The size of a developing industry like the metaverse is difficult to predict, but according to Citibank, it might be between $8 trillion and $13 trillion by 2030.
And if the global leader in investment banking and financial services is right, there will be roughly five billion people working, playing, interacting socially, shopping, and more within the rapidly developing frontier in less than ten years.
With a potential population and economy larger than China’s, the metaverse offers enormous opportunities for clever, creative businesspeople. Making trails into this new frontier will be difficult despite its size, though.
Although Citigroup has a very bright prognosis for the metaverse, there are some substantial market challenges. The biggest is that the market is still developing and isn’t fully understood. As a result, the market is currently very speculative from the perspective of investments. This is the main concern that company founders must get through before participating in VC roadshows.
Key Insights from a Venture Capitalist with Expertise in the Metaverse
Yet, a pessimist sees the difficulty in every chance, whereas an optimist sees the potential in every challenge, as Sir Winston Churchill famously put it.
And successful businesspeople excel at precisely this: recognizing the chance amidst the chaos. So, it’s crucial to outline the commercial prospect for your metaverse startup while pitching it to a group of realistic VCs. Unfortunately, that’s frequently easier said than done while working with developing markets.
We recently had a conversation with Dmitry Borisovich Volkov, Ph.D. in Philosophy, the founder and general partner of Social Discovery Group, to help startup entrepreneurs searching for funding have a better understanding of how to approach this particular industry. The multinational technology corporation, investment fund, and venture studio are making significant investments in the metaverse while continuously assessing who might prevail in the quest for metaverse glory.
The business recently made a $20 million initial commitment to projects centered on social life 3.0 applications that are tied to the metaverse. Yet, as Dmitry Volkov noted, the business is also assessing wider market potential.
He provides these critical advice and insights as company founders get ready to approach VCs.
The first rule: Follow for the changing industry norms
The absence of cohesiveness is “one of the main problems the metaverse faces,” according to Volkov. “The market is still incredibly fragmented even if the field is expanding in terms of hype and the amount of new ventures being launched. There are no portals to a larger metaverse, in contrast to Web 2.0. Although there are some fantastic virtual worlds, like Decentraland, Sandbox, Roblox, and others, to explore and make money in, none of them are actually connected.
But, he claims that progress is being made, which is fantastic news. To address the lack of interoperability that currently afflicts the field, organizations including Microsoft, Epic Games, Adobe, Nvidia, the Khronos Group, and others have joined the new Metaverse Standards Forum.
The organization is concentrating on interactive 3D assets and photorealistic rendering, human interface and interaction paradigms (including AR, VR, and XR), user-created content, avatars, identity management, privacy, financial transactions, the Internet of Things and digital twins, and geospatial systems, according to its website. This list not only emphasizes the top priorities in the sector, but it also provides entrepreneurs with a good breadcrumb trail to follow.
Dmitry Volkov advised anyone seeking to develop within the metaverse to think about joining the Metaverse Standards Forum and other business partnerships. “Knowing which direction the current is flowing is always preferable to jumping in. Also, it’s helpful to understand who the key actors are and how your project fits in.
The second rule: Concentrate on a product with a low cost
Without a doubt, Dmitry Volkov stated, visionary leaders are essential for company entrepreneurs. But they must also be practical. It’s fantastic for founders to express their goals for their business and how they hope to become the next Roblox.
Volkov added that it’s critical for entrepreneurs and financiers to keep in mind that there is already a Roblox. And it took the business close to 15 years to succeed.
The key takeaway is that a founder should prioritize finding untapped market opportunities and fast establishing a minimum viable product that the market would embrace before taking on the industry heavyweights.
Scaling and expanding the business are the main priorities once revenue starts flowing in. And this is precisely the location that companies must be in order to draw early-stage VCs. A modest reality is far simpler to sell to a VC than a huge ideal.
The third rule: Selling tools and shovels is preferable to gold mining.
If the California Gold Rush taught businesspeople anything, it’s that there’s very little chance of making it big when you chase gold. In 1848, most prospectors assumed that gold mining would be simple money, so they moved west.
Yet in actuality, a large number suffered severe hardships and went broke. Instead of selling picks and shovels, those same miners could have profited from each prospector that passed through town.
In the context of the metaverse, Dmitry Volkov remarked: “Let’s imagine you’ve developed a technology that can produce customized NPCs (non-player characters) automatically. Would building your own metaverse represent a better short-term business opportunity? Or would licensing the technology as a service to metaverse platforms that require a simple mechanism to populate new worlds be preferable?
The latter was chosen by Inworld AI, and it was a wise decision. A $50 million Series A investment led by some of the biggest names in VC was recently closed, the business stated. They realized that making money by selling picks and shovels was a far better option than going gold panning.
The fourth rule: Watch out for governmental regulations
The metaverse is undoubtedly the next major frontier for business, according to all the correct signals, said Dmitry Volkov. Yet, the metaverse has certain potential drawbacks, much like other major markets. Consumers are being cautioned by experts about issues like addiction, mental health issues, and privacy.
Whistleblower Frances Haugen warned Lawmakers last year that the metaverse will be extremely addicting and steal even more personal data from people. Now everyone is wondering how involved the government will be in regulating the metaverse as a result of this.
The Federal Trade Commission is attempting to stop Facebook’s most recent VR acquisition, which only increases worry. The American government, however, has other targets in mind besides Facebook. Since the advent of the internet, Congress is currently working to approve its first significant attempt to regulate big tech.
Whether you favor Big Tech or not, this is something to watch out for because it might make it more difficult to leave the industry in the future.
The fifth rule: Be wary of philosophical thoughts
There is strong momentum in favor of the metaverse. Also, it has a lot to offer both enterprises and entrepreneurs. But is it beneficial to both society and customers?
Volkov added, “The idea of life in the metaverse raises numerous questions. Will we feel more alone despite being more connected? Will our existence be a lie? Will we build an expanded reality only to merge with enormous, sophisticated, and intelligent machines? The Matrix is often interpreted as a critique of the metaverse.
American philosopher Robert Nozik made a further gloomy argument. Nozik’s hypothetical experience machine allowed users to fulfill desires like being married to their favorite Hollywood star or winning the jackpot. Nozik thought that indulging in this way would not be satisfying and would keep us from understanding a more profound truth. Will this lead to the metaverse’s demise?
Closing remarks
Volkov believed that life in the metaverse could be absolutely real. There will be genuine human interaction in the metaverse, as opposed to Nozik’s experience machine. Visitors can also exercise free will and make informed decisions, unlike in The Matrix. People will be free to enter and exit the virtual world as they see fit.
Users will have a satisfying and good experience if we as entrepreneurs and creators create the metaverse properly, according to Volkov. “And that ought to be our aim. I have faith that the sector can get through its developing pains and turn the metaverse into a secure and rewarding environment for everyone who enters it.
