Magic Leap Executives Quit as Company Struggles with Cashflow
It's no secret that Magic Leap hasn't lived up to expectations, with some stakeholders in the AR/VR industry calling it a "flop". Things continue to look dire with the company, as key executives signalled their intent to quit the firm this week on the heels of it having to put up its entire patent portfolio as collateral to secure a high-risk Series-E funding round.
CFO Scott Henry and Senior VP of creative strategy John Gaeta have both left Magic Leap as it is in the middle of its fifth official round of funding. The company has yet to disclose the value of its Series-E round as it hasn't closed, but a spokesperson has been quoted as saying that it will be a mixture of equity and debt funding. Henry has been with Magic Leap since 2014 and has helped it raise several funding rounds, during which the company has taken in $2.6 billion. Gaeta is a well-known name in the VFX industry, having worked on The Matrix in 1999 pioneering the "bullet time" effect.
"I want to let you know that Scott Henry and I have mutually decided that it is time for us to part ways," Magic Leap CEO Rony Abovitz wrote in an email to staff. "Scott's leadership and his expertise in financial management and raising capital have been an integral part of Magic Leap's growth and success over the past five years."
While the departure of the two executives is a symbolic blow for the company, it follows a pattern of staff departures as the company struggles to build a product that meets the expectations of its initial launch trailer. Through a combination of layoffs and redundancies, the headcount at Magic Leap has been trending downwards:
While we are just learning about Magic Leap's high-risk play of putting its entire patent portfolio up for grabs, no doubt this was internal water-cooler talk for staff for some time and a source of internal strife.
At the same time, the number of job postings at the company has also been on a similar trajectory, showing that the company has been slashing its budgets and preparing for a lean future:
Magic Leap Expectations vs. Reality
Last month when Wccftech interviewed AR/VR incubator Glimpse Group’s CEO Lyron Bentovim he said he believed that Magic Leap was a "flop" and the future of the AR/VR hardware industry was in what was coming out of big established players such as Microsoft (NASDAQ:MSFT) or Google (NASDAQ: GOOG/stock]), whereas startups were better equipped to handle the software side. What was Magic Leap's response? Their hired PR-flak emailed virtually every email account on the Wccftech domain asking us to remove the f-word.
While it would be easy to chalk this up to a second-tier PR company being hired on the cheap, it's actually indicative of a bigger problem at Magic Leap: the massive gulf between expectations and reality. To be sure, Magic Leap is only a flop if you look at it that way -- the company's library of patents and IP is impressive. But, the fact is, despite all the capital injected in the company, the end result is nowhere near what was promised in initial videos and products like the HoloLens 2 have usurped it technically.
"I had high expectations -- especially when they are hyping before you even saw MagicLeap’s product. And we were one of the first to get one," recounts Glimpse Group's Bentovim about when his firm first got a Magic Leap. "Everyone was lining up here at our office’s conference room – everyone wanted to see and use it – but after that everyone just moved on with their life. Everyone was like, ‘Ok, got it, not too exciting’."
"Personally, I prefer to have AR through my phone rather than Magic Leap at this point."
Magic Leap will be better off when it accepts reality and refocuses its product and marketing lineup to reflect this. There certainly is a market for its product: there's a strong demand in the industrial, healthcare and enterprise sector for AR.
There is a pathway to success for Magic Leap which would be a complete pivot and re-focusing of its product to these sectors. It won't be as flashy, but there will be a use case. Gaming like Magic Leap once imagined is not going to happen, but there still will be a way for the company to recover.