SAN DIEGO — The big question among tech investors and entrepreneurs today has to do with how quickly a new computing paradigm will arrive. Augmented reality and virtual reality are expected to be huge markets, but when will they become huge markets? The first major VR headsets from HTC and Oculus VR are expected to launch early next year. But will that immediately lead to revenues and opportunities for app makers and startups?

AR and VR are expected to become a $150 billion industry by 2020, according to Digi-Capital. There are more than 200 companies chasing the VR market and raising money to be ready for that market. I moderated a session last week on the prospects for AR and VR at the Intel Capital Global Summit in San Diego, California. We focused on the outlook for investment, the acceleration of the technology, and our predictions about the future.

The panelists included Ron Azuma, a seasoned AR/VR researcher at Intel; Dan Eisenhardt, CEO of the Intel-owned Recon Instruments augmented reality glasses provider; Ray Davis, Seattle studio manager at game developer and game engine maker Epic Games; and Andrew Beall, CEO of enterprise VR company WorldViz. They had expertise that ranged from gaming to enterprise VR, and had some deep experiences going back a long time.

Here’s an edited transcript of our panel.

AR VR panelists (from left) Ron Azuma of Intel, Dan Eisenhardt of Recon Instruments, Ray Davis of Epic Games, and Andrew Beall of World Viz.

Above: AR VR panelists (from left) Ron Azuma of Intel, Dan Eisenhardt of Recon Instruments, Ray Davis of Epic Games, and Andrew Beall of World Viz.

Image Credit: Milena Marinova

GamesBeat: Market researcher Digi-Capital estimates that virtual reality is going to be a $30 billion market by 2020. Augmented reality will be a $120 billion market by that time. Our own VB Profiles estimates that right now there are 234 startups that have raised $3.8 billion to date in virtual reality alone. They’ve created a collective enterprise value of around $13 billion and they employ about 40,000 people. Pretty good for an industry that has no sales yet.

We have a great panel to discuss these things, and now I’ll have them introduce themselves.

Andy Beall: I represent a company called WorldViz. We’re unique in a couple of regards. We’re one of the original VR companies. We’ve been in business since 2002 providing VR services and a universal development platform for professionals and enterprises to get into virtual reality and build content that has productive reality to it. We also have our own tracking system. My firm belief is that one of the most provocative ways to get into VR is to walk through it. We have an illustration up where you can experience our wide-area walking system in 1:1 scale.

My personal involvement with virtual reality dates back a decade prior to 2002. I come from a scientific background, using this technology to study human performance. The roots of my interest are in using this technology to understand the human condition, and that’s then fed into industrial applications.

The VR landscape.

Above: The VR landscape.

Image Credit: VB Profiles

Ray Davis: I’m a game developer and have been for about 15 years now. VR and AR are fantastic. They open a whole new frontier for us as far as attacking the experiences we can build. That’s exciting for us on the creative side. At Epic Games we make the Unreal Engine in addition to building our own games. We’re jumping into VR development so we can make sure we’re building the features and technology that can make VR available to everyone. They can take advantage of this platform and realize their visions.

In my personal career, I was working on the HoloLens project for about three years. I’ve had a good bit of experience with VR, AR, and combinations thereof. I’m a firm believer.

Dan Eisenhardt: I’m the founder and now CEO of Recon Investments. We were acquired by Intel this year. Our story dates back to 2008. The idea came out of swimming. I used to be a competitive swimmer, and I always wanted to have access to data in the pool. We ended up launching our product this month. It’s big with snowboarding as well. These people love technology, and they’ve found a way to do a lot of things on a mountain which a lot of technology usually can’t do for you. There was a real pain point we could solve, and that’s been the foundation of our products. We always look at solving problems. We’re not really in AR or VR. We’ve just been interested in solving a problem, and AR is what we used to deliver the solution.

Ronald Azuma: I work at Intel Labs. I’ve spent my entire career in industrial research. I come from more of a research and academic background than a business background. I first started working on virtual reality back in the late 1980s as a graduate student at UNC-Chapel Hill, but I’m mostly known for augmented reality. I wrote an early paper that defined the field and guided a lot of early work in the area. I have over 25 years of experience in this area. I’ve been able to see the technical and spiritual developments, as well as what still needs to be done.

Bullet Train.

Above: Bullet Train demo from Epic Games.

Image Credit: Epic Games

GamesBeat: What still needs to be done? We’re in a bit of a frenzy that started a couple of years ago. It surprises me how much momentum has grown behind VR this time around. There was a VR meetup that formed in May of 2014, right around when Facebook bought Oculus. It started with 60 people in Silicon Valley, and it became a whole conference unto itself this fall. Developers are going to these things and consuming every piece of information they can get about VR. I wonder how you can add some perspective to this. Are you surprised? Have you seen this before? Is there a good reason for all of this to be happening at such an accelerated pace?

Davis: Anybody who’s ever experienced a compelling VR experience can tell you. “Why is this happening? Because it’s amazing.” This is going to redefine how we interact with technology and computers over the next decade and beyond.

Over the next year, especially, this is going to be a critical year for VR. Oculus, HTC Valve, lots of these manufacturers will be bringing headsets out there. We’re going from a small tool that 100 or 200 developers can access to potentially thousands or tens of thousands. Then you’ll see a massive wave of creativity and expansion of what’s possible on the platform.

I see a lot of similarities to what happened with mobile phones. When Apple introduced us to the iPhone and the App Store — “Hey, look at this touch thing” — it started with fart apps. But eventually it led to some really compelling experiences that didn’t make sense on a PC or laptop or any other form of computing. Where we’re going with VR and AR is just a natural evolution.

Beall: VR has undergone a drastic revolution in the last couple of years, largely because of Oculus, but we’ve had other major players come in. The changes that have been very relevant are about comfort, allowing people to spend much longer in VR at any one time. Ease of use, performance for low latency. People aren’t getting sick. And finally price is the promise we’re all looking to see fulfilled.

Davis: How much do you think consumer VR is going to cost this year? That’s still the question.

Beall: A lot. Compared to five years ago, though — commercial VR cost thousands of dollars. Just out of curiosity, how many people here have had a compelling experience of VR? About half. Compelling to me would be something that’s very provocative, like walking the plank.

Oculus in the Enterprise -- the U.S.S. Enterprise, that is.

Above: Oculus in the Enterprise — the U.S.S. Enterprise, that is.

Image Credit: Oculus VR

Azuma: I was one of the people originally working at UNC who did that. In the very early days it was almost like a religious conversation. Did you feel a presence? Did you feel that you were actually immersed inside this environment? Some people argued that yes, they did. Others didn’t. My partner, Gary Bishop, argued that he’d never been present inside virtual reality.

We had a virtual model of a kitchen, and we had a macro tracking system. We asked people to kind of squat down and look at the height of the tables and cabinets there. Gary walked in and was immersed in this. Another person and I watched this. When we told him it was time to get up, he did this. Of course, there was nothing really there, but at least for a millisecond he was fooled. He was actually present.

The end result, though, is the question of how you actually measure whether somebody’s present in that. Well, you still don’t.

Davis: This is where I have to register a formal complaint. Why are you trying to make people scared?

Azuma: It was to try to get objective measures of presence. This was the core of the experience….

Davis: Research is great and all, but what I worry about is that I’m going to pay a lot of money for this thing that freaks the hell out of me. There are magical things you can do with VR. It can take you anywhere, any time.

Beall: And so from a marketing point of view, if you’re trying to make VR commercially viable, it’s one of the fastest ways for somebody who’s never tried this to walk in off the street, and after about 10 seconds you no longer have any doubt that VR is real.

Davis: Here’s my favorite followup question. How many people here have tried 3D TVs and said, “Yeah, whatever”? 80 percent, I’ll call that. Anybody who’s tried VR doesn’t raise their hand in that same situation. Once you have that experience you get it. This is something far more compelling. It’s amazing.

Our team just put together this demo where we’re playing with the touch controllers from Oculus. Initially in VR you obviously notice presence. Everyone talks about presence and immersiveness. But there’s another level of hand presence, when I have hands. We built this little shooting mechanic thing in, but 90 percent of the time, when people get in there they’re just amazed that they have hands. It’s the most natural thing. In reality I don’t pay much attention to my hands, but if it’s virtual reality, it’s fascinating. It’s a whole new level.

AR VR panelists (from left) Ronald Azuma of Intel, Dan Eisenhardt of Recon Instruments, Ray Davis of Epic Games, and Andrew Beall of World Viz.

Above: AR VR panelists (from left) Ronald Azuma of Intel, Dan Eisenhardt of Recon Instruments, Ray Davis of Epic Games, and Andrew Beall of World Viz.

Image Credit: Milena Marinova

GamesBeat: One good question to follow up on — maybe the audience gets presence, but what are you going to do with it? How long an experience are you going to create? Are you going to make this a 20-hour video game? Or is it like a horror movie, where once you pull the jump scare on them they’re not going to get scared anymore, so you have to fool them with something else? What’s a good example of something you can only do in VR with that sense of presence?

Beall: To me, presence is one of the products of the technology. I liken it to a hallucination. It’s powerful. It’s provocative. It’s overwhelming. It’s convincing. But hallucinations by themselves aren’t necessarily a good thing. They aren’t the goal. It’s the story you tell with that hallucination, the meaning behind it, that adds the value to VR.

Again, we’re not just in the business of scaring people, but imagine safety training. If I can provoke in you a sense of bodily harm, do you think you’re going to pay a little more attention to the golden-rule pamphlet that I’m trying to get you to sign off on? You bet. Same with evaluating a critical design review. If you’re about to build a hospital and make a half-billion-dollar investment in operating rooms, would you want your stakeholders to feel completely committed?

Eisenhardt: The practical applications of presence are amazing, especially in something like architecture. I can make a perfectly to-scale environment on a screen, but I don’t really get a sense of that space and height of the ceilings until I’m there in VR. It’s terrible to try to describe it, but there is a difference between a 2D presentation and being there in that environment.

Azuma: Both AR and VR have potential as new forms of media. People ask what’s the critical aspect of these that’s different from TV shows and video games and other kinds of things, and it’s presence. It’s the belief that I am actually in that apartment. I can move around. I can choose what I do and it reacts to that.