Amid Slow VR Growth, Virtual Hangouts Startup AltspaceVR to Shut Down

Xconomy San Francisco — 

Despite advances in virtual reality technology and plenty of hype, the medium has yet to take off in the way its advocates envision.

The latest reminder is the demise of AltspaceVR, a Redwood City, CA-based startup that hosts social experiences in virtual venues. The four-year-old company announced in a blog post Friday that it will shut down on Aug. 3.

“The company has run into unforeseen financial difficulty and we can’t afford to keep the virtual lights on anymore,” the company wrote in the post.

AltspaceVR raised $15.7 million from investors, according to its website. Its backers include Comcast Ventures, Tencent, Lux Capital, Dolby Family Ventures, and Google’s venture capital arm. The company said it last raised capital in 2015.

“It looked like we had a deal for our next round of funding, and it fell through,” AltspaceVR wrote in the blog post. “Some combination of this deal falling through and the general slowness of VR market growth made most of our investors reluctant to fund us further. We’ve been out fundraising but have run out of time and money.”

The company is also being sued for patent infringement by Texas-based Virtual Immersion Technologies, which filed several similar lawsuits against the likes of Boeing, Lockheed Martin, and Sliver.tv, Reuters reported in June.

AltspaceVR’s team thinks the company’s technology could be “foundational to the future of social VR,” and they’re figuring out what to do with the company’s assets, according to the blog post.

“We’d love to see this technology, if not the company, live on in some way, and we’re working on that,” the company wrote.

AltspaceVR’s story is indicative of both how far VR has come, and how far it still has to go.

The company combined social media with VR by offering people a way to share a variety of experiences in virtual rooms, such as reunions of friends, movie and TV viewing parties, karaoke nights, and live performances by comedians and other entertainers. The VR headset-wearing participants appeared as avatars, but were heard in their own voices.

AltspaceVR and other companies—including Facebook—believe social VR experiences could become a popular way for people around the world to connect. But we’re not there yet. (Other companies that have developed products similar to AltspaceVR’s include Facebook-owned Oculus, England-based Starship Group, and Seattle-based Convrge, which called it quits last year.)

AltspaceVR made more progress with this concept than most VR companies have so far. It said around 35,000 people use its product every month, “which we think is pretty good for the size of the VR market,” according to the blog post. AltspaceVR’s big events have typically drawn around 1,000 attendees, and the average user spends 35 minutes a day in its virtual rooms.

But the company wasn’t charging users to attend live performances or join hangouts. The idea, as Xconomy’s Bernadette Tansey explained in a November article, was to experiment with the medium and try to build a VR fan base.

“This is such new stuff that the business models are not well defined yet,” AltspaceVR CEO Eric Romo said in November. “We’re just trying to delight audiences.”

AltspaceVR plans to host a farewell party—a virtual one, of course—on Aug. 3 before shutting down the company at 7 pm Pacific time.

“We know many of our users have created vibrant relationships in AltspaceVR, so please use the next few days to connect with those friends and hopefully find another way to stay in touch,” the company wrote in the blog post.