Sharks Out of Their Depth, Fail to Byte VR Gaming

Last Friday, I watched Shark Tank on ABC, and with all the billions of dollars made in video games to date, with all the multinationals and hundreds of thousands of worldwide jobs owed to the video game market, it's heartbreaking to see just how poorly understood we gamers truly are.

Jan Goetgeluk, CEO of Virtuix

A colleague of mine, Jan Goetgeluk (pictured above), is the Founder of Virtuix - makers of the Virtuix Omni, which was on that episode of Shark Tank. The Omni is a low friction treadmill without moving parts.  Treadmill is a poor analogy; it's a physical platform that safely makes your legs and body part of the game without the limitations of space.  You can walk, run, jump and crouch - all without the clumsiness of a small room and being limited by a fixed camera or sensor range.

The hardware works with nearly all modern PC video games, and its only requirement is to have a display connected to the user's face.  The remaining interactivity is all seamlessly converted from the Omni to something the game's existing inputs will understandwith little to no latency.

While the Shark Tank investors danced around the valuation of the company by arguing that their $2 million dollars for 10% stake was way too high, they didn't see the forest through the trees and make a counter offer.  Why?

Here were their core arguments:

There is so much wrong with all these arguments, I just couldn't take them sitting down.  So here we go:

Gamers Are FAT and Lazy

According to ESRB, as much as 67% of adults play video games in US households.  The Shark Tank literally told more than two thirds of the adult population that they are too fat and too lazy to exercise.  In other words, it is completely out of our scope and wherewithal to stand up from our couch...and walk - not even for the fun of it.  It's a wonder that by January, 2012, Nintendo's Wii Balance Board sold over 32 million units, and there are several exercise games readily available on multiple consoles.

However, this in itself is a terrible counterpoint.  Virtuix Omni was never about the willingness of gamers to exercise.  Exercise is the by-product.  The big question is this: are gamers willing to immerse themselves in the game, and do so physically?  The answer is yes.  With just a series of promotional videos (and some community help!), Virtuix managed to raise over $1.1 million from gamers with thousands of presold units.  If you think about it, running and jumping is just an extension of moving about with our Kinect and PlayStation Move controllers - and we all know those products have sold very well.

Our Wives Won't Approve

Barbara Corcoran (pictured aboved) had the most frustrating feedback of them all.  She was so concerned about the gamer's physical appearance and what wives would think, she failed to see the opportunity that parents want.  Instead of fighting our kids to get off their gaming systems, an activity which is becoming a very important part of family life, we are looking at a real opportunity for games to help fight obesity by having our kids voluntarily do what we are otherwise begging them to do.  What warm blooded parent would miss out on this?!?

I really don't know who should feel more insulted by this statement: the gamers, the women...the nearly 50% of women playing video games...you tell me.

"Where the Rift Goes, Virtuix Omni Goes"

The statement that Virtuix Omni is somehow locked down to the Oculus Rift is completely false as well.  Backed with $16 million in private funding plus $2.5 million in Kickstarter funds, Oculus VR has an exciting future ahead.  However, what the Sharks failed to consider is that Sony PlayStation is also developing a competitive HMD, new VR prototypes are popping up in the news on a regular basis, and VR doesn't begin and end with any one company - including Oculus VR.  It was a terrible investment mistake to not see the positive direction this market is taking and not think one or two steps ahead.

It's Too Expensive to Exhibit in a Retail Environment

Setting aside the concern about expensive floor space for a moment, the Virtuix Omni is the perfect exhibit for retailers.  It's visually interesting, people will line up to try it, and it will bring regular foot traffic for gamers to buy complementary products like games and VR add-ons.  The real expense is figuring out how to handle all these potential customers which the store didn't have to deal with before.

The argument that retail space is too limited for something like this is also false and out of date.  We live in an online world now.  Brick and mortar retail game sales are diminishing compared to digital sales.  Even Best Buy is getting killed by "show boating" where people buy products, try them, return them, and buy the real thing online.  This is the world we live in now.  If retail is that important, all they need to do is have a unit on standby for show, and have the order completed and delivered through online sales channels.  Even though I liked the fridge and stove set I saw at the store, I still had to wait for delivery.  This is the same thing.

The Peripheral Market is Too Competitive

There is no disputing that the peripheral business is a challenged one because there are a lot of players out there.  In my opinion, the biggest issue is compatibility.  If your product requires native game support or patches from the game maker, it's a very difficult battle.  The Virtuix Omni is designed for the PC space; the early adopter market.  As I understand it, native Omni support is optional, NOT a requirement.  They are also offering a unique experience compared to the blurring count of headphones, joysticks, and vibrating chairs being offered in the peripheral space.  I just don't see this as being in the same category at all.

The Virtuix Omni is Too Much Money (DURING CHRISTMAS?!?)

At $499 the Virtuix Omni is too much money when combined with other required elements...or is it?  In the PC gaming world, people buy SLI and CrossFire GPU systems, triple monitor setups, surround sound systems...there is no limit, really.  Sell enough, and prices go down like everything else.  Or, maybe the knowledge of having a long term product that will keep your family entertained and exercising for a few hours a week is well worth making an investment you wouldn't have otherwise.  Time will tell.

So What Set Neil Off?!?

It's not like me to step out and defend a single product like this.  I have no vested interests in it, though I'm very proud that Jan got his start by posting his ideas in the MTBS forums and things grew from there - very much like the Oculus Rift and other independents that have since launched.  VR is very much a gamer driven space which is an advantage other new technologies haven't really benefited from.  VR has been a bottom-up market rather than a top-down industry invention.

I would have completely understood if the Sharks treated Jan's valuation as way off base and fair negotiation was impossible.  In all honesty, Jan's appearance may have been very premature because the most important complementary products aren't even on the market yet.  It's just that I honestly felt insulted by the way the Sharks discounted gamers and the lifestyles we lead.  They spent too much time insulting and dismissing the huge gaming market, when they should have been judging what the user actually experiences and what the positive ramifications of this are.

Worst of all was Barbara Corcoran.  We know that nearly 50% of women play video games.  Maybe they aren't the same games, maybe they aren't on the same platform even - but they are a valued part of the market.  I think it was a disservice and a poor investment strategy to assume that women would be against such a purchase.  If anything, with the right game and the right motivation, there isn't anything preventing women from benefitting from this product too.  Why wouldn't they?!?  Honestly, instead of resorting to divorce, if Barbara wasn't interested in the Omni and the Oculus Rift (or Corcoran pronounced "Ocleus Rift"), she could have at least benefited by sending her husband down to the basement for awhile so she could watch Mob Wives in peace.

On that note, maybe Jan's goal was just to get some publicity on national television before he was prepared to negotiate an investment deal for real.  I'm sure fellow gamers got it when they saw the Omni in action.  Yet similar to the way that video game physical activity is a by-product of the Omni, the by-product of Shark Tank was to highlight the clichéd gaming market opinions held by the purported movers and shakers of the investment world.  Outside of seeing Jan's product in action, that episode was a really sad state of affairs when it comes to how gamers are perceived - not just as consumers, but as people as well.

I am hopeful that the arthritic and out of date opinions of Shark Tank don't dissuade profit hunting investors from chasing down exciting opportunities like this which will help build a new and exciting class of game and entertainment development.  It's a very exciting market, and much of it is already 100% gamer backed with hard earned consumer dollars.

Good luck, Jan!  The investments will come.