Google Leads $542 Million Deal in Secretive Startup Magic Leap

21 Oct Google Leads $542 Million Deal in Secretive Startup Magic Leap

Google Inc.GOOGL +0.28% is hedging its bets as it prepares for a future when our laptops and smartphones will be antiquated technology.

In one of the largest venture-capital deals on record, the tech giant and a slew of well-heeled firms are investing $542 million in Magic Leap Inc., a secretive visual-display company near Miami. The startup is developing its own eyeglasses-like device, different from Google Glass, designed to project computer-generated images over a real-life setting.

Sundar Pichai, the head of Google’s Android, Chrome and Apps businesses, will join Magic Leap’s board in a rare move, while Don Harrison, the company’s head of corporate development, will become a board observer.

The investment group also includes chipmaker Qualcomm Inc.QCOM +0.64%, film-finance company Legendary Entertainment Inc., private-equity firm KKR KKR -0.55% & Co., Paul Allen’s investment firm Vulcan Inc., and venture-capital firms Kleiner Perkins Caufield & Byers, Andreessen Horowitz, and Obvious Ventures.

The deal values the company at just under $2 billion, two people with knowledge of the matter said. Earlier this year, Google’s rival, Facebook Inc.FB -0.91%, paid $2 billion to buy Oculus Rift, a maker of a virtual-reality headset. The two companies are using their sizable cash piles to bet on new methods of communication to ensure their place on all kinds of devices.

Little is known about Google’s latest bet.

Magic Leap is led by Chief Executive Rony Abovitz, who sold a robotics medical-device business to Stryker for $1.65 billion. Magic Leap

Mr. Abovitz, who has a degree in biomedical engineering from the University of Miami, has revealed little about the four-year-old startup in Dania Beach, Fla. An opening animation on Magic Leap’s website shows a tiny, life-like elephant bouncing on two hands, followed by a trademarked slogan, “It’s time to bring magic back into the world.”

In an interview with The Wall Street Journal, Mr. Abovitz said he sees Magic Leap as a new interface that could replace the PC monitors and smartphone screens that define the modern era of computing.

Its first product in development is a mobile and wearable device for the eyes, with the hardware and software designed by Magic Leap. At its core, Magic Leap’s visual technology is able to project accurate images onto the eyes, making it possible to see virtual 3-D objects as if they were part of the real world, Mr. Abovitz said. In other words, it tricks the mind into believing that virtual objects, whether fantastical monsters or jumping elephants, are actually part of the physical space.

Most virtual-reality goggles use stereoscopic imaging, involving two distinct images which are shown separately to the eyes and together create a sense of depth. This format has been known to trigger nausea, especially when there is a lag between the head’s movement and the computer chip’s rendering of the virtual space. Mr. Abovitz claims his technology doesn’t cause nausea.

He says Magic Leap’s technology could have far-reaching implications: a new format for movies and video games, a new paradigm for patient and doctor interactions, or as a communications tool made to feel like you’re in the same room with a friend who is thousands of miles away. Mr. Abovitz plans to eventually add other senses to the experience, such as touch.

The company, which now has more than 100 employees, will use the capital to ramp up hiring and prepare its product for manufacturing.

Google itself is writing the check, rather than its investment arms Google Capital or Google Ventures, suggesting the deal is strategic to the parent company. The decision by Mr. Pichai to join Magic Leap’s board is a sign of how important the investment is to Google.

“We are looking forward to Magic Leap’s next stage of growth, and to seeing how they will shape the future of visual computing,” Mr. Pichai said in a statement. Mr. Pichai, who joined Google in 2004, rarely goes on the boards of other companies. He was as a director of Jive Software Inc. and a travel startup called Ruba.

Magic Leap faces a crowded field as the battle for the future screen heats up. Besides Facebook’s acquisition of Oculus Rift, Sony recently introduced Morpheus, its own virtual reality headset for its game console. At stake, experts say, isn’t just a new entertainment toy but a chance to define how people will interact with computers.

Google has long been tinkering on this theme. When Google launched its search engine in the late 1990s, users typed in queries with keyboards. In more recent years, the company developed voice-recognition technology that lets people ask questions verbally into their smartphones and get answers from the search engine.

Google has also developed wearable technology, such as its Google Glass eyewear and a smart contact lens, which let people access information in other ways. Meanwhile, the company’s Project Tango has built a smartphone and tablet that use sensors, cameras and software to build three-dimensional images of people’s surroundings.

Mr. Abovitz declined to comment on a potential partnership between Magic Leap and future iterations of Google Glass.

Though few have experienced Magic Leap’s technology first hand, it has raised the attention of Hollywood.

Richard Taylor, the co-founder of Weta Workshop, the company behind the special effects of “The Lord of the Rings” film trilogy, sits on the board. Meanwhile, Thomas Tull, the head of Legendary Pictures, made an investment in this round personally and through his company. Mr. Tull says Legendary plans to work with Magic Leap to make the technology available to its creative partners. He says the tech has to be seen to be fully understood.

“It was incredibly natural and almost jarring — you’re in the room, and there’s a dragon flying around, it’s jaw-dropping and I couldn’t get the smile off of my face,” Mr. Tull said.