VR training is about to take flight with Talespin

TLDR: Immersive training platforms such as Talespin are poised to grow in the short to medium-term to a number of industry tailwinds (e.g. cheaper headsets, COVID-19, mainstream adoption)

Imagine it’s August 2020, and you’re a new grad out of college. Your first day of training for your new job is today, and you’re pumped. You get up, change out of the sweats and college sports team T-shirt that has been your uniform for the last four years, and into your nicely pressed work clothes. You’re excited to learn and bring your best to this new job, despite COVID.

Your excitement quickly wanes as you’re faced with the reality of a WFH week of training. 8 hours a day on Zoom, watching endless videos and moving into countless breakout sessions. You’re not engaged, you’re barely learning, and you’re definitely not having much fun.

This is a reality that many new grads had to face in the age of COVID. But this did not have to be the case. There is another option- XR (AR+VR) training, which provides in-person-like training in an interactive and fun way.

This article will highlight one of the players in the burgeoning XR training market, Talespin, starting with the market opportunity.

Market

Zooming out a little bit and looking at the market as a whole, the XR (AR/VR/MR) market represents a substantial opportunity, with estimated spend in 2020 exceeding $16B. Projections expect spend to grow at an ~38% CAGR, reaching a total spend of ~$73B in 2024.

Though today the majority of this spend is driven by consumer use-cases (e.g. gaming, videos), industry experts expect that business use cases will continue to expand in the near future. By 2023, industrial usage alone is expected to triple consumer spend (Statista).

On the business side, one of the largest opportunities for XR lies within corporate training. When looking at enterprises that currently adopt VR solutions, over 70% of those surveyed by Superdata primarily utilize VR for training.

Furthermore, the existing corporate training industry represents a ~$220B market opportunity (TrainingIndustry). As this market is currently very fragmented, there is opportunity for software-based solutions to eat up a lion’s share of this market.

Almost everyone in the working world can attest to the need for a more engaging training experience. Anyone who has tried AR/VR can vouch for its unparalled sense of immersion. Clearly, there is a huge opportunity for players to disrupt this large and fairly stagnant industry.

Of the players currently enabling software-based solutions to this complex problem (e.g. Strivr, Motive.io, Scope AR, VR Vision, etc.), one company that has proven its ability to thrive in this growing market is Talespin, a VR training solution provider with a proven track record in the insurance space.

Competitive landscape

Talespin has two buckets of primary competitors: other XR training platforms, and legacy training systems.

Within the first bucket, there are a number of players to look out for. One is Strivr, another XR training platform that has made its mark with brand names such as the New England Patriots, Walmart, and Verizon. The CEO has a strong knowledge of application in sports specifically, and the company positions itself as an all-in-one XR training platform, with experts to create curriculums, deploy XR training, and software to scale among the employee base.

Within the second bucket, legacy training platforms often require lots of human capital, especially within the insurance industry. For example, selling insurance, providing quotes, and accurately assessing damage are all common actions that require in-person training. Still, there are some software providers that provide computer-aided training, such as Ingage. Ingage provides simulations, online courses, and even board games to help train individuals within the industry.

When we look at the cross-section of these two buckets, there are not many players other than Talespin. Given its focus on insurance specifically and proven use-cases, Talespin will likely have a first-mover advantage and continue to scale within its target market, especially given its strong product offering.

Business

Talespin’s primary offering is Runway, which provides a unified XR software to administer, track, analyze, and support XR training software for a company’s workforce. Within the Runway platform, content is split into soft and hard skill use cases, called Propel and CoPilot respectively.

CoPilot is Talespin’s soft-skills training platform, that utilizes AI in order to curate virtual experiences for difficult real-life scenarios such as negotiation, sales, feedback, leadership or even hiring/firing. As of now, use-cases include HR, Sales/Customer Service, and Leadership training modules. Talespin’s most known training simulation is an HR simulation in which the trainee has to fire a 60-year-old employee named Barry due to inappropriate workplace behavior. An LA Times reporter personally attested to the efficacy of this software, stating that he felt he could more effectively “stick to the script” after running the simulation a number of times (LA Times).

On the other hand, Propel focuses on object and process-based knowledge training, simulating job tasks such as residential leaks and repairs.

The simplicity and focus of Talespin’s product offering will allow the company to have clear messaging to its potential customer base. Furthermore, as primarily a B2B software provider, the company can effectively scale compared to more WC intensive companies. This level of focus and specificity is not only seen in Talespin’s product offering, but also its key customer base.

Customers

Talespin has proven its viability with a number of different customers, but is currently focusing on the insurance industry. The company is positioning itself as the first off-the-shelf VR training content library in the insurance industry, and has had a number of successful use-cases proving its effectiveness in the market.

The most well-known use case is Farmers Insurance, who has invested in Talespin’s Series A after seeing success in training insurance adjusters. This bodes well for the company, as landing a successful case study with such a large institution could allow for quick adoption within its key market.

The company’s focus on being the go-to learning platform for the insurance industry is a smart decision for three reasons:

1. The company has a proven use-case and strong support from a large player in the industry with its partnership with Farmer’s Insurance.
2. The insurance industry is historically a very sticky industry and so as Talespin scales, it will likely continue to have a strong customer base to pursue an effective land and expand strategy.
3. Due to potential network effects as the company signs up more companies within the insurance industry, the product will naturally improve both with respect to the insurance industry and even adjacent industries, creating expansion opportunities deeper into insurance and in other markets.

Given the company’s focus, its well-positioned to be the first XR training platform to reach scale within the insurance industry, especially given its strong management team.

Team

Talespin’s executive team brings with it a number of key personnel with a variety of experiences, from immersive media, to B2B software, to other XR training companies. Kyle Jackson, the current CEO, brings strong B2B experience with his experience co-founding Open Drives. Furthermore, Jeroen De Cloe, Talespins Chief Innovation Officer, is the CEO and co-founder of Sticky Studios, a development studio for mobile and XR experiences. Other notable executives bring B2B E-learning sales experiences among other skills.

Talespin has a strong executive team with years of combined experience that will help position it as an industry leader in the burgeoning XR training industry. To improve its strong position in the market, the company can add high-level executives that have experience specifically in the insurance industry. This could send a stronger signal that the company is focusing on being the go-to learning platform within the insurance industry.

Economic Model

Though information is not publicly available on the exact economic model of Talespin, it is likely that Talespin employs a tiered pricing model with additional features available via subscriptions, similar to other SaaS offerings.

Potential Use of Capital

Talespin should use its next fundraise in order to further accelerate growth within the insurance industry. The company can utilize growth capital to do a mixture of the following:

1. Hire someone for the executive board that has deep expertise within insurance training, in order to best lead the company to grow within the space
2. Increase R&D spend in order to quickly scale its product line to be the best-in-class training platform within insurance, before using these learnings to build a more universal platform for other industries (e.g. HR/hiring)
3. Increase S&M spend in order to cement the company’s foothold in insurance, before expanding to other industries

Catalysts

1. Potential for expansion into adjacent industries: As Talespin continues to grow its library of XR training experiences for insurance, there will be certain modules (e.g. firing/hiring, dealing with workplace complaints, difficult customer situations, etc.) that will be easily transferable to other industries or even universal.
2. High-grade, affordable mobile VR: with the release of the Oculus Quest 2 in 2020, a high-quality VR headset starting at $299, Facebook has provided individuals with an affordable way to get into VR. It’s estimated that ~3M units of the Quest 2 have been sold. Compared to the the original Quest, which is estimated to have sold ~800K units (ARinsider), it is clear that mobile chipset powered VR is just getting started.
3. COVID-19 accelerating WFH trends: as in-person workplace trainings were quickly cancelled due to COVID-19, many companies turned to WFH solutions for alternative forms of training. Many companies turned to AR/VR training specifically (SearchCIO). Thought there may have been an over-correction towards WFH solution, in the long-term, it is likely that these alternative solutions will see quicker adoption vs. a world without COVID.

Items for further diligence

There are a number of things that require further diligence such as:

Customers

1. Surveying customers alongside notable competitors (i.e. both XR training and more traditional enterprise training providers) in order to stack rank NPS scores and brand awareness
2. Analyze customer case studies in order to identify key customer pain points
3. Dig deeper into who are the major players in insurance training and whose market share Talespin is taking

Economic Model

1. Conduct further diligence on the specific nature of Talespin’s business model, and if it is, in fact, priced as a subscription
2. Understand company’s unit economics, understanding customers’ ACVs, LTVs, CACs, etc. in order to understand if the company’s business model is scalable
3. Understand customer behaviors, calculating metrics such as Net/Gross Dollar retention in order to evaluate customers behaviors
4. Determine the company’s path to EBITDA profitability in order to estimate if/when the company will reach positive EBITDA
5. Analyze revenue trends- want to see high growth here that can be effectively accelerated by more capital

Note: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. These views do not represent the views of my employer and are my personal opinion.