As the realms of virtual (VR) and augmented reality (AR) rapidly evolve, the landscape of entrepreneurship and investment within these sectors has witnessed extraordinary growthParticularly in the AR industry, startups and capital influx have catalyzed a substantial acceleration spanning from product development to the entire industrial chainHowever, despite this momentum, since 2019, there has been a noticeable downturn in financing activities across the VR/AR industriesData from 2023 reveals that a total of 229 financing and acquisition events occurred worldwide, marking a significant year-on-year reduction of approximately 31.64%. The overall investment capital experienced a striking decline of around 57.06%, amounting to roughly 21.1 billion yuan.

As we navigate through this seemingly perpetual 'winter' for AR startups, reports of tough financing conditions and profitability challenges abound

Yet, paradoxically, this phase also signals an exciting transformation, as the VR/AR sector gradually transforms from an embryonic state into an era characterized by rapid growthFor instance, data from IDC reveals that in 2023, the Chinese AR headset market hit unprecedented highs, with shipments reaching 262,000 units, reflecting a staggering year-on-year increase of 154.4%. This figure constituted 36.1% of the total AR/VR shipments in China.

The industry is maturing, yet the financial landscape poses increasing challengesThus, amid this environment, those companies that manage to capture the attention of investors become all the more valuableThis year, Rokid announced securing approximately 500 million yuan in strategic financingThis substantial investment, especially when contrasted with the typical millions garnered by many contenders in the market, suggests a definitive signal from the capital market

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With prevailing conditions becoming increasingly demanding, it is evident that investors are steering their finances toward companies demonstrating greater potential and capability.

Since its inception, Rokid's total funding has surpassed 2 billion yuan, significantly positioning it as a frontrunner within the AR sectorNotably, as of this year’s first half, Rokid led in financing within the AR spaceThe affection from investors seemingly implies that Rokid is steering its course toward the next significant milestone in the AR industryA salient question, however, arises amid the competitive milieu dominated by giants like ByteDance, Xiaomi, and OPPO, as well as numerous emerging startups: Why has Rokid emerged as the pioneering player in this field?

Searching for Optimal Solutions in User Demand

"We focus diligently on the product, the user, and creating an ecosystem," summarizes Rokid CEO Misa (Zhu Mingming), encapsulating the company’s roadmap over the past several years

The first half of 2024 heralded a wave of new product releases within the AR landscape, with Rokid and a cadre of other AR firms unveiling fresh offeringsThe Rokid AR Lite, for instance, epitomizes the current cutting-edge in AR technology.

In stark contrast to Apple's Vision Pro, this device is tailored to meet contemporary consumer demandsThis is evident in its design and functionality: weighing a mere 75 grams—comparable to a pair of wireless Bluetooth earbuds—its Station is compact enough to be handled and transported easilyDesigned for three primary settings—home, outdoor, and travel—it supports a range of activities including gaming, entertainment, large-screen viewing, web browsing, coding, document editing, and PowerPoint presentations.

The Marketing AR Lite is indicative of Rokid's product philosophy and exemplifies Misa's commitment to "seriously focusing on products." Thus, a notable distinction between Rokid and many other AR companies is its consistent emphasis on user-driven product development

For over a decade, the prevailing perception of AR devices was encumbered by bulky "helmets." In Misa's view, however, "the user experience is paramount."

This conviction propelled him to chart a distinct courseWhile the industry leader Apple opted for a VST (Video See-through) approach, Misa made bold strides with an OST (Optical See-through) strategy"Product decisions should not be influenced by complicated factorsConsidering from the user's perspective, we believed Apple made the wrong choice, so why should we follow?" Misa firmly articulated in an interview with 'Interface News' and its Financial Bulletins.

Unlike the VST approach, which reconstructs physical realities via cameras and sensors, OST enables direct entry of real-world light into the user's eyesFrom a hardware perspective, this method enhances user comfort and aligns with the innate human inclination to remain connected to the physical realm, thus rendering it more palatable to the general populace.

Products rooted in user demand naturally garner acceptance

On November 9, 2023, Misa disclosed in his social media that Rokid AR clinched a single order of 20,000 units—setting a record for AR ordersTo contextualize this, during the first half of 2023, the total AR product shipment in China was a meager 68,000 units, of which 62,000 were for consumer marketsRemarkably, Rokid accounted for one-third of this volume.

As we move into 2024, Rokid’s product lineup continues to evolve in response to user demandThe Rokid AR Lite debuted, achieving over 10,000 sales in less than 12 hoursChallenging industry giants can often feel more daunting than starting from scratch; however, Misa's team's refusal to conform has indeed carved a new pathway for Rokid in the realm of spatial computing.

Currently, Rokid has secured a leading position among top-tier brands domesticallyA report named '2024 Insights into China's AR Industry Development' indicates that Rokid has served over one million customers, capturing around 30% of the market share and claiming the top spot in AR glasses within this niche.

Breaking Through the Ecological Bottleneck

Rokid's strengths in technology and differentiated products have been instrumental in its competitive breakout

However, its ascendance in public perception hinges significantly on its rapidly evolving ecosystemBack in 2012, Google Glass pioneered AR exploration before Apple; however, its practical uses remained bogged down by a frightfully limited content ecosystemFor a long duration, this deficiency served as a severe vulnerability in the industry.

Even with Apple's mastery in supply chains, development, and marketing, the debut of Vision Pro highlighted challenges regarding ecosystem establishmentAn effective ecosystem encompasses hardware devices, operating systems, and a plethora of tangible applications and experiencesThe lack of a content ecosystem has severely affected cross-user interaction, prompting consumer critiques that dubbed the Vision Pro merely as “a headset.”

Misa perceives the bigger pictureFrom Rokid’s inception, he recognized that innovation transcends product and technology; a comprehensive ecosystem had to be built from the ground up.

This ecosystem necessitates a holistic approach, embracing aspects from hardware to contextual usage

He defined Rokid's mission as rendering these devices accessible for wider usage among consumersIn tandem, by expanding offline experiential environments through collaborative operations, Rokid seeks to entice an array of ecosystem partners, thereby enhancing overall service quality.

In contrast to Apple’s often-closed ecosystems, Rokid promotes multiplicity within its ecosystemNotably, Rokid is forging partnerships across various industries, from tourism attractions to commercial real estate and educational institutions.

An exemplary instance is the integration of AR technology into cultural tourismDuring the 2024 CCTV Spring Festival Gala, Rokid enabled a seamless blend of Li Bai’s animation with the Big Wild Goose Pagoda, demonstrating the potential of their technologyMore recently, Rokid’s “Shuoxi Lake Wonder Night” project merged traditional scenic boundaries, bringing mythical imagery like temples and ancient streets into the physical realm.

Additionally, the release of the first domestic AAA action game "Black Myth: Wukong" showcased further AR capacities

Participants can deeply immerse themselves in the game through AR glasses, significantly enhancing the viewing experience relative to conventional displays by providing a more expansive and engaging visual landscape.

The convergence of tourism sites and major gaming properties underscores Rokid's ethos centered around ecosystem developmentMisa stands firm that the essence of an effective ecosystem is openness.

Thus, within the Rokid AR Glasses App marketplace, users are free to download and test a spectrum of software and gamesThis library includes both exclusive applications for Rokid AR Glasses and a variety of AR adaptations of popular mobile applications, encompassing platforms like WeChat, NetEase Cloud Music, and Microsoft Office.

Traversing the Capital Markets

Rokid's articulation of products, users, and ecosystems responds deftly to the initial questions posed in this article

It serves as a foundation for Rokid’s smooth progression toward commercializing its offerings.

"Do not focus solely on commercialization; when products, users, and ecosystems are well in place, commercialization will follow naturally." Misa's insights suggest that chasing commercialization often strays from the entrepreneurial reality, with genuine market validation occurring amidst the expanding influence of product applications.

Nonetheless, this does not discount the essential nature of external funding and progression towards commercializationThroughout Rokid's funding timeline, adjustments have been made according to situational necessities regarding funding sources and proportions.

In its early days, with both products and ecosystems in nascent stages, Rokid needed to present a coherent product to the market, securing most of its funding from market sources

The infusion of capital alongside advancements along the industrial chain enabled an accelerated launch of its terminal products.

As Rokid fortified its product lines and cultivated its ecosystem, the challenges it faced—both internally and externally—began evolvingAs Misa states, with a well-defined business model now established, the emphasis on growth is fundamental.

Consequently, the reliance on market funds has lessened"Government-guided fund ratios are now increasingly significant," Misa elucidates: under mature business models, market perceptions of corporate risks and tolerances have diminishedFor Rokid, excelling in product development while identifying avenues for sustained growth is essential at this juncture.

Over the past decade of entrepreneurship, Rokid has refrained from accepting financing from beyond the AR industry, emphasizing that stakeholders within the AR domain have played a pivotal role in its development.

In January of this year, Rokid completed a C+ funding round of nearly 500 million yuan

Notably, this round was spearheaded by the Hefei municipal government, supplemented by various financial and strategic investors.

The transition from market-driven to government-led funding hints at Rokid's maturity while simultaneously acknowledging a fresh series of challengesMoving forward, the organization must enhance its ecological capabilities while unearthing further opportunities for cost reduction and efficiency improvements throughout the value chain.

Misa approaches these new challenges with anticipatory ambition, remaining steadfast in his foundational strategy centered around products and usersFor him, prioritizing product excellence remains the primary goal of entrepreneurship.

By the end of July, the phenomenal sales landscape for Rokid's AR glasses validated Misa's strategiesThis scenario significantly influenced the secondary market, with Rokid-concept stocks preparing to surge