➤ The hype around virtual reality has cooled, leaving investment demand for opportunities with a proven return on investment.

➤ Enterprise spatial computing in design, training and telerobotics will be a paradigm shift as important as the internet itself.

➤ Mainstream VR in enterprise will be ubiquitous by 2025.

Chief Revenue Officer Joe Michaels has been with 6-year-old VR hardware startup HaptX Inc. since 2016. Since that time, the company has more than doubled in size, from fewer than 20 employees to about 40. The company pivoted from entertainment VR as the consumer market proved elusive, and looked to the enterprise space in 2018 as it released its flagship HaptX Gloves, which simulate real touch sensitivity in virtual environments. Since then, the company has landed partnerships for design, training and telerobotics, including a recent deal with Nissan Motor Co. Ltd.

S&P Global Market Intelligence caught up with Michaels after the company landed a finalist position in the SXSW Interactive Awards to discuss enterprise VR and the future of the technology. What follows is an edited version of that interview.

S&P Global Market Intelligence: How has the conversation around VR changed over the years at SXSW and the tech conference circuit in general?

HaptX Chief Revenue Officer Joe Michaels Source: HaptX

Joe Michaels: I would say the mood has changed in a good way for VR. This year it's less about how cool VR is and more about what VR can do for me. It's about productivity and getting more out of VR, and that's a really positive thing for our industry.

Practical applications are good to see, but hype generates interest. Why do you say that shift is a good thing?

I think there was irrational exuberance around VR, and it led to unrealistic expectations, hundreds of millions of headsets and mass audiences within the first year or two. The broad mass audience that the world was expecting didn't materialize and that led to some head-scratching by early innovators and investors and analysts. The price point isn't there for consumers. We're just early. That's not to say entertainment isn't doing exciting new things in VR ... but that's a longer, less steep curve.

Fortunately, there's a gigantic enterprise market to fund VR and invest in its success. What can VR do to improve my business, make me more productive, save me money, cut my time to market — those kinds of task-oriented objectives that help demonstrate ROI and fund the growth that we all talked about several years ago.

What are the enterprise opportunities HaptX is working on?

In general, there's a massive shift going on from the physical to the virtual. Just as we saw commerce early on move from physical stores to virtual ones, mail going from paper mail to email, in the enterprise space, slowly but surely, companies are looking to take what was physical and move it to the virtual.

For example: training. For generations companies have used books or videos to train their employees, and they're looking for ways to make it more experiential in virtual reality. And so what we've seen is a desire to invest in virtual training. Think about the massive costs involved in designing a new vehicle model and how much you can squeeze out of that process by moving it to the virtual world. That's something we've seen when we talked to countless car makers — the desire to speed up the process by doing more in VR. Shaping the exterior of the car using VR, sitting inside a virtual vehicle before you build a prototype — all these steps help you get to better designs faster by doing more virtually. And fortunately for us, all of that really requires touch, which is really our specialty.

We've done pioneering work in telerobotics, adding touch to robotic hands, so over long distances, you can feel what the robot feels. We're doing work in telesurgery and aerospace. We've had interest from construction. There's interest from the general scientific community, and believe it or not, there's interest from the travel world.

How has the investment climate evolved?

It was definitely easier to raise money in the AR and VR space a few years ago at the beginning of the hype cycle, and now there is more conservatism for VR companies. However, that can be a good thing because now investors are looking for solid companies with unique product and technology, and a good business plan, and that's not a bad thing. Fewer companies are competing for dollars, and I think it's still never easy for hardware companies to raise money. We've relied heavily on angels and strategic investors and wealthy individuals to help us bridge the gap while we get ready for big institutional investment down the road.

Is the ROI potential in the enterprise space reflected in the investment interest?

There's a lot of excitement about enterprise VR offerings, hardware, software services. They get that the future of the VR market is enterprise-focused spatial computing and immersive computing. They still want venture-scale opportunities but they're looking for early traction in companies with something unique.

What does a mature VR market look like, and what's the time horizon?

We're at the beginning of a long shift from physical operations to virtual ones, and there's a huge opp to ride a long, giant growth wave as companies shift more to VR. I think the growth opportunity is almost unlimited. It's the same size opportunity that we had at the beginning of the internet era, where over time almost everything is going to move in that direction. Now there is no such thing as a corporate strategy without a technology strategy, an internet strategy, and the same I think will be true for spatial computing. When do we get there? I think sometimes we joke, "VR startups need to stay alive until '25." Like in 2025, we expect the kind of mainstream adoption across enterprise that will make useful VR technologies like ours a must have.