82% of AR/VR Startups Fail: The Shocking Truth Behind XR’s Struggles

Why AR/VR Startups Are Failing at Alarming Rates

The metaverse was supposed to usher in a new digital era.

AR/VR startups were at the forefront, promising immersive experiences that would change the way we live, work, and play.

Investors bought into the dream, pouring billions of dollars into these ventures. The hype was relentless, and the potential seemed limitless.

But here’s the harsh reality: 82% of AR/VR startups fail.

That’s not just a statistic—it’s a wake-up call.

What’s going wrong?

From clunky usability to poor market foresight, the reasons are numerous—and frustratingly avoidable.

This article dives deep into the pitfalls dragging AR/VR startups down and offers a practical roadmap for future ventures to navigate the challenges and succeed.

If you’re ready to learn from the mistakes of the past and chart a smarter path forward, keep reading.

The High Hopes for AR/VR Ventures

AR/VR technology has always sparked our imagination.

From sci-fi visions of virtual worlds to the global phenomenon of Pokémon Go in 2016, it’s easy to see why this space feels so full of promise.

Remember Pokémon Go? It turned millions of people into real-world adventurers, seamlessly blending digital and physical worlds. It was proof that AR could be both engaging and wildly successful.

Naturally, investors took notice.

Billions of dollars flooded into AR/VR startups, with many predicting the metaverse would revolutionize industries like:

• Gaming and entertainment: Fully immersive experiences that redefine play.
• Healthcare: Virtual training environments for surgeons and therapists.
• Education: Interactive classrooms that bring lessons to life.

It felt like a revolution was just around the corner.

But then came the challenges.

Scaling AR/VR ventures turned out to be far tougher than expected.

Some of the biggest hurdles included:

• Hardware limitations: Most users didn’t own the headsets needed to access these experiences.
• Usability problems: Clunky interfaces and motion sickness drove people away.
• Lack of clear value: Too many startups focused on tech for tech’s sake rather than solving real-world problems.

These issues have slowed AR/VR’s journey toward mass adoption.

But they also offer a road map for improvement.

By addressing these challenges head-on, today’s startups have a chance to break through where others have faltered.

Let’s explore these hurdles—and how they can be overcome.

Key Reasons Why AR/VR Startups Fail

1. Scalability Challenges

Scaling is a mountain that many AR/VR startups fail to climb.

The biggest obstacle? Limited access to hardware like AR/VR headsets.

Most consumers don’t own devices like the Meta Quest 3 or HoloLens. And those who do are often tech enthusiasts, not your everyday user.

In 2022, global AR/VR headset shipments reached just over 8 million units. Compare that to the 1.2 billion smartphones sold, and it’s clear these devices haven’t gone mainstream yet.

Now imagine launching a VR shopping mall app. It’s sleek and immersive but works only with Google Cardboard.

Problem? Google Cardboard was outdated before it hit shelves, meaning your audience is almost nonexistent.

If you’re building for AR/VR, ask yourself:

• Can your audience afford the required hardware?
• Are they comfortable using it?

Until AR/VR tech is as accessible as smartphones, scalability will remain a major hurdle.

2. Poor Usability

Let’s be honest—no one sticks with a product that’s clunky or hard to use.

Yet, many AR/VR startups fall into the trap of prioritizing “wow-factor” over user experience.

Take AR home decor apps, for example.

In theory, they’re a game-changer. You scan your room, and voilà! That new couch appears in 3D right in your living space.

Sounds amazing, right?

But many apps crash, lag, or make it nearly impossible to place items accurately. One app with over 100,000 downloads ended up with a 2-star rating for these exact reasons.

It’s not just about bugs, though.

Usability also means ensuring comfort. Apps that cause cybersickness or visual fatigue won’t win fans.

Building AR/VR products? Test relentlessly. A seamless user experience isn’t optional—it’s critical.

3. Overreliance on Motion-Based Interactions

Motion-based controls are fun… until they aren’t.

Many AR/VR startups overuse them, forgetting that novelty wears off quickly if it’s not practical.

Imagine managing your to-do list by waving your arms around. Fun for five minutes, exhausting after ten.

That’s exactly what happened with a real AR productivity app. Users complained about arm strain and cognitive overload.

One reviewer summed it up perfectly: “Great for a workout, terrible for actual productivity.”

Motion controls work when they add real value—like in gaming or training. But as a replacement for simpler methods? It’s often more trouble than it’s worth.

4. Solving the Wrong Problems

Here’s a hard truth: Just because you can do something in AR/VR doesn’t mean you should.

Too many startups build cool tech without addressing real user needs.

Take one VR social network, for example.

Its pitch? “Revolutionize communication.”

Its problem? It didn’t offer anything Zoom or Skype couldn’t do better.

Users were left wondering, “Why would I bother with this?”

Successful startups don’t just make tech—they solve problems. And if your solution doesn’t make life easier, faster, or better, people won’t stick around.

5. Focusing on Trends Instead of Longevity

Trends are tempting. They promise quick wins and lots of buzz.

But they’re also fleeting.

When Pokémon Go took the world by storm in 2016, dozens of AR startups tried to ride its coattails.

The result? Many of these ventures fizzled out as soon as the hype died down.

Why? Because they didn’t plan for the long haul.

Trends come and go, but sustainable businesses solve timeless problems. If you want to succeed in AR/VR, think about the value you’ll provide after the trend fades.

AR/VR startups fail when they prioritize flash over substance.

The winners in this space are the ones that focus on real user needs, usability, and long-term scalability.

A New Solution: The Metaverse Innovation Canvas (MIC)

Let’s be real—AR/VR startups have a tough road ahead. Poor usability, scalability hurdles, and vague value propositions are just the tip of the iceberg.

That’s where the Metaverse Innovation Canvas (MIC) comes in.

This specialized tool was designed to help AR/VR startups navigate these challenges. Unlike generic frameworks like the Lean Canvas, the MIC focuses on the unique demands of XR, giving founders a roadmap to create meaningful and scalable solutions.

What Makes the MIC Stand Out?

The MIC isn’t about throwing spaghetti at the wall and hoping something sticks. It’s built to address the specific pain points that AR/VR startups face. Here’s what sets it apart:

1. Problem-Centered Design

Great products solve real problems.

The MIC guides founders to dig deep into their users’ pain points. Instead of vague goals like “build an AR app,” it prompts you to ask:

• What problem am I solving?
• Who needs this solution?
• Why does this matter?

For example, imagine an AR app for interior design. Instead of saying, “We let users place furniture in a room,” you might say, “We help people visualize how furniture fits their space, so they feel confident making big purchases.”

It’s a subtle shift, but one that ensures you’re solving a real problem.

2. XR-Specific Value Propositions

AR/VR isn’t just another tech platform—it’s a whole new way of interacting with the world.

The MIC forces you to define what makes your solution unique to XR. Why would someone choose your app over a non-immersive alternative?

Think about how AR apps like IKEA Place let users see furniture in their homes with life-size accuracy. That’s value you can’t get from a website or catalog.

3. Usability at Its Core

Let’s talk usability.

Clunky interactions or confusing interfaces can kill even the coolest AR/VR idea. That’s why the MIC has blocks focused on:

• Motion-based interactions: Are they intuitive or just tiring?
• User comfort: Is your app designed for prolonged use without causing fatigue?
• Interface simplicity: Can users figure it out without a manual?

By focusing on these details early, the MIC helps you create something users actually enjoy.

4. Scalability Planning

Here’s the thing: the AR/VR market isn’t static. It’s evolving fast.

The MIC makes scalability part of your plan from the start, prompting questions like:

• What happens when hardware improves?
• How can this grow with user needs?
• What market trends could disrupt us?

It’s about building a solution that doesn’t just work today—it thrives tomorrow.

Why You Need the MIC

The MIC isn’t just a fancy framework. It’s a survival guide for AR/VR startups.

It keeps you focused on solving real problems. It pushes you to create value that’s unique to XR. And it ensures your product is both user-friendly and future-ready.

If you’re serious about making waves in the AR/VR space, the MIC isn’t optional—it’s your blueprint for success.

Lessons for Aspiring AR/VR Startups

Succeeding in the AR/VR world isn’t about flashy tech or chasing trends—it’s about creating meaningful, user-focused solutions that stand the test of time.

Here are four lessons every aspiring AR/VR startup should take to heart:

1. Understand the User’s Needs

The best startups don’t just build what’s possible—they solve real problems.

Ask yourself, “Why would someone use this?” If you can’t answer that clearly, it’s time to rethink your idea.

For example, AR navigation apps like Google Live View thrive because they address a universal need: finding your way in unfamiliar places. The AR element enhances the experience, but the core problem—getting from A to B—remains the focus.

Tip: Validate your ideas early. Talk to potential users, test prototypes, and make sure there’s genuine demand for your solution. Guesswork is a luxury no startup can afford.

2. Start Small, Think Big

In the AR/VR world, starting small can be your secret weapon.

Target a niche market where you can deliver a laser-focused solution. Pokémon Go, for instance, didn’t just drop into the general gaming market—it tapped into the pre-existing Pokémon fanbase. By serving a dedicated audience first, it gained traction and scaled from there.

Tip: Find a specific problem or audience to start with. Nail your solution, then iterate and expand. You don’t need to be everything for everyone on day one.

3. Prioritize Usability

Let’s be honest: even the coolest AR/VR tech will flop if it’s clunky or frustrating to use.

Usability isn’t just a nice-to-have—it’s the foundation of user retention. Consider ergonomic challenges, interaction fatigue, and accessibility from the start.

Think about VR fitness apps like Supernatural. Their success isn’t just about the workouts—it’s about creating an intuitive, immersive experience that feels effortless to use, even during intense activity.

Tip: Conduct rigorous usability testing. Make sure your product is intuitive, comfortable, and designed for long-term use. If it’s not, your users will move on.

4. Plan for the Future

The AR/VR space evolves faster than most industries, so long-term planning isn’t optional.

Hardware will improve. User expectations will shift. Market dynamics will change. You need to be ready.

Look at Oculus Quest’s journey. From its early days to now, it’s constantly adapted to better hardware, evolving user needs, and emerging markets. That adaptability is key to its staying power.

Tip: Build scalability and adaptability into your business plan. Ask yourself: How will this grow with the market? How will we stay relevant as technology advances?

The Path Forward: Turning Challenges Into Wins

Yes, AR/VR startups face a daunting failure rate.

But here’s the good news: the future is still incredibly bright.

The industry is young, brimming with potential, and filled with opportunities for those ready to seize them. Think of it as an open frontier—there are risks, but the rewards for those who navigate wisely can be monumental.

Learn From the Past

Every failed AR/VR venture is a lesson waiting to be learned.

What worked? What didn’t? Why did it fail? These are questions every founder should ask before launching their own solution.

Avoiding mistakes isn’t enough—you need to use past failures as a roadmap to make smarter decisions. Why stumble when others have already marked the potholes?

Leverage the Right Tools

This is where frameworks like the Metaverse Innovation Canvas (MIC) come into play.

The MIC pushes you to:

• Focus on solving real, tangible problems.
• Build usability into the core of your product.
• Plan for growth by thinking about scalability and future trends.

It’s not just a tool—it’s a guide to help you sidestep common pitfalls and build something lasting.

Adopt the Right Mindset

Here’s the thing: tools and strategies will only get you so far.

Success in AR/VR also requires the right mindset.

You need to embrace adaptability, stay committed to user-focused innovation, and be relentless in your pursuit of creating value. AR/VR is still evolving, and your ability to evolve with it will set you apart.

The Opportunity Is There

The path forward isn’t easy, but it’s wide open.

With the right approach, AR/VR startups can do more than survive—they can thrive. They can create groundbreaking solutions that change how we interact with the world and set the stage for a new era of immersive technology.

If you’re ready to rise to the challenge, the opportunity is yours to take.

Conclusion: Redefining Success in AR/VR

AR/VR startups are venturing into uncharted territory.

The challenges? They’re big.

But here’s the thing—they’re not impossible to overcome.

Success in this space isn’t about riding the hype or jumping on trends. It’s about creating meaningful, user-focused solutions that make life easier, better, or more exciting. It’s about leveraging XR’s unique capabilities to solve real-world problems in ways no other technology can.

So, as you gear up for your AR/VR journey, ask yourself:

• Are you solving a genuine problem that users care about?
• Are you prioritizing usability over flash?
• Are you designing with scalability and long-term growth in mind?

If your answers are yes, you’re already ahead of the game.

The AR/VR industry is still young, and the path to success is wide open for those who dare to innovate thoughtfully and execute relentlessly.

This is your opportunity to not just build a product—but to shape the future.

Reference:

• Asadi, A. R., 1, Saraee, M., 2, Mohammadi, A., 2, School of Information Technology, University of Cincinnati, & School of Science, Engineering and Environment, University of Salford. (2022). Metaverse Innovation Canvas: a tool for Extended Reality Product/Service development [Journal-article].