By Mehr Sokhanda
Augmented reality (AR) and virtual reality (VR) have been promoted for years as technologies that would transform how we work and interact with information. Yet adoption has proven far more difficult than early projections suggested. Alec Pestov, founder of vGIS, discusses his eight-year journey building a company in this space. Pestov’s experience highlights the challenges of scaling AR/VR, the pivots required to find product-market fit, and the lessons that emerging founders can apply to their own ventures.
About vGIS: vSITE by vGIS simplifies and de-risks underground utility work by making it easy to understand, document and track field projects. It provides real-time insights on progress, profitability—powered by
The Spark That Started It All
Unlike some startups born out of a clearly defined problem, vGIS began with excitement over emerging technology. Pestov admitted that his founding motivation came from sheer awe: “We saw Microsoft HoloLens, and we thought we must do something with that, and that’s how we started. This is the absolutely wrong way to start a company, so I would not recommend it to anybody,” he remarked.
At the time, the team envisioned AR as the next massive platform shift. They remembered how the iPhone’s arrival in 2007–2008 had unleashed a wave of unicorns, and they believed wearable devices like HoloLens could replicate that trajectory. Their assumption was that they would get in early, build something impressive, and ride the wave of growth. But the problem, as Pestov reflected, was that they began with the solution instead of the problem: “We had an idea, and we had the technology skills to build the idea. However, we lacked the industry expertise.”
This lack of industry-specific expertise meant Pestov and his team had the technical capacity to build, but they didn’t know who their customer truly was. They eventually partnered with a group from the utilities sector which provided field knowledge and helped shape the first version of their product. This collaboration gave vGIS its initial foothold, but the early years were still marked by constant trial, error, and redirection.
Building VSITEVSITE: From False Starts to Focus
Once the first version of their technology — called vSITE — was built, the real question loomed: who was going to use it? The team ran experiments across multiple industries, testing one customer segment after another. At first, they envisioned utility workers wearing headsets to see underground assets in real-time. The vision was bold, but in practice, it proved impractical. Utility workers weren’t ready to adopt complex wearables in the field.
The next idea was to sell to locators — the people who spray markings on the ground before digging. Once again, the concept seemed promising but didn’t stick at scale. After that came indoor construction, different integrations, and other field applications. Each time, they saw glimpses of potential but no sustainable traction. As Pestov explained: “We had plenty of false starts, I won’t lie; we tried many things, and we went down the wrong path many times.”
This process of chasing possible markets took years. It wasn’t until 2022 that Pestov’s team made a decisive pivot. By then, it had become clear that mixed reality as a category lacked scalable use cases. The market itself was retreating. Microsoft scaled back HoloLens, Magic Leap failed to deliver on its promises, and Apple’s Vision Pro launched to fanfare but fell short. Pestov’s team realized they had to salvage their existing work by applying it to a sector where the technology could solve immediate, tangible problems.
That pivot led them to infrastructure construction. Using digital twins, AR overlays, and integrated scanning, they began focusing on problems like planning, safety, and documentation. This was not a glamorous use case, but it was one where the technology added measurable value. “In 2025, we finally identified real-life use cases and currently we’re validating them. We’re hoping that it’s not another false lead, but this time it seems much more significant than in the past,” he said.
The shift from chasing hype-driven opportunities to addressing industry-specific pain points was a turning point in the company’s evolution.
The Reality of Selling Tech to Construction
The construction sector is not known for being quick to adopt new technology. In fact, it is often cited as one of the industries lagging in digital transformation. Pestov explained why this is such a challenge: “Construction workers like hammers, because a hammer is a simple tool. Everybody understands how to use it, and it always works. So, giving something more sophisticated than a hammer to a construction worker will be met with resistance.”
In office environments, software glitches are inconvenient but tolerable. Workers can restart a program, refresh a page, or troubleshoot with IT. On a construction site, however, where crews cost thousands of dollars an hour and safety is at stake, there is no patience for unreliable tools. If AR/VR systems don’t work perfectly, they won’t get a second chance.
At the same time, Pestov noted, construction’s lag in adopting technology presents opportunities. The gap leaves room for innovators to introduce tools that improve efficiency and safety, provided those tools are practical, intuitive, and as reliable as the simple hammer. This balancing act — building advanced technology that meets the simplicity and dependability demanded in the field — remains vGIS’ ongoing challenge.
The Hype Curve and the Fall to Earth
AR/VR’s rocky trajectory can be explained through the technology hype cycle, a framework Pestov used to describe the industry’s boom-and-bust pattern. Every new technology, he explained, follows a familiar arc: an initial trigger, a surge of inflated expectations, a crash into disillusionment, and—eventually—more grounded, practical adoption. AR/VR is no exception.
The industry’s trigger came with innovations like Google Glass and Microsoft’s HoloLens. Soon after, Magic Leap raised massive amounts of funding on the promise of revolutionizing how humans interact with the digital world. For a time, expectations were sky-high. Media stories described AR as a platform that would reshape industries from healthcare to education. Investors poured billions into startups racing to build the future.
But the reality fell short. The technology wasn’t ready, hardware was expensive, and user adoption lagged. Pestov described how the hype cycle gave way to disappointment: “The entire industry essentially collapsed… Apple underperformed, Magic Leap exited, Microsoft disappeared altogether. It’s a complete disillusionment and collapse of the industry. Nonetheless, there is hope,and I will explain how we see future developing…”
Pestov stressed that this isn’t the end of AR/VR. It’s the bottom of the cycle, where reality sets in and practical applications start to emerge. As history shows, technologies rarely live up to their sci-fi visions in the short term. Instead, they mature into less glamorous but highly useful tools. For AR/VR, this means shifting from fantastical consumer applications to targeted, problem-driven deployments.
Where AR/VR Works Today
Pestov outlined the niches where AR/VR is already demonstrating value:
- Heads-Up Displays: Far from the ambitious visions of immersive headsets, simple heads-up displays are proving their worth. In oil and gas, aviation, and heavy industrial sectors, tens of thousands of units have been sold because they deliver critical, real-time information while keeping workers’ hands free.
- B2C Applications: Consumer-facing AR/VR has seen success in gaming (e.g., Pokémon Go), navigation and travel, home DIY tools, shopping, entertainment, and language learning. These are relatively lightweight, convenience-driven use cases that can scale.
- B2B Applications: In business contexts, AR is showing promise in manufacturing, aerospace, logistics, field services, and healthcare. These industries have specific needs that AR can address, particularly when integrated with existing workflows.
- VR Training: Education and training are standout areas. By immersing users in realistic simulations, VR enhances retention and provides safe, cost-effective environments for learning. Design visualization, military training, and medical simulations are all examples of gaining traction.
As Pestov put it: “The future lies in point solutions. If you identify a niche and build something exceptional for that small, specific need, there’s a real opportunity. There are countless niches out there—you just have to find the right one. Another path is to develop foundational technologies. Even the biggest players, like Microsoft and Apple, don’t build everything themselves. They often integrate components from other companies or acquire startups that solve niche problems. Building these foundational blocks can be both valuable and lucrative.” Rather than chasing the dream of building the next metaverse, Pestov emphasized the value of smaller, targeted solutions.
Hard Lessons from the Founder’s Journey
Pestov distilled his years of experience into honest lessons that resonate beyond AR/VR.
- Love the Process, Not the Glory.
Running a company is not glamorous. Pestov compared entrepreneurship to being a professional fighter: “Running a business is like getting kicked in the face every day. You don’t have to like it, but you must enjoy the process enough to keep going.”
Founders who chase the spotlight rather than the grind will struggle. The day-to-day is often painful, but resilience comes from finding satisfaction in the process itself.
- Start With the Problem.
“Don’t build solutions first. Spend all your time understanding the problem. We built solutions for problems that didn’t exist.”
This was one of vGIS’ biggest early mistakes. Technology-first thinking led them into dead ends. Only by deeply understanding industry pain points did they begin to find traction.
- Get Out of the Office.
Pestov stressed the importance of leaving the comfort of brainstorming sessions and spending time with customers in the field. He personally rode along with locator teams for weeks, observing their workflows and timing their tasks. This kind of immersion revealed insights no survey or call could capture. “There is no truth in the office. Be next to your customers, however non-glamorous the work is,” he stated. - Charge for Pilots.
Early on, vGIS offered free trials for vSITE, hoping to entice adoption. But they found that free tools were undervalued and underused. Paid pilots forced customers to invest attention, yielding better feedback and more meaningful engagement. - Ignore Innovators.
Innovators love testing new tools but rarely become repeat buyers. Pestov advised distinguishing between innovators and mainstream users who will drive sustainable revenue. - Filter Feedback Carefully.
Positive feedback can be misleading because people tend to sugarcoat their opinions. Pestov warned against being lulled by enthusiasm without real evidence of product-market fit. - Scale Only After Validation.
Premature scaling, Pestov noted, has killed many startups. vSITE avoided this pitfall by staying humble, questioning whether early traction was genuine, and resisting the urge to expand too quickly.
Looking Forward
Despite certain setbacks, Pestov remains cautiously optimistic. AR/VR may not yet live up to its grandest promises, but opportunities exist in niche, problem-driven applications that deliver tangible value. His journey is a reminder that technology alone doesn’t build companies — disciplined execution, relentless learning, and humility do.
As he summed up: “Validate real-life deployments. Ignore the hype, ignore innovators. Learn from people who will use your system every day. Learn from them and diversify”
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