Osterhout Design Group

» see osterhoutgroup.com as it lived, on the wayback machine

~ the eulogy ~

Ralph Osterhout had been making things you wear on your head since before most of the augmented reality industry was born. He is credited with the PVS-7, the night vision goggle that a generation of American soldiers looked through, and with building gadgets that ended up in James Bond films. He founded Osterhout Design Group in San Francisco in 1999 and spent fifteen years as a defense and industrial supplier, which is to say fifteen years of selling small numbers of expensive head-worn optics to customers who did not blink at the price.

In 2014 Microsoft bought roughly eighty of his wearable patents for a figure reported at around $150 million. Those patents went into HoloLens. It was a complete validation of twenty years of work, and it was also the moment the company stopped being a quiet supplier, because the obvious next move after proving your patents are worth that much is to go and build the product yourself.

The money arrived at the end of 2016: a $58 million Series A led by 21st Century Fox, with Shenzhen O-Film Tech and Vanfund Urban Investment also in, valuing the company at $258 million. ODG took that to CES in January 2017 and put up a two-story booth. The R-8 was to be under $1,000 and the R-9 was $1,800, both running Qualcomm's Snapdragon 835 before anything else on earth did, and the trade press spent that week calling them the best thing at the show.

Neither one reached a consumer. By the autumn of 2017 the funding was gone and by early 2018 half the staff had followed it. The ones who stayed went onto half pay, then onto no pay at all. The company borrowed $8 million from a Chinese firm to settle what it owed its own employees. On 15 January 2019 the liquidation specialist Hilco Streambank ran a sale of 107 issued patents and 83 pending applications, and that date is where the company stops.

~ the dossier ~

~ the price history ~

Read the numbers in order and the shape of it is unmistakable. Microsoft paid about $150 million for a slice of the patent portfolio in 2014. Investors valued the whole company at $258 million at the end of 2016. In late 2018 Magic Leap signed a letter of intent to buy it for $35 million, and then withdrew as the staff count fell, with one source telling TechCrunch that the thinking had become, in effect, that they would buy the intellectual property and leave the company behind.

So a subset of the patents was worth four times in 2014 what the entire business was offered in 2018. Facebook and Lenovo had looked as well, and both of them passed. The asset that had made ODG credible was the only one anybody still wanted, and at the auction it was the only one left to sell.

~ what went wrong at the booth ~

ODG had about a hundred people at its 2017 peak, which is a reasonable headcount for a company selling a few thousand industrial headsets a year and nowhere near enough for a consumer hardware launch. The R-9 was promised to developers in the second quarter of 2017 and to consumers in the third. The R-8 was to follow in the fourth quarter. Hitting those dates meant tooling and certification across several markets, on top of a retail and support operation that a defense supplier does not keep lying around.

The optics were good and the company had been right about the category earlier than almost anyone. What it lacked was the one thing Microsoft or Facebook could each absorb without noticing, which is the cost of being early for several years running.

~ the auction ~

Hilco Streambank is who you call when there is nothing left to run. The catalog listed the issued patents and the applications at various stages, down to the trademarks and what the notice called tangible collateral supporting the business. Ralph Osterhout did not respond when TechCrunch asked him about any of it.

osterhoutgroup.com resolves today and returns a perfectly healthy 200, which is the trap this site keeps running into. What it serves is an Indonesian site about something else entirely, sitting on an expired domain that somebody picked up cheap. A status code is not a pulse.

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