Polyarc, creator of the virtual reality game Moss, has raised $9 million as it expands beyond VR to augmented reality games. The funding was led by Hiro Capital, with contributions from Vulcan Ventures and Galaxy Interactive via its Galaxy EOS VC Fund.

The Seattle-based company will continue to make VR games, but it is now adding AR to its core business competency, Polyarc CEO Tam Armstrong said in an interview with GamesBeat.

Moss stars a cute mouse named Quill, who goes off on an adventure through a kingdom. The game uses Epic Games’ Unreal Engine and debuted on the PlayStation 4’s PSVR in February 2018, arriving later on the Oculus Quest, HTC Vive, and Oculus Rift. It’s a beautiful game, and it received numerous accolades, including a 90/100 score on GamesBeat.

VR hasn’t really lived up to its original sales projections (even though it has found a passionate audience), and AR can access a much larger audience on a variety of devices, such as ordinary smartphones. Armstrong said he liked AR because it can offer strong emotional reactions to characters in the same way VR can.

“We’ve been interested in the game design and character interaction implications of physical interaction and the ability to reach into the world and get emotional feedback — the ability for the characters in our games to directly acknowledge the player and convey thoughts and feelings to them,” Armstrong said. “We started doing that in VR because it was the technology that was available to offer those solutions. We started looking at AR because it shares those features.”


Origin story

Polyarc was founded in 2016 by Armstrong, Chris Alderson, and Danny Bulla, who wanted to pursue VR’s potential in the design of a fundamentally new form of games. This is the company’s second round of funding, after it raised $3.5 million in 2016 to fund the development of Moss. Ian Livingstone, a founding partner of Hiro Capital, will join Polyarc’s board.

Livingstone, former head of Eidos and founding partner at Hiro Capital, said in an interview with GamesBeat that this is Hiro Capital’s sixth investment. He said the $117 million fund is named after the lead character in Snow Crash, the 1992 science fiction novel that introduced the term “metaverse.” He and cofounder Luke Alvarez wanted to create a fund that provides follow-on capital to European game companies so they wouldn’t all be owned by foreign entities by the time they sought late-stage capital. But in this case, Hiro Capital is investing in a Seattle company because the firm also decided to invest in the best folks it could find, regardless of where they were, Livingstone said.

“The most exciting thing about the game system is that it is constantly changed by evolving technology,” Livingstone said. “And each time that happens, it is additive to the markets. If you look at music, every new format is substitutional. And the revenues don’t grow. But with games, each new platform brings new revenues. A long time ago, VR was very clunky. But now everyone is talking about the metaverse. Polyarc has demonstrated its expertise in a phenomenal way, and we are absolutely delighted to be helping them get to the next stage.”

“There’s a continuum between the two media,” Armstrong said. “They’re not perfectly overlapped. But there are certain games that fit on multiple platforms, and in other spaces, like mobile and in console. I’m personally very excited about designing against the constraints of these different platforms.”


Expanding to AR

As for the disappointing size of the VR market, Armstrong said his company was always careful to scope its projects to fit the size of the opportunity.

“We didn’t want to go too big too early with VR games,” he said. “We sized our teams based on the reality that we were seeing. The thing that excites me about AR, in particular, is that it is a blended space and that it’s a way for more people to be introduced to our characters.”

Polyarc raised the $9 million after evaluating its needs for a project in development, as well as other projects beyond that, Armstrong said. It was difficult to finish the funding arrangements during the pandemic, but the coronavirus did not otherwise affect the deal, he said.

“We persevered through it, and in the end, we had come up with very reasonable terms beforehand, and we double-checked them the entire time to make sure that as conditions change, we are still talking about a fair deal,” Armstrong said.

Armstrong is bullish about VR going forward because platforms such as the wireless Oculus Quest provide a much better customer experience than was previously possible.

“In terms of VR tech, I feel like we’ve just recently crossed the first really significant threshold for your average consumer,” Armstrong said. “As soon as it became untethered, I think that was really important. And then to have it be tracked inside out (with internal sensors, rather than external cable-connected sensors) was super important. It’s hard to overstate the friction of having cables in your home and having to install hardware on your walls and keep extra things on your desk. That’s real friction that causes real people to look at what their alternatives are for their entertainment.”