Corporate VCs Mattel, Sesame back AR game maker Osmo

Osmo, maker of augmented reality iPad games for children, has raised $24 million in funding with the aim of helping to build the next big thing in children’s entertainment.

The Palo Alto, California-based company raised the latest funding from Mattel, Houghton Mifflin Harcourt and Collab+Sesame, the early-stage venture firm formed by Collaborative Fund and Sesame Workshop, the nonprofit behind the children’s TV program “Sesame Street.” Also participating in the latest financing were Shea Ventures and existing investors Accel Partners, Upfront Ventures and K9 Ventures.

Mattel and Sesame previously teamed up 20 years ago for Tickle Me Elmo, the plush toy based on the “Sesame Street” character. Explaining their interest in Osmo, co-founder and Chief Executive Pramod Sharma said the companies are seeking “a medium that lets them reimagine their content.”

Sharma and co-founder Jerome Scholler, both ex-Googlers, launched Osmo in 2013. Sharma was with Google for eight years, where he worked as an engineer on the company’s book-scanning project, an experience which provided the inspiration for Osmo. Osmo makes a set of educational games that uses the front-facing iPad camera along with physical objects. Kids can draw, assemble puzzles or arrange tiles as the app recognizes and responds to their efforts. The objective, Sharma said, is to “take the play beyond the screen, make it a lot more social, tactile, tangible, and a lot more interactive.”

The initial Osmo kit retails for under $100.

“The breakthrough in Google Books was the idea of using multiple cameras to do image parsing,” Sharma said. In 2012, when he started working on his own company, some of that same technology was entering tablets and smartphones, creating a new opportunity. “What can we do with these devices which have very strong cameras and computers?”

Osmo’s next big move is launching on the iPhone in Q1 next year. In addition to building out its own content offerings, the company expects to open its platform to third-party creators at some point, Sharma said.

This is Osmo’s third financing, following a $2.5 million seed round in 2013 and a $4 million Series A in 2014. Sharma told VCJ this could be considered a Series B strategic funding.

“Corporate investors are not really traditional investors,” Sharma said, “they’re content partners, and investment is sort of a secondary thing as part of the partnerships.”

Osmo co-founders Pramod Sharma (left) and Jerome Scholler (right) and their children. Photo courtesy of Osmo.