There are 8 million reasons why you should care if Magic Leap succeeds

March 23, 2018 by Rob Wile, Miami Herald

When it comes to tech, the most buzzed-about companies often raise big investments—and big questions.

That's been the case with Magic Leap, the Plantation-based augmented reality company whose wunderkind status has resulted in more than $2 billion in investment—and a slew of legal disputes.

In the past six months, Magic Leap announced it had raised $502 million from Singapore's wealth fund; an unstated amount from German publisher Axel Springer; and, earlier this month, $461 million from Saudi Arabia's national investment fund and other unnamed investors.

That brings their total reported investment to $2.3 billion, including incentives from the state and Broward County.

For a company whose goal is to literally transform how everyone sees the world, the hype makes sense.

The company also recently showed off its new partnership with the NBA, whose fans will be able to interact with live stats and commentary as they watch a game on a Magic Leap headset. A few weeks later, the Royal Shakespeare Company in London said it was partnering with Magic Leap on a project to "change the way audiences experience theatre," according to the theater troupe's website.

And in December, Magic Leap finally unveiled its long-anticipated Magic Leap One "creator edition" headset for developers, allowing any company to create content that a user can experience as lifelike.

Then there's the less favorable news. Magic Leap now finds itself in yet another legal quagmire, this time with its senior director of global security. Recently, the company filed for a declaratory judgment against the director, claiming he planned to use a whistle-blower complaint to "extort" the company by accusing it of stealing technology from Microsoft.

That dispute is the latest in a series of legal complexities. In October, the company filed a report with the Plantation Police Department alleging Magic Leap had been defrauded by a recruiting firm, according to a report in Business Insider. And in 2017, Magic Leap settled a harassment suit brought by a former employee who alleged a company culture rife with sexism.

All the while, the company has displayed an aggressive penchant for secrecy and has pushed back release dates—raising further questions.

Experts disagree about whether Magic Leap's issues are red flags or whether they are simply growing pains.

"These things happen ... the bigger the company, the bigger the liabilities," Joe Russo, head of Palm Beach Tech, a nonprofit tech trade organization, said in an email.

The technology press has been more skeptical. "Many details (about Magic Leap's product) remain unclear," Romain Dillet of TechCrunch wrote in February. "For instance, the company hasn't shared anything about pricing and software features. It's hard to grasp the use case of the device without this information."

Magic Leap's fate is more than simply a topic of tech gossip. Florida taxpayers plan to invest more than $8 million in Magic Leap through tax breaks and incentives from the state and the Greater Fort Lauderdale Alliance, an economic development agency.

The Alliance does not see anything to be worried about.

"Magic Leap's presence is extremely valuable to our community," Bob Swindell, president and CEO of the Alliance, said in an emailed statement to the Herald. He noted that they had just participated in a tech hiring event at Nova Southeastern University. He did not address Magic Leap's legal issues.

A spokesperson for the Florida Department of Economic Opportunity declined to comment on any of the recent developments, other than to say that Magic Leap had submitted required paperwork documenting progress toward meeting its goals for incentives. The documents, submitted on time, are still under review by an auditor.

Magic Leap has created dozens of high-paying tech jobs in a state where the annual median family income is less than $59,000. Many employees have moved from across the country—and the world—to Plantation, once known mostly for its giant mall, just to be part of Magic Leap's story. Patrick McKenna, a venture capitalist now based in Miami who recently touted the area as a tech destination in a New York Times article, said Magic Leap has shown "that an innovative technology company can raise large sums of money and attract world class talent to South Florida."

But the mixed signals it's sending were recently on display at a pitch event hosted by Wynwood's The LAB. A Magic Leap employee served as a judge on the pitch panel—on the condition that she not discuss the company, and that the LAB neither promote Magic Leap nor use its logo.

Ironically, Magic Leap has been most forthcoming about what is happening inside the company in legal documents. In the Feb. 28 filing for judgment against its security director, Magic Leap maintains that the director, Todd Keil, had planned to submit a complaint alleging Magic Leap management rejected his recommendation that Microsoft HoloLens devices—direct competitors to Magic Leap's reality-shaping headsets—delivered to Plantation be confiscated and returned. Keil also planned to allege he was told by a senior manager that Magic Leap would retain possession of a HoloLens device, Magic Leap says. And Keil planned to argue Magic Leap's conduct violated the federal Defend Trade Secrets Act, the filing states.

Magic Leap says each of these accusations is false, and that Keil was simply retaliating for his poor performance reviews.

In a brief phone interview, Keil said he has an agreement in place with Magic Leap that stipulates he cannot discuss the dispute. He said he has been with the company for two and a half years, and had moved to Florida from Texas, where he has since returned. A representative for Magic Leap did not respond to an inquiry asking whether Keil is still employed.

Mike Lingle, a managing partner at Miami's 10xU startup advisory who has consulted for many South Florida tech companies, says there is reason to continue asking questions about what's going on in Plantation.

"They've raised way too much money for a company with no product and no revenue," he said in an email. "This leads people to behave strangely. I'm actually surprised that more cash hasn't walked out the door."

The secrecy around the company could cripple its chance for success, he said.

"Look at how much trouble Google had launching Glass, and they did everything right," he said, referring to a technology Google ultimately pulled from retail shelves. "Customers need to be involved in the development process, especially when you're asking them to change their behavior. Secrecy kills startups."

As it happens, a video interview posted in which a new Magic Leap employee speaks highly of the company was pulled down within 24 hours of going live. According to a report by Next Reality, a website that covers the futuristic augmented reality technology Magic Leap works on, a Plantation-based employee named Necole Pynn discussed in the video how Magic Leap CEO Rony Abovitz's 2013 Ted Talk ultimately led her to join the company.

"I started doing research when I first applied for the job," she said, according to Next Reality. "I started looking into some of the people who worked there, and I realized that so many of my creative heroes work in this company."

Next Reality Editor Adario Strange said it is ironic the video "disappeared" so quickly.

"It was easily the most full throated and glowing review of the company's culture I've seen, so it might have helped Magic Leap to allow her voice to be more widely heard," he said in an email.

The company that posted the video, Trench Media, could not be reached for comment. Magic Leap did not respond to a request for comment.

Strange believes the excitement surrounding Magic Leap may have caused expectations to outpace reality.

"If the Magic Leap One isn't several orders of magnitude better than Microsoft's HoloLens, there may be a good deal of disappointment after so many years of anticipation," he said. "Personally, I'm hoping it lives up to the hype."

Strange believes many startups like Magic Leap inevitably go through "learning experiences" as they attempt to establish a healthy and productive culture.

"In that respect, there's a certain amount of margin of error to be expected," he said.

But its other issues cannot be ignored.

"Some of the allegations that have been reported are troubling for such an incredibly well funded ," he said.

Explore further: Google-backed Magic Leap alleges workers stole its secrets

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