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Oculus Deal Said to Deliver 20-Fold Return to Spark, Matrix

Photographer: How Hwee Young/EPA

A visitor tries out an Oculus Rift virtual reality headset at SITEC 2013, IT & Consumer Electronics show in Singapore. Close

A visitor tries out an Oculus Rift virtual reality headset at SITEC 2013, IT &... Read More

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Photographer: How Hwee Young/EPA

A visitor tries out an Oculus Rift virtual reality headset at SITEC 2013, IT & Consumer Electronics show in Singapore.

Spark Capital invested in Oculus VR Inc. in June after the firm’s partners bought the company’s virtual-reality goggles online. The bet ended in a 20-fold gain following Facebook Inc.’s agreement yesterday to buy Oculus for as much as $2.3 billion, said people with knowledge of the deal.

Spark and Matrix Partners each invested about $19 million in Oculus in two rounds last year, first in June then in December, said the people, who asked not to be identified because the figures weren’t disclosed. The venture capital firms’ stakes are now worth about $380 million each, they said.

Oculus’s ascent was rapid. The Irvine, California-based company raised $2.44 million in August 2012 on crowdfunding site Kickstarter Inc. for a product called Oculus Rift. It was pitched as a virtual-reality headset for video games that “allows you to step inside your favorite game and explore new worlds like never before.” More than 9,500 people backed the project, according to the site.

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“We found Oculus on Kickstarter, we met one of the co-founders, but what really sold us was the product,” Andrew Parker, a partner at Boston-based Spark, said in an interview earlier this month. “We are geeks first and venture capitalists second. We really enjoy technology and relish the opportunity to try new things.”

Photographer: Matthew Lloyd/Bloomberg

A gamer wears a high-definition virtual reality (VR) headset, manufactured by Oculus VR Inc., as he plays Gaijin Entertainment's "War Thunder" video game on a personal computer (PC) during the Eurogamer Expo 2013 in London, U.K. Close

A gamer wears a high-definition virtual reality (VR) headset, manufactured by Oculus VR... Read More

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Photographer: Matthew Lloyd/Bloomberg

A gamer wears a high-definition virtual reality (VR) headset, manufactured by Oculus VR Inc., as he plays Gaijin Entertainment's "War Thunder" video game on a personal computer (PC) during the Eurogamer Expo 2013 in London, U.K.

Parker credited his colleagues Nabeel Hyatt and Bijan Sabet for ordering the Oculus goggles and getting others in the firm to play with them. Spark also profited from early bets on Tumblr Inc. and Twitter Inc.

More Money

Spark and Matrix were joined in December by Andreessen Horowitz, which led a $75 million investment at a $300 million valuation, the people familiar said. All three firms own about a 17 percent stake, the people said.

A representative for Oculus didn’t respond to a request for comment.

Yesterday’s deal includes $400 million in cash and 23.1 million Facebook shares as well as an additional $300 million if certain milestones are met.

The acquisition boosts competition between Menlo Park, California-based Facebook and Google Inc. beyond just Web advertising. Google, based in Mountain View, California, sells connected eyewear called Google Glass and last month bought digital thermostat maker Nest Labs Inc. for $3.2 billion.

“Google glass is augmented reality, while Oculus is virtual reality,” said Chris Dixon, a partner at Andreessen Horowitz in Menlo Park and an angel investor in Kickstarter. “Virtual reality is the next big platform after mobile.”

Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.

No Equity

Kickstarter lets people donate to projects they want to support, often in exchange for an early version of the product. They don’t get equity in the companies they back. CircleUp Network Inc. is among crowdfunding sites focused on letting individuals buy stock in startups. CircleUp said today that it raised $14 million from investors including Canaan Partners and Google’s venture arm.

“When Oculus raised over $2 million in 2012 on Kickstarter, it was one of the biggest donation based raises ever,” CircleUp Chief Operating Officer Rory Eakin said in an e-mail. “Imagine if those early supporters were equity investors instead of just donors.”

To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Ari Levy

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