> Magic Leap has raised more than $2.3 billion to date, and has been valued at above $6 billion.
How can you raise that much money without shipping a product? Or better question, why do you need raise that much money in the first place?
How can you raise that much money without shipping a product? Or better question, why do you need raise that much money in the first place?
Some businesses and technologies are extremely capital intensive and funding can/should/is provided on achieving benchmarks instead of a cohesive product. This is different than shipping an MVP and improving it which in some industries is not possible. YC for example funds hardsci fusion reactor companies and SA talks about how they iterate really fast during the YC period to produce some tangible benchmark which is obviously much less than a full-fledged product but much more than some nebulous "concept".
So yes, it makes sense that certain industries receive larger than average investment relative to other industries at similar product stages. While I myself am extremely skeptical of Magic Leap, their technology and the likelihood investors aren't participating in some sunk-cost fallacy investment thesis there is a non-cyncial view: MagicLeap has been showing significant achievement along both technological and production benchmarks privately to investors and they are confident that the technology & manufacturing improvements warrant continued investment.
I think the amount of capital raised pre-validation is insane as it isn't simply larger than average it is orders of magnitude larger...
https://en.wikipedia.org/wiki/Webvan
Look at all that money down the drain.
Webvan's model hasn't yet been validated. The local delivery startups and offerings are still losing lots of money. If anyone can make it work it will be Amazing, but it has yet to be validated as a profitable business.
Ideas are the easy part.
That's astonishing.
https://en.wikipedia.org/wiki/Beenz.com
https://en.wikipedia.org/wiki/Flooz.com
https://en.wikipedia.org/wiki/Global_Crossing
to be fair to global crossing, they did build a really awesome international network, the revenues just didn't support the billions spent on it.
Why? You're building something that requires massive upfront capitilization.
People here act like this kind of money is unprecedented. How much many goes into building infrastructure? How much money do investors put into building a new building? Large construction projects routinely raise 10s or even 100s of millions of dollars.
Sure, if you're funding a building you're "buying" a "product" that is much better understood and has a higher chance of success (but can also fail!). But it also has a much lower chance of getting you very high returns. All that startups like Magic Leap do is take both of these numbers to the extreme: very small chance of success, but at being a 100-billion-dollar company. Some investors like this tradeoff, and they tend to be pretty savvy and educated. This also tends to be a small part of their portfolio. I think we shouldn't assume we know better than them, just because we read some stuff on the internet.