By Jack Nicas 

Magic Leap Inc. is an oddity in the tech industry, even by Silicon Valley's heady standards.

Located adjacent to a trailer park in South Florida, Magic Leap has amassed nearly $1.4 billion in funding, more than 500 employees and a dozen big-name investors.

Yet the secretive startup still lacks one major detail: a product. After nearly four years, Magic Leap is still developing a head-mounted gadget that projects images onto users' eyes so the digital world appears to interact with real life.

On Tuesday, the startup confirmed another big step toward bringing its so-called mixed-reality device to consumers, announcing it raised $794 million in new funding from some top firms in tech, finance and entertainment. Chinese Internet giant Alibaba Group Holding Ltd. led the funding round, which Magic Leap says values the Dania Beach, Fla., company at $4.5 billion.

Alphabet Inc.'s Google and Qualcomm Inc., which backed Magic Leap's $542 million round in October 2014, reinvested. They were joined by J.P. Morgan Chase & Co., Fidelity Management and Research Co., Morgan Stanley, Wellington Management Co., funds advised by T. Rowe Price Associates Inc. and Time Warner Inc. unit Warner Bros.

Magic Leap has yet to publicly show the device it has been working on for nearly four years, a head-mounted gadget that projects images onto users' eyes so the digital world appears to interact with real life. Magic Leap is one of a number of startups preparing for a future beyond smartphones and laptops, where people are immersed in digital worlds. The company is creating goggles that can project 3-D images onto the viewer's retina so it appears that, say, a furry monster is walking around in real life.

Presumably, in the future, viewers could have conversations with family members across the country as if they were in the same living room.

This blending of virtual and real worlds is called mixed, or augmented, reality, different from the virtual-reality technology developed by Facebook Inc.'s Oculus unit and others that place people entirely into a digital space.

"Your brain is the video display; there's nothing in the way anymore," said Magic Leap founder and Chief Executive Rony Abovitz, a 45-year-old biomedical engineer who sold his last startup, a robotic surgery firm, for $1.7 billion.

Virtual-reality headsets from Oculus, Sony Corp. and HTC Corp. are hitting stores this year, in part because the technology is easier to achieve than mixed reality, which must have sophisticated sensors and software to constantly interpret the real-life surroundings. That is why Magic Leap needs so much capital--the company says it is virtually creating a new technology from scratch.

Magic Leap said it has developed new computer chips that leverage silicon photonics, a field of semiconductors that essentially involves miniaturizing fiber-optic technology onto a chip. These components can send data far faster than conventional silicon chips. "We need to shrink components that have never been shrunk to this size before," said Brian Wallace, Magic Leap's marketing chief.

Even so, Mr. Abovitz claims Magic Leap's product isn't years away. "We are actively in product development, manufacturing operations and supply chain lines," he said, adding the company will "be in the market relatively soon."

Magic Leap faces other challenges. Virtual-reality headsets harness the energy and computing power of connected PCs, game consoles or smartphones. Mr. Abovitz said Magic Leap's devices will be "beautiful, light,...mobile and probably much smaller than most people would expect."

Yet they will also likely need their own high-grade computer processors and battery life to last a day.

Consumers generally use virtual reality in isolated settings, such as at home. Magic Leap wants users to wear its devices in public. The failure of Google Glass--an eyeglasses-like device that placed a small screen above users' right eyes--suggests that consumers are loath to wear computers on their face all day.

Google has revived its Glass project for business applications, and Microsoft Corp. plans to distribute its $3,000 HoloLens mixed-reality headset to developers this quarter. Neither company has said it's developing a consumer device.

Mr. Abovitz declined to discuss price but said Magic Leap is building a consumer product that will also have business potential. Magic Leap's website shows an image of surgeons looking at a three-dimensional heart.

Mr. Abovitz said the device could theoretically translate signs and menus automatically when users travel abroad, or even give tips as users study a game of chess. Alibaba Executive Vice Chairman Joe Tsai is joining Magic Leap's board, which includes Mr. Abovitz, Google CEO Sundar Pichai, and Richard Taylor, co-founder of Weta Workshop, the New Zealand special-effects studio behind the "Lord of the Rings" movies. Alibaba said that it invests "in forward-thinking, innovative companies" that it "can both provide support to and learn from." The company declined further comment.

Alibaba was Magic Leap's "first-choice strategic partner to enter China, " Mr. Abovitz said. Magic Leap is building "a whole new computing platform, and they are the largest Internet player in certain segments of China," he said. "I think those two things can come together in a very complementary way."

Write to Jack Nicas at jack.nicas@wsj.com

 

(END) Dow Jones Newswires

February 02, 2016 00:15 ET (05:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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