Ann Arbor is a hub for virtual and augmented reality. But can we keep it that way?

When "Pokémon GO" debuted earlier this year, it made the futuristic concept of augmented reality a daily, addictive part of countless lives.
 
But the game is just the latest advancement in the intertwined worlds of virtual reality (VR) and augmented reality (AR), and the next could originate from the burgeoning AR and VR hub of Ann Arbor.
 
The fields of AR and VR are closely related. AR supplements a user's natural environment with computer-generated input (a la the Pokémon who appear in the real world on a mobile user's screen in "Pokémon GO"), while VR generates an entire simulated environment. AR and VR research isn't new to Ann Arbor; the University of Michigan 3D Lab has been experimenting with a wide variety of 3D technology including AR and VR since its founding in 2002.
 
But 3D Lab director Eric Maslowski says he's seen AR and VR hit two distinct cycles of popularity since he's been in the field. Maslowski says the first cycle of interest in the '90s "died off" quickly, in large part because technology wasn't far enough along to produce what he describes as "killer content." But interest surged again in 2012 with the announcement of the Oculus Rift VR headset, which promised to drastically improve user experience at the fairly accessible price tag of $599.
 
"It started to show people this stuff can be affordable," Maslowski says. "It can be done at a low cost, which was definitely not the case before."
 
Since then, VR and AR have exploded. Companies from Google to Sony have rushed to offer their own takes on the VR headset, and "Pokémon GO"'s wild success this year is proof positive of AR's readiness for prime time. Accordingly, Ann Arbor has seen significant growth in AR and VR development outside U-M's 3D lab, with numerous startups in the field popping up here in recent years.
 
According to Maslowski, that's pretty unusual. Outside of West Coast and East Coast tech hubs, he says VR and AR activity elsewhere in the country is limited mostly to "pockets of enthusiasts."
 
"In terms of really proactive effort or strong intention towards the field ... I think Ann Arbor is probably unique and robust," Maslowski says. "A lot of other AR and VR efforts are taking place in research labs and universities and things like that. It's not outside of the research or academic context, as it is in Ann Arbor."
 
Why Ann Arbor?
The innovators pursuing AR and VR ventures in Ann Arbor say the city is attractive for both the wide range of local talent and the entrepreneurial support available in town. Local startups in the field include Spellbound, which produces an AR mobile app that brings the illustrations in children's books to life with animations and sound. Aveopt recently introduced a product that allows prospective homebuyers to tour properties from the comfort of home via a VR headset. And Autonomous Safety is developing an AR product that allows a drone to survey a disaster area and report back to first responders with analysis of potential survivors, escape routes, and other data. All three companies have gotten established in Ann Arbor within the past two years.
 
Eric Petersen, president of Autonomous Safety, graduated from the University of Michigan in 1995. But he says at that time, even if the technology had been available to create his AR drone concept, he wouldn't have tried to do so in Ann Arbor.
 
"In the olden days there wasn't the encouragement, the entrepreneurship encouragement, from the city or the university," he says. "But now, Ann Arbor SPARK is great and the university Tech Transfer office has been very supportive. It's not impossible to try to start a business."
 
Spellbound president Christina York says her operation has drawn heavily on a variety of resources from the University of Michigan. York found entrepreneurial support in the university's Zell Lurie Institute, and enthusiastic young programmers in Wolverine Soft, the university's video game development student group.
 
"Our No. 1 talent pool is from the University of Michigan," York says. "It was a nice little hub of talent around us."
 
Aveopt president Wayne Baer says there are also advantages in being able to work out his products' bugs in isolation from the scrutiny of the west and east coasts' tech centers.
 
"Historically speaking, there's always been the view that we're flyover country," he says. "But ... we view Ann Arbor as sort of our competitive advantage."
 
Struggles of a burgeoning hub
However, Baer hastens to note that he doesn't wish to paint a "totally rosy picture" of Ann Arbor as a haven for AR and VR businesses, and other locals in the field agree. The city may be the best option outside of the coasts for AR and VR, but it's still got a long way to go as far as retaining businesses in the field.
 
For examples, look no further than Avegant, which developed its Glyph VR headset here before moving to the San Francisco Bay area, and Neurable, whose "brain-computer interface" started here before relocating to Boston. After fundraising for nine months in Ann Arbor, Neurable president and CEO Ramses Alcaide told Crain's Detroit Business in August that his company "went to Boston for one day and got what we wanted." In addition to greater generalized access to capital outside Ann Arbor, some venture capital funds devoted exclusively to VR and AR, like the San Francisco-based Virtual Reality Venture Capital Alliance, have begun to arise.
 
"Are we limiting ourselves by staying in the Midwest and not tapping into that?" Baer asks. "Possibly."
 
York also notes that while there is plenty of talent in town for an AR or VR business to engage with, there are problems with the way Ann Arbor cultivates and retains it. Wolverine Soft has provided a major informal support network for Spellbound, but York worries that U-M has very little formal curriculum oriented towards game programming, an essential component of many VR and AR technologies.
 
"There's not a lot of heavy-hitting programs that contribute," she says. "We find that for the students, this is their hobby ... They use the skills they learn in school, but they often go off and learn the languages that we need on their own."
 
And when they do, they're still not very likely to find a local job in their field. While Ann Arbor's AR and VR scene may stand head and shoulders above the rest of "flyover country," it still pales in comparison to the coasts.
 
"These students come out and either they go to work at a marketing agency or maybe work at the Big Three, creating models for cars," York says. "But most of them who want to have a career that flourishes have to move out of the state."

Pursuing a critical mass
Maslowski notes that AR and VR endeavors in Ann Arbor are still connected more by the industries they serve, or the startup community in general, than by the AR and VR fields themselves. However, he predicts that a local AR and VR business community may begin to arise if the amount of companies in the field continues to grow.
 
"There's a lot to learn from each other that can help us grow products even further," he says.
 
There's a certain critical mass that must be achieved to take Ann Arbor to the next level as a hub for AR and VR. York notes that attracting some more technology-specific funding to the area will certainly help to cement Ann Arbor's AR and VR industry, and keep talent in town – which of course will require more companies to first take a chance on AR and VR here in the first place.
 
But she says the tide may be turning – thanks, ironically enough, to good old "Pokémon GO." York says that while she once spent a considerable amount of time combating blank stares as she tried to explain AR in pitch meetings, the technology and its potential are now increasingly common knowledge.
 
"It's a lot more open now," she says. "People understand that something as silly as a little game based on a card system had massive economic impact."
 
Patrick Dunn is the managing editor of Concentrate and an Ann Arbor-based freelance writer for numerous publications. Follow him on Twitter @patrickdunnhere.
 
All photos by Doug Coombe.
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