Light Art VR is raising capital via SAFE with a valuation cap of $25 million and no discount. With revenue of more than $1.9 million in 2021, the company yields a revenue-to-valuation multiple of 13x. This multiple is above the 8.1x industry average for software companies in entertainment. NextVR, a company that captures and delivers live virtual reality content, was acquired by Apple at around a 4x revenue multiple. But although Light Art VR’s revenue multiple is above the industry average, its valuation and multiple is in line with other growth stage software entertainment companies in the crowdfunding market. Overall, Light Art VR’s price in this funding round offers investors a fair deal.

Light Art VR is targeting the virtual reality (VR) and augmented reality (AR) market, especially in Muslim-majority countries in the Middle East and North Africa. The virtual reality market in the Middle East and Africa is estimated to be worth more than $790 million in 2022, with a massive growth rate of 43.5% between 2020 and 2028. The market size is small, especially considering that Light Art VR is focusing on a niche market by producing Muslim-focused content. A large market would be more advantageous since it could help sustain the company’s growth. 

However, the good news is that 93% of people in the Middle East and North Africa were Muslims as of 2010. So countries in these regions are likely to have high demand for Islamic-focused VR content. The VR market is also growing rapidly and is estimated to reach more than $23 billion by 2028. This growth is largely driven by younger generations’ increased demand for new entertainment. 

Islamic content might also be popular in regions such as Saudi Arabia. The country generated about $12 billion in revenue during the Hajj pilgrimage season in 2019. Hajj is one of the five pillars Muslims practice as part of their faith. Having a virtual option could attract a large number of people, especially those who may be unable to make the pilgrimage in person.

Although Light Art VR’s target market is currently small, extremely rapid growth in the VR market more than makes up for this. Additionally, the company’s focus on Muslim-centered content also gives it an advantage in the Middle East and North Africa markets. Overall, Light Art VR has ample market potential.

Light Art VR CEO and co-founder Muhammad Bayazid is an award-winning filmmaker. He studied film at Los Angeles Film School and screenwriting at New York Film Academy. Although Bayazid does not have previous entrepreneurial experience, his expertise in making and directing films is an asset to the company.

Producer and co-founder Samah Safi Bayazid is also a filmmaker and director who studied applied English at the University of Jordan and screenwriting and filmmaking at New York Film Academy. Like the CEO, her industry experience will likely prove useful in helping Light Art VR develop entertainment and content.

CFO and co-founder Fahim Aref is a serial entrepreneur. He is the co-founder of a famous app among the Muslim comminity called Scan Halal, which provides food label information that helps Muslims determine which foods to avoid. The app has more than 1 million downloads. Although Aref does not have previous experience in the virtual reality or entertainment industry, he has strong managerial skills. He worked as the president of Tejara Group, which distributes refurbished devices to countries in need. Aref was also the manager of oil and gas companies where he helped raise funds and close acquisition deals.

Light Art VR’s founders have complementary skills. Muhammad Bayazid and Samah Safi Bayazid bring extensive knowedge in filmmaking and compensate for Aref’s lack of experience in that field. Aref’s entrepreneurial and leadership skills can help scale the business and ensure strong operations. The founders also have the advantage of being Muslims, so they know what appeals to a Muslim audience and how to convey accurate information in a religious context. 

Other Light Art VR team members include full-time computer graphic designers. But the team still lacks a few key hires, such as a chief technical officer to lead and grow the company’s software and a marketing and sales team. However, Light Art VR’s current team has proven its ability to achieve success.

By partnering with museums, malls, and other businesses, Light Art VR provides a fully immersive experience for those looking to explore Islamic content and history. Light Art VR has a first-mover advantage in the virtual reality (VR) market for Islamic content, as it is the only company that’s bringing an all-in-one solution to the market. By providing software, hardware and relevant content, Light Art VR can position itself as a one-stop shop for all Islamic-focused VR needs. 

However, there are a few companies that have built VR simulations catered to a Muslim audience. Vhorus has built an Experience Mecca VR experience on Oculus where users can take a tour of Kaaba, the metaphorical house of Allah. Labbaik VR is a Pakistani startup that educates people on how to perform Hajj and Umrah pilgrimages correctly. Although not a direct competitor, FuninVR, a Chinese company, has been exhibiting in Dubai. The company provides different simulator equipment, such as egg chairs and interactive cinema. Although the company doesn’t target a Muslim audience, it could enter the market eventually. In the future, Light Art VR might also face competition from Meta, formerly Facebook, since the company has established a presence in the United Arab Emirates. Although Meta doesn’t currently have a plan to create Islamic content, nothing really prevents a public company with billions in revenue from doing so as the market gets hotter.

Nevertheless, Light Art VR has a lot of advantages. First, the company has a unique business model. Rather than targeting customers through Oculus, it partners with museums, theme parks, government organizations, and malls, which helps it reach a wider audience. Light Art VR is then able to capture revenue from both selling products to partners and sharing a percentage of the revenue the businesses capture. 

The company also provides multiple ways for businesses to monetize VR content. Businesses can choose to set up a theme park attraction that walks the viewer through a simulated setting, a “space station” theater or a small dome theater with sounds and haptic effects. These theaters can also include adventure chairs, where users can either wear VR headsets or be inside a dome for a 3D effect, which is good fit for high-traffic locations. Light Art VR’s high-quality products include simulations with desert smells, wind, and other effects, which no other competitor currently offers.

Even small businesses that cannot afford to pay for major installations can benefit from Light Art VR services. According to one of the co-founders, the company provides a “comfort” 360 custom-fit VR headset that is more affordable than the company’s other options. The headset comes with its own content and batteries. The company also updates its content every six months, which allows businesses and Light Art VR to generate revenue from repeat customers who want new content. Light Art VR’s co-founders also state that the company offers businesses the ability to view customer and revenue statistics, which can help them optimize their approach.

Light Art VR has $12 million in intellectual property, which gives it defensibility against future competition. In addition to producing high-quality Islamic content, the company ensures its content is approved by Islamic scholars and by the Ministry of Religious Affairs, which helps minimize controversy.

Overall, there are no established competitors in this religious niche market. And even if competitors were to enter the market, Light Art VR has a significant head start in establishing itself as the leading company with its high-quality products and services.

Light Art VR generated $1.9 million in revenue in 2021, a 1,397% increase from 2020. The company was able to achieve this revenue due to a project with the government of Qatar, where it designed custom VR content of a seaport. With the revenue from that project, Light Art VR had an impressive profit of $1 million and achieved a gross profit margin level of 68%, which is revenue after costs of doing business have been deducted. This level of profit margin is above the 41.9% average of the entertainment industry. However, it is important to note that Light Art VR’s project for Qatar was a one-time project, and the company may not be able to replicate that same level of revenue in 2022. 

One concern is that Light Art VR has not raised much previous capital. It has only raised $255,600 and has $325,000 on hand as of 2021. A company that needs to manufacture hardware requires a lot of capital. However, Light Art VR seems to be balancing this need by having its clients pay for projects ahead of time. In fact, according to a co-founder, Light Art VR is negotiating with the Quranic Park in Dubai to build a full-experience installation. The Quranic Park receives about 500,000 visitors a year, which makes it a great potential revenue stream for Light Art VR. 

Light Art VR has multiple revenue streams. It provides services that can cater to different audiences depending on what its business partners want and also has gift shops that include figures of Islamic holy sites and perfumes with scents of these holy sites. According to a co-founder, the company also plans to expand to create religious content beyond Islam, such as stories about Jesus and Moses. 

Overall, Light Art VR has shown very strong growth in one year and has been scaling quickly despite its lack of outside capital. 

An investment in Light Art VR carries a relatively low risk. The biggest areas of concern are the lack of funding and timing. The company has raised only $255,000 in the past and has $325,000 on hand as of 2021. The company’s success depends on its ability to deliver both software and hardware services, including adventure chairs and building domes. These products require a lot of capital. Fortunately, the company has not run into issues delivering services to partners so far, mainly because most partners pay upfront. But it is important to take into account that Light Art VR manufactures its equipment in China. COVID-19 has disrupted the supply chain industry, which could affect Light Art VR’s business and its ability to deliver service in a timely manner. To prevent possible problems, it could be important for the company to have the products manufactured ahead of schedule to account for delays in receiving equipment from the manufacturer. And without much cash on hand, it is hard to do that.

Focusing on a niche market is not always an advantage to companies. Since Light Art VR delivers religious content through virtual reality (VR), its audience is more limited than a company that focuses on secular content. Some members of the faith might even view VR as an inauthentic way to experience religion and holy sites. 

The market is also not very defensible. With the VR industry growing at a rate of 43.5% annually in the Middle East and North Africa, strong competitors will undoubtedly enter the market sooner or later. With the little cash Light Art VR currently has, it might not be able to sustain its growth and establish itself as the leading VR company for Islamic content. Lastly, the company doesn’t seem to have a clear exit strategy yet, which could delay returns for investors.

Despite its limited capital, Light Art VR grew its revenue by nearly 1,400% from 2020 to 2021, reaching more than $1.9 million. The company’s high-quality content has attracted the attention of governments and organizations (where most of its 2021 revenue came from).

Although the virtual reality market in the Middle East and North Africa is niche and has low defensibility, Light Art VR has secured intellectual property worth $12 million, which protects it from future competition. The company also has multiple ways to monetize its products and technology. Light Art VR’s ability to customize products to fit its business partners’ needs gives the company the flexibility to target both wealthy and less wealthy countries by making products affordable to them. 

Light Art VR also has an advantage in that the team members are Muslims and know how to cater to their target consumers appropriately. The team’s expertise also likely makes the company’s content more accurate and thus more appealing to its audience. Beyond Islamic content, Light Art VR has also delivered non-Islamic content through its government project with Qatar. The company has already proven that it can address multiple verticals of VR content, an ability that should help it scale in the future.

Light Art VR is a software and hardware technology company that creates virtual reality (VR) and interactive content for Muslim audiences in Muslim-majority countries. The company operates in a niche and low-defensibility market, which might hinder its expansion. It has low capital and funding, which might delay service delivery to business partners. Light Art VR also has a small team at this time. 

However, the VR market in the Middle East and North Africa (MENA) region is growing very rapidly at an annual rate of 43.5%. And 93% of the MENA population was Muslim as of 2010, which makes it the perfect region to target. Since Light Art VR is the first company to provide an all-in-one solution for Islamic VR entertainment, it might capture a big segment of the market before other competitors emerge. Because of its high-quality products, Light Art VR has made contracts with governments to provide its services, and the company’s revenue grew by more than 1,400% in 2021. This revenue growth is also thanks to the company’s ability to customize its technology to fit clients’ needs. And while the team is currently small, it is by no means lacking in relevant skills. Finally, this funding round’s valuation is a fair deal for investors. For all these reasons, Light Art VR is a Deal To Watch.

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Yasmin Sharbaf, March 29, 2022.