Well, not so fast.
First, AR as an industry is expected to be globally massive -- research firm Digi-Capital pegs it at being $120 billion by 2020. And, despite the tech and media world's current fixation with virtual reality (VR) -- which is here and now -- further-out AR is expected to dwarf the overall VR market (which Digi-Capital pegs at a comparatively modest $30 billion). That means that AR ultimately will follow the 80/20 rule -- grabbing 80% of the overall "immersive" market. Why? Because AR's partially (rather than fully) immersive reality gives it much broader consumer and enterprise application. Think of it as the AR market being analogous to the ubiquitous mobile market, whereas the VR market is more analogous to the more limited game platform market. My firm, Manatt Digital Media, previously laid all of this out (and other important factoids) in a compelling VR/AR infographic that lays out the overall market opportunity and key players in it (and is worth checking out here via this link).
Second, with this "mother of all rounds," Magic Leap does much more than leap over competing AR players -- it catapults them. How can other start-ups compete against that? Mega-rounds of capital don't guarantee success, but it certainly doesn't hurt. That kind of money empowers Magic Leap to grab the land in this global AR/immersive land-grab. It also affords long-term experimentation and patience to "get it right."
Third, just think of the pedigree and diversity of Magic Leap's overall syndicate. It includes Chinese e-commerce giant Alibaba (which led this new round), Google, Qualcomm, Warner Brothers, and J.P. Morgan (just to name a few). Those are respectively behemoths in (i) international commerce and social media (among its many "talents"), (ii) search and video (well, all of you know who Google is), (iii) mobile, (iv) content and media, and (v) finance. Now that's a well-rounded round of players that, together, are committed to freezing out any competition and drive overall success across all consumer and enterprise channels with their collective reach and influence.
Again, none of this guarantees product excellent, market acceptance, and overall success at mega-scale.
But, it certainly doesn't hurt.
So, hype or cold hard reason?
Yes, there may be some froth here. But, with an endless string of potential suitors all fighting for some love in this hyper-competitive round and amidst this opportunity, this valuation was cold hard reality.
In other words, the invisible (augmented?) hand in action.