How A 20-Year-Old College Dropout Raised $18 Million To Build The Perfect Virtual Reality Headset

Oculus VRPalmer Luckey.Forget about the PlayStation 4 or Xbox One, the real game-changer in video games is a new virtual reality headset called the Oculus Rift.

The Rift is a virtual reality headset unlike any other, sucking you into PC games with an enormous field of view and stunning stereoscopic 3D that doesn't feel forced like in movie theaters.

We tried an early version the Rift out and were blown away, but with only a low-resolution developer kit available, legions of avid fans have been dying for details on the long-awaited HD consumer version, slated to arrive sometime in 2014.

So we set up an interview with the inventor of the Oculus Rift, 20-year-old Palmer Luckey, to talk more about how he turned a device he invented in his garage into a startup worth over $18 million, Oculus VR.

Business Insider: I know you worked as an engineer at the University of Southern California, but how did you first become interested in the hacker/maker scene?

Palmer Luckey: So I had been in the hacker/maker scene for quite a few years before I worked there. I mean, most of my life. I was interested in virtual reality for several years even before working at USC, it wasn’t an interest that started there at all. In fact, when I started working at USC, I already had prototypes of the Rift that were very similar to the final design.

BI: You have said before that you have the largest private collection of virtual reality headsets, so were these "Frankenstein" Rifts? Did you combine parts from other head mounted displays, or did you buy parts separately?

Luckey: A combination. I built a lot of different prototypes. Some of them were modified head-mounted displays from other people. Some of them were built from standard off-the-shelf components with some custom bits.

BI: And how did you know how to do that?

Luckey: I’ve been a bit of an electronics enthusiast and maker for a long time. I actually started the forum called ModRetro. It’s an electronics enthusiast community that focuses on modifying vintage game consoles, and it’s actually one of the larger game console modification forums on the internet. I started that site when I was 15. ModRetro was actually founded by myself and one of the people that currently works as an engineer at Oculus. So we've stuck together.

BI: So were you in college when the Oculus Rift started making waves?

Luckey: At the time I was still taking college courses. I started attending community college when I was 14 or 15, just doing general education stuff like history and mathematics. Then I went on to California State University Long Beach to pursue a degree in journalism. And then I ended up dropping out to found Oculus.

BI: Have you ever been involved in a startup before? It must have been intimidating to start a hardware and software business for the first time.

Luckey: So there are two things. When I started the company it was just myself, and I did all the paperwork and all the fun stuff, got a tax ID and all that. That was just a pain, but you can do it with the help of the Internet. But then I had Brendan Iribe and Mike Antonov come on board — Mike is our chief software architect and Brendan is our CEO — they have a lot of experience with startups, so they were able to handle a lot of the business side of things, so that I could focus on the VR headset itself.

BI: The Oculus Rift Kickstarter raised close to $2.5 million, and you just recently received an additional $16 million in funding on top of that. What does this mean for Oculus?

Luckey: We are going to be using these new resources to expand our team, hiring the best people in the industry. We made it a long way with our Kickstarter, but this investment is going to let us deliver a truly world class consumer product.

BI: What is the average "Palmer Luckey" day like?

Luckey: The average Palmer Luckey day involves lots of working with all kinds of new components, and new hardware, building prototype head-mounted displays, combined with talking lots of developers, lots of the people who have headsets, and getting feedback from them, and obviously talking to people like you.

BI: Most of your team consists of software developers and programmers. You’ve mentioned that even your CEO can code. That’s a different approach than many other startups. Do you think that’s part of your success, having everyone involved in such a vital way?

Luckey: I think it’s a great idea to have a company that’s leaning heavily on the engineering side, rather than having a bunch of people whose job it is to just market the thing or hype it up. Mainly what we’re doing is just trying to make this headset. And I think the kind of jobs we have on the team reflect that.

BI: Online communities, such as the Oculus subreddit, are filled with fans creating and testing their own demos for the Rift. What are your thoughts on the Rift's popularity on online forums?

Luckey: I’m a huge fan of online communities. I think that asynchronous internet-based communication forums such as Reddit and other discussion forums are one of the best things that could possibly have happened to collaborative invention. The Rift certainly would not exist without forums. It’s kind of fascinating how you can bring people together from all around the world with some tiny niche interest and all collaborate on something. But I feel like we’re all doing this together.

BI: I know the Oculus subreddit would kill me if I didn't ask you about the consumer model of the Rift. Your goal is to have higher resolution display without the "screen door effect," which shows the outlines of the display's pixels. At what point do you stop waiting for better or cheaper displays to come out and just pull the trigger?

Luckey: So it’s not necessarily a price thing. We’re out there trying to select the absolute best panel that we can. It's not that the difference between the most expensive panel on the market and the cheapest panel on the market is so huge that we should be making decisions based on that. And there are ways to remove the screen-door effect without necessarily just increasing the resolution. What you’re really trying to do is increase the fill ratio of the display, so that there’s more emissive area than non-emissive area. So it’s going to continue to get better. You could get rid of the screen door effect on a 720p display if it were properly designed. I can’t share exactly what we’re doing, but we’re working on it.