Phygital represents the dynamic force shaping our reality by blending the physical and digital worlds. Fueled by the relentless march of technology and digitization, this evolution is orchestrating a profound shift in how we connect with each other and ourselves. It acts as a portal to innovative, immersive, and interconnected experiences across sectors, from fintech to healthcare. We at LETA Capital continue to explore the influence of phygital across markets and industries.
"The beauty of digital solutions is in enhancing the real world and pushing its limits. That emerges in the sets of “phygital” technologies and it happens TODAY, not tomorrow."
Sergey Toporov, Partner at LETA Capital
With exponential growth forecasts, transformative innovations, and support from influential giants like Microsoft, Apple, Alphabet, Meta, Amazon, and ByteDance, who have collectively invested over $160 billion in the phygital space, the stage is set for extraordinary expansion. The phygital devices market, including smartphones, headsets, wearables, etc., valued at $365 billion in 2022, is poised for a 10x increase by 2029, reaching an impressive $3.9 trillion. Concurrently, the global user base for phygital products is expected to surpass 1.4 billion, and the total addressable market for phygital is estimated to be a staggering $216 trillion by 2030. Notably, IT and E-commerce emerge as sectors with the most significant growth potential, projecting market sizes of $34 trillion and $44 trillion, respectively, with a focus on the phygital paradigm.
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In the course of building the marketmap, we selected key phygital verticals, within which we identified the biggest and/or most promising startups, scaleups and the main players forming the overall phygital landscape. In selecting companies, we relied on open data, our own experience and expert opinion.
One more angle we found interesting to discover was how VCs were investing in physical technologies over the last years. We saw that venture capital investments in phygital over the last decade have been substantial. Augmented Reality (AR) attracted over $20 billion, 3D technologies secured $18+ billion, and the Internet of Things (IoT) received an impressive $45+ billion. Notably, AR investments alone reached $22.78 billion, with North America leading at $15 billion. Europe, while contributing less, still played a significant role with $2.4 billion. Concurrently, 3D technology and IoT investments reached $19.78 billion and $46.40 billion, respectively, primarily propelled by North America. The total VC investments in AR, 3D, and IoT companies exceeded $90 billion, involving more than 16,000 deals.
As fervent advocates of phygital technology, we have crafted the State of Phygital report to evaluate the dynamic landscape where physical and digital realms intersect. Through data, forecasts, and real-life cases, this report aids in comprehending why it is crucial to adapt and leverage such integration across various facets of life and business.
Alex Glukhov, Analyst at LETA Capital