Deal with PIF would take augmented reality start-up’s total fundraising to $2.3bn
Saudi Arabia’s sovereign wealth fund is in talks to invest as much as $400m in Magic Leap in a deal that would take the US tech start-up’s total fundraising to $2.3bn, even though its augmented reality glasses have yet to go on sale. The deal between Saudi Arabia’s Public Investment Fund and Florida-based Magic Leap is expected to be unveiled in the coming weeks, according to people close to the discussions.
The new financing is an extension to Magic Leap’s $502m funding round, announced in October, which was led by Singaporean investment fund Temasek. The Saudi investment would be at the same valuation of around $6bn, these people said, adding PIF to Magic Leap’s high-profile roster of investors including Alibaba, Google and Fidelity. Magic Leap declined to comment. The PIF did not respond to a request for comment.
Magic Leap’s “mixed reality” glasses feature what it calls digital lightfield technology and an advanced array of sensors to place virtual objects in specific positions in the real world. But it has shown few people its planned “mixed reality” headset, which has already been in development for almost eight years, and it has generated scepticism in some quarters of Silicon Valley. Talks with PIF are ongoing and there is no guarantee a deal will be finalised. If completed, it would mark the second high-profile investment in the US technology industry by PIF following its 2016 injection of $3.5bn into Uber.
The $230bn wealth fund has been at the centre of Crown Prince Mohammed bin Salman‘s effort to diversify the kingdom’s economy away from oil. Its Uber deal valued the ride-hailing service at $62.5bn but came just months before Uber skidded into a series of scandals, ultimately leading to the departure of chief executive Travis Kalanick. Subsequent to that deal, PIF became the principal backer of a $93bn investment fund managed by Japan’s SoftBank, which was created to allow SoftBank founder Masayoshi Son to make large bets on technology companies.
Many interpreted the $45bn sum put into the SoftBank Vision Fund as a sign that the kingdom decided that it was better suited to navigating the technology sector with an experienced entrepreneur. But a deal directly with Magic Leap would up-end that logic. Investors say that the scale of Magic Leap’s fundraising, unprecedented for a private tech company before its product has been launched, is due to the wide range of hardware and software breakthroughs required.
These include developing its own silicon and optics system to power the digital lightfield visuals from within a compact device, as well as building out the operating system and applications that will run on it. The company is vying with the likes of Microsoft and Apple for a head start in what some see as the next generation of computing.
Founder and chief executive Rony Abovitz insists that its technology could one day replace both PCs and smartphones with what he calls “spatial computing”. In December, the company unveiled a preliminary device, Magic Leap One, aimed at “designers, developers and creatives”. However, it is unclear exactly how much the “Creator Edition” of its device will cost — probably more than $1,000 — or when it will be made widely available.
Earlier this month, Magic Leap struck a partnership deal with the NBA, the US basketball league, showing off a promotional video featuring player Shaquille O’Neal wearing its futuristic goggles. Magic Leap has promised that its “creator portal”, a toolkit for external developers to create apps and games for its headset, will be available in early 2018.