SpaceX in 2023?

  • Elon Musk challenged Facebook founder, Mark Zuckerberg to a cage fight.
  • SpaceX launched 96 successful missions with its Falcon series of rockets, a 57% increase over its previous annual record.
  • SpaceX conducted two test flights of the largest and most powerful rocket ever built, Starship.
  • Roughly two-thirds of SpaceX's launches in 2023 were devoted to building out Starlink, the company's satellite-internet megaconstellation.
  • Isaacson’s Elon Musk biography was published in September including everything from Musk’s tumultuous relationship with his father to his work ethic and “demon mode”.

Moving forward what can we expect from SpaceX and its controversial founder? Continued innovation pushing the aerospace industry to new limits? Yes. More drama? Without a doubt.

Here is some of what is to come in 2024:

🤝 Venture Deals

Just Announced

Check back next week!

LA Exits

  • CG Oncology, an Irvine, CA-based developer of immunotherapies for bladder cancer, filed for a $100M IPO. It plans to list on the Nasdaq (CGON) with Morgan Stanley as left lead underwriter, and has raised around $317m in VC funding. - learn more
  • McNally Capital agreed to sell Advanced Micro Instruments, a Costa Mesa, CA-based maker of gas analyzers and sensing technologies, to Enpro (NYSE: NPO). - learn more

Actively Raising

  • ReelCall, Inc., an entertainment technology company focused on powerful apps and platforms that help build and maintain the professional network of connections vital to career growth, is raising a $850K Pre-Seed Round. - learn more
  • CZero, a hard-tech startup that is developing a technology for decarbonizing natural gas, is raising a $1.5M Seed Round. - learn more
  • Couri, a technology startup addressing last-mile delivery issues, is raising a $450K Pre-Seed Round at a $2.2M post money valuation. - learn more
  • Sweetie, a marketplace to help people plan date nights, is raising a $250K Angel Round. - learn more
  • StartupStarter, an investment platform that provides real-time data and analytics on startups, is raising an $850K Angel Round. - learn more

If you’re a founder raising money in Los Angeles, give us a shout, and we’d love to include you in the newsletter!

📅 LA Tech Calendar

Sunday, January 7th

Wednesday, January 10th

  • Startup Cafe: Networking with a Kick - Entrepreneurs, Startups, and Tech Enthusiasts join together to meet and connect with like-minded people, industry professionals and investors, while enjoying a nice cup of coffee in Venice at The KINN. This week’s interactive discussion about AI’s evolution in entertainment will feature Dr. Sam Khoze and Rachel Joy Victor.
  • Venice Tech Happy Hour- Join Startup Coil and FoundrHaus Wednesday evening and enjoy the sunset from the rooftop, grab a bite overlooking Abbot Kinney, and mingle with other tech enthusiasts and entrepreneurs by the bar on the patio.

Have an awesome event coming up? Reach out to be featured on next week’s Newsletter!

📙 What We’re Reading

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