Magic Leap Goes to the Saudis
Magic Leap (pvt), the Florida based AR company that has been one of the most successful AR companies in terms of raising capital, has indicated that the Saudi Arabia Public Investment Fund ($620b as of 1Q ’22) has increased its stake in the company, now holding a controlling interest. The deal, which consisted of $150m in convertible preferred and $300m in debt, and gives the fund the right to appoint 4 of the company’s 8 directors. Magic Leap, which was founded in 2010 by Roby Abovitz, has raised over $3.5b through 28 investors, including Google (GOOG), Alibaba (BABA), Qualcomm (QCOM), AT&T (T) and a number of VCs, but went through some difficult times in 2020. The company was forced to lay off ~1,000 employees (~50% of staff) when sales of its Magic Leap 1 AR headset, released that year failed to materialize as expected, and rumors that the company was looking for a buyer turned out to be untrue as the company went back to private investors for more capital. The company then changed focus (most of the layoffs came from the consumer segment) to the enterprise market, and the founder and CEO gave up the reins to a new CEO in 2020. Since then, he has relinquished his board seat to found a new company, Sun & Thunder (pvt), that creates Ai characters (“SynthBees”), a Metaverse engine, and “some really cool and creative things”, according to the company.
Magic Leap’s initial headset problem was price, and while the device (Magic Leap 1) was quite sophisticated, it cost ~$2,300, which was hard to justify in the consumer market in 2018. Since then the company announced the Magic Leap 2 in January of 2021, but did not release the device until September 29 of this year. While the new device itself costs ~$3,300 (~$5,000) for the complete package), and is the most expensive AR device released in 2022, it is designed to be used across a number of industry verticals where considerable software has been developed to integrate the device with existing applications such as IT tools, 3D modeling, training, collaboration, technical guidance, and metaverse creation. The device has considerably more internal storage capacity than similar devices, a positive for quick responses to user needs, although the display uses LCoS (Liquid Crystal on Silicon), an LCD based technology that is rarely used in such devices, having been replaced by Micro-OLED or Micro-LED display technology.
The Saudi confidence in the company is a bit surprising considering their original investment, which we believe was made in March 2018 ($461m) has seen a number of ups and downs but given the pre-money valuation of Magic Leap of between $1.5b and $2b, they seem to be optimistic about the longer-term prospects for AR and Magic Leap itself. If the Saudi’s do take four board seats, there will have to be some reshuffling, as those seats have been held by Alibaba, Qualcomm, and Google representatives, but with over $700m invested, the Saudi fund has the right to run the board. All in, the Saudi Fund, which remains under the control of Mohammed bin Salman, the Crown Prince and Prime Minister of Saudi Arabia, has stakes in other tech companies (Uber (UBER), Capcom (9697.JP), etc) but also has made investments in a number of US politically linked companies, particularly those of Jared Kushner, triggering issues surrounding Kushner’s ongoing support for the Saudi government, despite human rights violations. There has been little controversy over the existing Saudi investment in Magic Leap, but given the political climate, that could change quickly given the company’s status as a US unicorn.,
Magic Leap’s initial headset problem was price, and while the device (Magic Leap 1) was quite sophisticated, it cost ~$2,300, which was hard to justify in the consumer market in 2018. Since then the company announced the Magic Leap 2 in January of 2021, but did not release the device until September 29 of this year. While the new device itself costs ~$3,300 (~$5,000) for the complete package), and is the most expensive AR device released in 2022, it is designed to be used across a number of industry verticals where considerable software has been developed to integrate the device with existing applications such as IT tools, 3D modeling, training, collaboration, technical guidance, and metaverse creation. The device has considerably more internal storage capacity than similar devices, a positive for quick responses to user needs, although the display uses LCoS (Liquid Crystal on Silicon), an LCD based technology that is rarely used in such devices, having been replaced by Micro-OLED or Micro-LED display technology.
The Saudi confidence in the company is a bit surprising considering their original investment, which we believe was made in March 2018 ($461m) has seen a number of ups and downs but given the pre-money valuation of Magic Leap of between $1.5b and $2b, they seem to be optimistic about the longer-term prospects for AR and Magic Leap itself. If the Saudi’s do take four board seats, there will have to be some reshuffling, as those seats have been held by Alibaba, Qualcomm, and Google representatives, but with over $700m invested, the Saudi fund has the right to run the board. All in, the Saudi Fund, which remains under the control of Mohammed bin Salman, the Crown Prince and Prime Minister of Saudi Arabia, has stakes in other tech companies (Uber (UBER), Capcom (9697.JP), etc) but also has made investments in a number of US politically linked companies, particularly those of Jared Kushner, triggering issues surrounding Kushner’s ongoing support for the Saudi government, despite human rights violations. There has been little controversy over the existing Saudi investment in Magic Leap, but given the political climate, that could change quickly given the company’s status as a US unicorn.,
Magic Leap 2 AR glasses - Source: Magic Leap
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