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    Home » A Buzzy VR Startup Pivots Again—This Time to Games
    Games

    A Buzzy VR Startup Pivots Again—This Time to Games

    News RoomBy News RoomNovember 30, 20233 Mins Read
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    “The games, as an experience, are not super different from a really great mobile game,” says Loewenstein. “The difference is in distribution. It is a new kind of category of games.”

    This is the third time in seven years that Spatial has shaken up its business model. Loewenstein wouldn’t go as far as saying the latest pivot was a Hail Mary pass, but the startup needs a completion. Spatial was first founded in 2017 by Agarawala and Jinha Lee, who had previously worked on AR interaction technology at Samsung. It has raised $48 million in venture capital funding since then. Its largest round came in December 2021: $25 million from Korea Investment Partners, Lerer Hippeau, White Star Capital, and Balaji Srinivasan, among others.

    “I think it’s good for tech companies to be real,” says Loewenstein. “Earlier this year we had a conversation as a leadership team and with our board about where we were from a runway standpoint. But in this case, because we had already proven the browser-based social tech, and because we had use cases in Spatial that validated the thesis that games were sticky, I think they were willing to give us the vote of confidence.”

    There’s broader market evidence suggesting that Spatial’s move could be an auspicious one. Despite slowed growth in 2022—as consumers shifted from pandemic-era screen habits—the global gaming market is projected to reach $187.7 billion in revenue this year. According to Pitchbook, a Morningstar company that tracks venture capital funding and merger activity, consumer spending on games in the US was up 12 percent year over year midway through 2023, totaling $4 billion for the second quarter.

    And again: Roblox. People are spending more and more hours in the Roblox app, making it a darling of the user-generated gaming world, even as the company’s costs rise and it faces alarming content moderation problems.

    “Roblox’s success with user-generated games definitely served as a source of inspiration,” says Eddie Lee, general partner at White Star Capital. “And the browser-based experience quickly became the most popular mode in Spatial.”

    “The engineering challenge is significant, and convincing the world to create games for the web is not easy either, but we think there is a compelling opportunity behind these hurdles,” Lee adds.

    As for potential content moderation issues, both Eddie Lee and Loewenstein acknowledge the need for guardrails. But Spatial is so early in hosting user-generated games that it hasn’t figured out its strategy for keeping things civil. It offers a reporting system for games or spaces on its platform, but right now that feeds directly to two Spatial employees who manually decide whether to suspend or block a user or specific content. Spatial says it will likely turn to more AI tools to moderate as it scales up its game platform.

    Scaling, of course, is the crucial part. For startups, it always is.

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