In a blog post, the company said i ran into “unforeseen financial difficulty” and couldn’t afford to “keep the virtual lights on anymore.” The post said the company tried to raise a new round of funding, but a deal fell through and it ran out of time and money. The company said, ” We’d love to see this technology, if not the company, live on in some way, and we’re working on that.”
Eric Romo, CEO of AltspaceVR, started the company in his home office in 2013. The company raised $ 10.3 million in 2015 from Comcast Ventures, Tencent, Dolby Family Ventures, Raine Ventures, Lux Capital, Western Technology Investments, Maven Ventures, Promus Ventures, Streamlined Ventures, and Rothenberg Ventures.
Romo said in an interview with GamesBeat in April that the company was hoping to monetize events that companies paid for, not unlike how Linden Lab monetized corporations in its Second Life virtual world. But Altspace VR’s traffic was relatively small, at about 35,000 users a month. That’s a sign of how small the overall base for VR is, and it probably tells you why the company ran out of funds, as that number isn’t enough to get investors excited. Mobile and PC-based VR units are expected to grow from 6.4 million globally in 2016 to 20.3 million in 2017, according to SuperData Research.
It’s not clear exactly what this means for other VR startups, but everybody knows that growth is slower than expected. Other VR startups such as enterprise-focused Envelop VR have also shut down this year.
Greg Castle, founder of Anorak Ventures and an early Oculus investor, said he was sad about the Altspace VR news.
“There are two distinct strategies I see in social VR,” he said in an email. “Companies focused on building out the infrastructure (outside in), and those focused on customer experience (inside out). AltSpace and (Linden Lab’s) Sansar for example have spent a lot of time building out a really robust infrastructure platform and are largely relying on other developers to create fun experiences built atop their platform. Rec Room and Star Trek on the other hand have focused more on providing a compelling, engaging experience off the bat for users which in turn has the potential to build a strong social community. Given the user numbers and slower adoption curve as an investor I prefer the later strategy.”
He added, “In terms of what it means for venture backed VR companies, I think it’s probably a reality check in a somewhat frothy market. I think Eric and his team are fantastic and trust they’ll find their way.”
And Tipatat Chennavasin, cofounder of the Venture Reality Fund, said in an email, “When a shutdown happens it’s hard to understand without knowing all the details. Altspace VR, led by Eric Romo, was a true pioneer and did some ground breaking work in VR and social. It’s a shame they weren’t able to get further funds to continue to innovate, the news also comes right after Within announcing a $ 40M round, indicating evolving investor dynamics in the sector.”
Chennavasin added, “For later venture rounds the bar is raised higher and tangible metrics really come into play. A lot of times the main challenge for early innovators is to manage the company’s growth in a nascent but potentially explosive market where there are no established investment patterns and the venture investors are still discovering the subtleties of the sector. Altspace has opened many doors of creativity and teased us all with compelling possibilities in social VR. I’m afraid their timing wasn’t precisely aligned with investor sentiments, especially in later rounds where certain growth parameters are expected, which is hard to do in early stages of the VR market with a small installed base. One last thing I will add is that the team were not just pioneers but also great supporters of the larger VR development community and will be missed. They have definitely learned a lot on their journey and I look forward to seeing what they do next.”
Andrew Wilson, CEO of Electronic Arts, also said on Thursday that it may be a couple of years wait for the mass market VR market.