We spent 4 weeks exploring the metaverse ecosystem in Europe and here’s what we found: Part 2

In case you missed it, here’s Part 1 with our first 5 findings about the metaverse ecosystem. Now let’s continue!

6. Where’s the money going?

In the first 5 months of 2022, over $120 billion was invested in metaverse technologies and infrastructure, but where did that go exactly? VC investment trends indicate that there is a high preference for software as opposed to hardware due to the latter’s lengthy and capital-intensive development process, apart from Deep Tech-specific VCs and hardware companies themselves.

In addition, there is a significant preference for infrastructure and middleware startups. As one VC we met said, “when there is a gold rush, invest in picks and shovels”. While there is indeed a lot of hype and uncertainty around the metaverse, one method to manage your risk is to invest in those laying the tracks as opposed to building bedazzled trains.

7. What are the key concerns?

The key concerns around the metaverse are predominantly ethical – including privacy, social and economic inequalities, accessibility, and identity – which doesn’t necessarily surprise us as they reflect real world societal issues we already have. There is no magic wand or right answer to any of them; it is simply the case that responsible pioneers of this nascent industry must bear them in mind while building it. As one founder said, “Few VCs are going to ask you “ok, but what are your regulations or where are your moderators for this?”, if there is no risk of liability due to the lack of laws. It is your responsibility as a decent human being to anticipate this before you are legally required.” The key concern then is human nature before regulation comes in, as it typically has been.

With regards to people spending more and more time in the metaverse to the point that it negatively affects or even engulfs their ‘real’ life (à la Second Life divorces of 2008), we shared that concern with one founder who changed our perspective: “you already spend a significant amount of time on your phone each day, let alone your computer: why not just make that time spent richer, more valuable?“

8. The skills and diversity gaps will only be exacerbated.

Various profiles will be required to pave the way for metaverse adoption: more business professionals who understand the role it can play in a context that adds value, and more technical professionals from game developers to designers specialized in 3D UI/UX. Quite naturally, a good deal of experienced workers will come from the gaming industry, where the most obvious use case of metaverse technologies resides. The issue is that the gaming industry arguably has a pressing diversity problem, with women making up a paltry 24% of the workforce on average, cases of harassment and toxic office cultures famously making headlines, and only 40% of employees from underrepresented ethnic groups.

We similarly noticed on our trek how hard it was to not only meet diverse founders, but even see diverse employees, and how this impacted the content and experiences being created. Of course, when you are building something which has never been done before, beggars can’t be choosers when finding the talent available to build it (and fast). In the long-term though, industry players would be wise to proactively hire and train diverse professionals to protect against echo chambers and create dynamic offerings for their clients and the wider public. Why? Well, it’s not only the right and ethical thing to do, but also with women tipped to own 75% of discretionary spending by 2028 and Gen Z entering adulthood as the most racially and ethnically diverse generation, it’s just good business sense.

9. What could it mean for the climate?

More often than not, those we spoke to had positive hopes for the metaverse’s impact on the environment. Could the advanced capabilities of VR, for example, develop virtual tourism and reduce the carbon footprint of its counterpart? Could we spread awareness through empathy via more realistic experiences of climate challenges experienced by those around the world? With Teams and Zoom already drastically cutting down many businesses’ travel, could the metaverse take this even further?

On the other hand, the development of metaverse technologies relies heavily on cloud and edge data stores + computing which would generate increasing amounts of greenhouse gas emissions. Additionally, new hardware requirements could result in increased e-waste generation. While the implications remain to be seen, it is heartening to discover that climate impact is at the forefront of many in the field’s minds.

10. The role of government in all of this.

Regulation
Anyone who watched Google CEO Sundar Pichai being quizzed by the American Congress in 2018 could agree that government and legislators have not done the best job of keeping pace with technological developments. This in turn has made regulation at times to be either patchy or akin to shutting the stable door after the horse is long gone.

The metaverse has the potential to literally become another world, and without regulation or agreed upon standards, it truly is the Wild West. We are barely into its advent and yet there are already reports of sexual assaults on Meta’s own platform. Who do we trust to police the metaverse, which is bound by no physical geography? How will people be held accountable for harm they commit? How will users be identifiable and traceable, or will that not be the case? Unfortunately, on this front, we have been left with more questions and concerns than answers.

Equality of Access and Opportunity
For all three of us, it was our first time in Stockholm, and we were immediately impressed by the wealth of diverse startups and maturity of its tech environment. When we mentioned it to one of the founders there, they enlightened us as to why that was the case; in the late-1990s, Sweden intensely pursued a policy to put a computer in every home (especially those of lower income households), and concurrently made early investments in internet connectivity. This sowed the seeds – and developed rich soil – for startups, birthing and incubating the likes of Spotify, Skype and Klarna, despite having some of the highest tax rates in the world. As we stand at the threshold of metaverse and Web3.0 technologies, we can’t help but wonder if this is another opportunity for governments to act for the sake of equality, opportunity, and investment in their future economies.

This doesn’t necessarily need to take the form of ownership programs: the Oodi Library in Helsinki, for example, is a technical library decked out not only with books and working spaces, but also 3D printers and VR headsets that are free for the public to use. South Korea, meanwhile, has recently pledged $177.1 million to metaverse projects as part of its Digital New Deal, a program for investing in new technologies in the country’s economy. The investment intends to kickstart the country’s metaverse industry by supporting companies and creating jobs, while Seoul is building a $2.8 million metaverse platform to allow citizens to access public services virtually.

With so much stood to be gained (and, if we’re not careful, lost) from opportunities in and around the metaverse, there’s a strong argument for governments to be proactive in preparing their citizens and infrastructure, and future-proofing their own economies.

Closing Notes

To say the very least, our trek was eye-opening. There are a plethora of talented, passionate people working to bring the best of the metaverse to every industry and for every cause, from democratizing the quality of medical care available worldwide to enabling immigrants to access work they would excel at. The beauty of exploring an industry whilst it’s being built is that anything is possible, and imaginations run wild with all the directions it could go in. And, what’s more, our imaginations potentially can’t even fathom where this could take us. When Bill Gates explained “this internet thing” to David Letterman in 1995, who knows if he could have imagined Instagram or Netflix. As we get further along the line, the path and possibilities will become clearer and more concrete, though one thing is already for sure: it’s upon us to be responsible, ethical and conscientious of where it goes, and for who, to bring more value than harm to the way we live.

A sincere✨thank you✨to all the wonderful people we met during our trek and took the time to educate us. And thank you to INSEAD, digital@INSEAD, Sandra El Dakkak, Pascale Balze, and the Rudolf and Valeria Maag Centre for Entrepreneurship for supporting us throughout, and to our mentors Rami Ajami and Peter Zemsky.

Thank you to our interviewees!