• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
  • Our Commercial Technology team has established itself as one of the strongest in the UK. We are ranked in Legal 500, Chambers & Partners and PLC Which Lawyer, with four of our partners recommended.
  • Our team provides practical and commercial advice founded on years of experience and technical know-how to technology and digital media companies that need to be alert to the rules and regulations of competition law.
  • Our Corporate Practice has a reputation for delivering sound legal advice, backed up with extensive industry experience and credentials, to get the best results from technology and digital media transactions.
  • In the fast-changing world of employment law our clients need practical, commercial and cost-effective advice. They get this from our team of employment law professionals.
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  • Our litigation practice advises on all aspects of dispute resolution, with a particular focus on ownership, exploitation and infringement of intellectual property rights and commercial disputes in the technology sector.
  • We have an industry-leading reputation for our outsourcing expertise. Our professionals deliver credible legal advice to providers and acquirers of IT and business process outsourcing (BPO) services.
  • We work alongside companies, many with disruptive technologies, that seek funding, as well as with the venture capital firms, institutional investors and corporate ventures that want to invest in exciting business opportunities.
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  • With a service that is commercial and responsive to our clients’ needs, you will find our tax advice easy to understand, cost-effective and geared towards maximising your tax benefits.
  • At Kemp Little, we advise clients in diverse sectors where technology is fundamental to the ongoing success of their businesses.They include companies that provide technology as a service and businesses where the use of technology is key to their business model, enabling them to bring their product or service to market.
  • We bring our commercial understanding of digital business models, our legal expertise and our reputation for delivering high quality, cost-effective services to this dynamic sector.
  • Acting for market leaders and market changers within the media industry, we combine in-depth knowledge of the structural technology that underpins content delivery and the impact of digitisation on the rights of producers and consumers.
  • We understand the risks facing this sector and work with our clients to conquer those challenges. Testimony to our success is the continued growth in our team of professionals and the clients we serve.
  • We advise at the forefront of the technological intersection between life sciences and healthcare. We advise leading technology and data analytics providers, healthcare institutions as well as manufacturers of medical devices, pharmaceuticals and biotechnological products.
  • For clients operating in the online sector, our teams are structured to meet their commercial, financing, M&A, competition and regulatory, employment and intellectual property legal needs.
  • Our focus on technology makes us especially well positioned to give advice on the legal aspects of digital marketing. We advise on high-profile, multi-channel, cross-border cases and on highly complex campaigns.
  • The mobile and telecoms sector is fast changing and hugely dependent on technology advances. We help mobile and wireless and fixed telecoms clients to tackle the legal challenges that this evolving sector presents.
  • Whether ERP, Linux or Windows; software or infrastructure as a service in the cloud, in a virtualised environment, or as a mobile or service-oriented architecture, we have the experience to resolve legal issues across the spectrum of commercial computer platforms.
  • Our clients trust us to apply our solutions and know-how to help them make the best use of technology in structuring deals, mitigating key risks to their businesses and in achieving their commercial objectives.
  • We have extensive experience of advising customers and suppliers in the retail sector on technology development, licensing and supply projects, and in advising on all aspects of procurement and online operations.
  • Our legal professionals work alongside social media providers and users in relation to the commercial, privacy, data, advertising, intellectual property, employment and corporate issues that arise in this dynamic sector.
  • Our years of working alongside diverse software clients have given us an in-depth understanding of the dynamics of the software marketplace, market practice and alternative negotiating strategies.
  • Working with direct providers of travel services, including aggregators, facilitators and suppliers of transport and technology, our team has developed a unique specialist knowledge of the sector
  • Your life as an entrepreneur is full of daily challenges as you seek to grow your business. One of the key strengths of our firm is that we understand these challenges.
  • Kemp Little is trusted by some of the world’s leading luxury brands and some of the most innovative e-commerce retailers changing the face of the industry.
  • HR Bytes is an exclusive, comprehensive, online service that will provide you with a wide range of practical, insightful and current employment law information. HR Bytes members get priority booking for events, key insight and a range of employment materials for free.
  • FlightDeck is our portal designed especially with start-up and emerging technology businesses in mind to help you get your business up and running in the right way. We provide a free pack of all the things no-one tells you and things they don’t give away to get you started.

The Realities of M&A: Virtual or Augmented?

A Brief History of the Video Game

In the Autumn of 1961, Steve “Slug” Russell, Martin “Shag” Graetz and other members of MIT’s Tech Model Railroad Club were bouncing ideas around.  The club had been formed twenty years earlier, ostensibly for replica train enthusiasts but really for engineers who shared a passion for understanding how things worked and how to master them.  By the 1960s, the members’ interests were still hobbyist, but they had progressed from train circuits to transistors, core memory systems and experimental computers. 

The department had just taken delivery of a new PDP-1 computer, designed and built by Digital Equipment Corporation, a company established by two former MIT graduates.  The PDP-1 was cutting edge design, but through today’s eyes resembles something from The Jetsons – a 1950s guess at what a futuristic machine should look like: the size of a wardrobe, covered in lights and diodes, attached to a typewriter and a hexagonal monitor with a circular screen, the type of thing you’d expect to see a WWII naval commander search for submarines on.  At the time, the students couldn’t get that excited about it either, so Slug and Shag were searching for a way to best demonstrate the PDP-1’s capabilities and potential to the department. 

 “Somebody had built some little pattern-generating programs which made interesting patterns like a kaleidoscope,” said Russell in a 1972 interview with Rolling Stone“Not a very good demonstration.  Here was this display that could do all sorts of good things!  So we started talking about it, figuring what would be interesting displays.  We decided that probably you could make a two-dimensional manoeuvring sort of thing, and decided that naturally the obvious thing to do was spaceships.”

In December 1961, Russell sat down at the PCP-1 and began coding.  In April 1962 – the nickname “Slug” was bestowed upon him for the speed of his programming – he was finished.  The game he had created was Spacewar.  It immediately attracted a cult following within MIT, so much so that the computer laboratory was forced to shut down play except during lunchtime and after studying hours. 

Spacewar was the original video game, and its creators the original hackers.  Spacewar would go on to inspire the arcade culture of the late 1970s, which begat the UK bedroom-coding games boom of the 1980s, which paved the way for the rise of Nintendo, then Sony, then Microsoft, then Apple as powerful gaming-platform owners and players in what is today a multi-billion pound industry across the globe.  Spacewar showed that video games would become a driving force in the progress of computer technology.  Video games made computers approachable.

The same thing is happening right now with virtual reality and augmented reality.

The VR and AR Boom

“Alright, so here we are in front of the, uh, elephants. Uh. The cool thing about these guys is that, is that they have really, really, really long, um, trunks and that’s, that’s cool.  And that’s pretty much all there is to say.”

As a piece of oration, it’s not exactly I Have a Dream, but the above dialogue – and the 19 second video clip which accompanied it – played a fundamental role in bringing the broadcasting industry into the digital age and changing the way in which people consume media.   The clip, named “Me at the Zoo” was shot by Yakov Lapitsky and featured Jawed Karim during a trip to the San Diego zoo.  It was uploaded by Karim on 23 April 2005 to his newly-launched website, YouTube, becoming the first video to be available through the platform.  

Catalysts for pivotal events tend to have inauspicious beginnings.  Virtual reality is no different, only we can also add in a false-start along the way.   

The term “virtual reality” in modern usage was popularised by Jaron Lanier’s VPL Research company in the late 1980s, and captured the public’s imagination with the promise of head-mounted systems and power gloves.  In 1992, Computer Gaming World foresaw “Affordable VR by 1994”.  However, whilst Hollywood was dishing up science-fiction tales of VR worlds jumpstarting mental and physical development (Lawnmower Man) or being used to access cybernetic brain implants (Johnny Mnemonic), reality gave us the nausea-inducing Virtual Boy.  The expectation far exceeded the consumer experience and the technology never saw mainstream adoption.

Fast forward twenty years and the virtual reality and augmented reality technology is finally able to make good on its promise.  Investment in the sector has exploded, and digital M&A firm Digi-Capital recently predicted that the combined AR and VR markets could be worth $150 billion by 2020.  To put that into some kind of perspective, that’s almost double the entire global video game industry or ten times the amount of global music sales.    

Since Facebook acquired Occulus Rift for $2 billion back in 2013, there has been a huge amount of consolidation and investment in the sector.  A recent report by CB Insights shows Q4 2014 funding alone reaching $623 million across twelve different deals.  A significant part of this ($542 million) was the investment by Google and others in Magic Leap, a start-up developing a mysterious AR device built harnessing “special photons” the technology for which has been kept under wraps but has been described by Business Insider UK as “so badass you can’t believe it”.

[As a side note: maybe it’s because I’ve been recently writing about tech bubbles, but as much as I’m giddy with excitement about Magic Leap’s ideas for the future of VR and AR (and I am), on reading that description I couldn’t help but be reminded of Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds.  Specifically, of the infamous company which went public at the height of the South Sea Bubble in 1720 and managed to raise £2,000 (£250,000 in today’s money) on the back of a pitch which advertised itself as “a company for carrying out an undertaking of great advantage, but nobody to know what it is”, and which (unsurprisingly) turned out to be a dud.  Google has over half a billion reasons for believing Magic Leap is a very different proposition.]   

Q1 2015 saw 22 separate deals in the sector close, and the number keeps growing.  Recent deals include the $50 million investment into Jaunt to develop cinematic VR, the $24 million fundraising by Glyph, the VR headset manufacturer, and the $15 million raised by CastAR, the augmented reality gaming start-up.  Although it is video games / media platforms leading the way – Occulus faces competition from HTC and Valve’s tie-up (Vive) as well as Sony’s PlayStation VR (Project Morpheus) - the majority of the recent investment is (according to CB Insights) in enterprise applications.

Future Applications and M&A Activity

Indeed, a significant number of commentators see the largest potential markets for VR and AR being outside the media and entertainment sectors.  In a recent Wired article, Brian Shuster (internet pioneer, now CEO of Utherverse Digital and Ideaflood) reflected on the impact of the Internet on consumer business and expectation and the potential impact of VR and AR:

“The way the Internet and the ‘flat’ World Wide Web set off this period of economic nirvana was, in short, that it changed everything – everything, that is, for some segments of the economy.  All kinds of costs were taken out of entire industries, such as music, travel and shopping… But some industries were largely untouched by the World Wide Web.  Industries like real estate, conventions and classroom education… Virtual Reality holds the promise to be even more transformative than the flat Web was – reaching into every segment of every market and remaking it to be virtually accessible.”

Imagine being a student in a VR/AR-enabled society.  By slipping on a headset, you would be able to attend lectures in real-time, interact with real classmates and be taught by the world’s finest professors, making use of the best online interactive learning tools. 

Similarly, medical applications of VR and AR are starting to emerge.  Companies like EchoPixel, a developer of software which converts flat images of patient anatomy into interactive 3D representations, are exploring virtual reality applications for doctors, medical students and patients.  In fact, any situation where a professional has to examine or control something at a distance could benefit from VR or AR technology.

Where investment leads, M&A follows and we’re already experiencing a marked rise in the number of EdTech and MedTech acquisitions, involving target companies which are developing their own VR and AR solutions.  For now, the games designers are the ones setting the VR and AR agenda, and whilst it is difficult to predict where exactly the market is headed, the proliferation of new patents means that high-valuation consolidation is typically on the horizon.

   

For more information, please contact Andy Moseby, Corporate Partner