In 2016, the domestic VR market experienced a rollercoaster ride, from the fiery enthusiasm of virtual reality to the harsh reality of a "cold wave." It was like living through a high-speed cycle of life and death within a virtual world. Many startups found themselves on the brink of collapse before they could even enjoy the taste of success. Unlike a mere dream, this was real—once these companies fell, there was no second chance to rise again.
However, the dream of VR didn’t vanish. As global trends shifted toward stability, a second wave of funding quietly began. Compared to the wild frenzy of the previous year, the market now showed more calmness and rationality.
Rebirth in Reason
In 2016, VR became a hot topic. Major players like Samsung, Sony, Apple, Huawei, iQiyi, and Ray Media all made their moves. Startups flooded the market, and by the end of the year, the VR market had reached 3.46 billion yuan. But just six months later, the scene changed dramatically. The rapid growth couldn't sustain the chaotic development model. With the overall investment market shrinking, many VR companies faced tough times. The VR headset market, in particular, became a battlefield, with about 90% of manufacturers shutting down. Well-known names like Storm Mirror, Mido Entertainment, and Zhongjing Vision were forced to cut staff or delay wages. At that time, the "winter theory" loomed over the entire industry.
By the first quarter of 2017, China’s VR market share continued to decline, reinforcing the idea that winter had truly arrived. Yet, as new rounds of funding emerged, hope for recovery began to spark.
According to incomplete data, several VR startups received significant funding in the first half of the year. Snow Leopard VR, Handan VR, and RGBVR raised millions in A-round and Pre-A financing led by Sequoia Capital and Jiubang. Another company, VR, secured a B-round led by Thunder and Yingying Network, raising 30 million RMB. Noi Teng, a VR startup, also got a C-round from VMS Legend Investment Fund, amounting to 10 million USD.
Wei Wei, founder and CEO of Yang Wei, believes that the ups and downs of 2016 were just a normal “metabolism†for the VR market. Companies that failed to meet consumer demand or market rules were naturally weeded out. After the bubble burst, the market would restructure itself, which is ultimately beneficial for long-term healthy development.
As the VR market enters a period of rapid development, policy support has created fertile ground for technological innovation. Virtual reality development was explicitly included in China's "13th Five-Year Plan." According to research institutions, with government backing and capital inflow, the market is expected to grow significantly. By 2021, China is projected to become the largest VR market globally.
In March, the Investment Promotion Committee of the Virtual Reality Industry Alliance was officially established. The "White Paper on Investing and Financing of China's VR Industry in 2017" provided detailed insights into the current state and future direction of the market.
Looking at the financing structure of the domestic VR industry in 2016, it's clear that the focus of investment has gradually shifted from hardware to content. Early-stage opportunities for hardware investment have diminished, and many small hardware companies are now moving towards areas like content distribution, original content creation, and content collaboration.
The future of VR will likely be driven by consumer applications, with real estate, engineering, and education being the most promising sectors for enterprise-level adoption.
From 2017 to 2020, the VR market is expected to enter a mature phase, with market size reaching 91.82 billion yuan. Hardware solutions will converge, open-source platforms will expand, and most technical challenges will be resolved. Content will be better supported, application scenarios will improve, and the industrial chain will continue to develop.
Currently, most VR investments are concentrated in the angel and A-round stages, with nearly half of the companies still in early accumulation phases. As the industry matures, future investment will shift from early-stage seed and angel rounds to later-stage financing.
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