In 2016, the domestic VR market experienced a dramatic rollercoaster. From the initial excitement of the "VR boom" to the harsh reality of the "cold stream," it was like living through a virtual life-and-death journey. Many startups faced early failures, unable to enjoy the taste of success before their paths ended. Unlike previous tech bubbles, this one didn’t just fade away—it left lasting scars. Companies that couldn’t meet consumer expectations or adapt to the evolving market were quickly weeded out, and many never recovered.
Yet, the dream of VR wasn’t over. As global trends shifted toward more sustainable growth, the second wave of funding quietly began. Compared to the wild frenzy of the previous year, the market now showed signs of maturity and rationality. Investors started to focus on quality over quantity, and those with solid business models found new opportunities.
The year 2016 saw an explosion in VR interest. Major players like Samsung, Sony, Apple, Huawei, iQiyi, and Ray Media all made bold moves into the space. Startups sprang up everywhere, and the market reached a valuation of 3.46 billion yuan. But just six months later, the situation changed rapidly. The unsustainable growth rate couldn't keep up with the industry's chaotic development. Combined with a shrinking investment climate, many companies struggled to survive.
The VR headset market became the hardest hit, with around 90% of manufacturers closing down. Well-known names like Storm Mirror, Mido Entertainment, and Zhongjing Vision faced layoffs and financial difficulties. At the time, the “winter theory†seemed inevitable. However, by the first quarter of 2017, a new wave of funding emerged, signaling a potential recovery.
Several promising startups, such as Snow Leopard VR, Handan VR, and RGBVR, secured significant rounds of financing from top venture capital firms like Sequoia Capital and Jiubang. Others, like VR company Noi Teng, raised millions in Series C funding. These developments gave hope to the industry and suggested that the market was on the path to recovery.
Wei Wei, founder of Yang Wei, believes the turbulence of 2016 was just a necessary “metabolism†for the VR industry. Companies that failed to meet consumer needs or follow market rules were naturally eliminated. After the bubble burst, the market would restructure itself, which is ultimately good for long-term healthy growth.
With strong government support, China’s VR industry has found fertile ground for development. Virtual reality was explicitly included in the "13th Five-Year Plan," indicating its strategic importance. Industry analysts predict that under policy and capital support, the market will see massive demand. By 2021, China is expected to become the world’s largest VR market.
In March 2017, the Investment Promotion Committee of the Virtual Reality Industry Alliance was officially established. Their "2017 China VR Industry Investment and Financing White Paper" provided detailed insights into the current state and future of the market. According to the report, after the market cultivation period from 2014 to 2016, the domestic VR industry entered a phase of rapid development between 2017 and 2019.
Industry demand for standards, compatible applications, and accessories will grow rapidly. Consumer awareness of VR is deepening, and the enterprise market is beginning to take shape. By 2020, the VR market is expected to reach 91.82 billion yuan, with hardware solutions, open-source platforms, and technical challenges being largely resolved. Content will be more comprehensive, application scenarios will expand, and the industrial chain will continue to improve.
Looking at the current investment trends, attention has shifted from hardware to content. Early-stage hardware investments have become less attractive, and many small hardware companies are now focusing on areas like content distribution, original production, and content collaboration. The future of VR lies in widespread consumer adoption, and sectors like real estate, engineering, and education are likely to lead the way in enterprise applications.
As the market matures, investment will gradually shift from early-stage rounds to later-stage funding. This evolution reflects a more stable and sustainable approach to VR development. With continued innovation and support, the industry is poised for long-term growth.
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