Startup Investors Have Fled The Metaverse

Almost nobody these days is spending much leisure time in the metaverse. Additionally, almost no investors are backing fresh rounds for startups creating the next generation of virtual worlds.

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That, broadly, is the finding from our latest data dive into venture funding tied to the metaverse, virtual worlds and augmented reality. Investment around these themes hit a multiyear low in 2023, driven by declining support for consumer-focused startups.

For perspective, below we mapped out the past six years of funding to the space.

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U.S. metaverse-related investment also contracted sharply. The largest late-stage venture round in the space last year was an $82 million Series D for Augmedics, a developer of augmented reality image guidance technology for surgery. Intriguing indeed, but hardly a recreational application.

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Meanwhile, there were no U.S. rounds of $100 million or more in 2023 for consumer-facing companies developing virtual worlds. And as illustrated below, the six-year chart shows a clear downward slope.

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We don’t talk about the metaverse

Lower funding feeds into a narrative of the metaverse as yet another example of a much-hyped tech breakthrough that never gained mainstream adoption.

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After all, it was just over two years ago that Mark Zuckerberg famously renamed Facebook as Meta. The move came with a founder’s letter envisioning a future in which one could “teleport instantly as a hologram to be at the office without a commute, at a concert with friends, or in your parents’ living room to catch up.”

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Fast-forward to today, and Meta’s initially legless metaverse, Horizon Worlds, hasn’t proven popular. To date, the company has lost tens of billions on its metaverse efforts.

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It’s not just Meta. Across brands, U.S. sales of VR headsets and augmented reality glasses have reportedly plummeted. In the startup sphere, the most heavily funded company is Magic Leap, which has raised $3.5 billion to date but hasn’t shown traction.

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Even the term “metaverse” looks poised for a reboot, with hawkers of headsets and associated software opting for terms like “spatial computing” and “three-dimensional user interface."

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Enter Apple

But before we give up on visions of a headset-enabled, immersive digital reality, it’s time for Apple to have its moment.

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Last week, the world’s most valuable technology announced a Feb. 2 public release for its much-anticipated Apple Vision Pro headset. CEO Tim Cook modestly described the $3,500-plus  wearable as “the most advanced consumer electronics device ever created.”

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Remarkably, Apple’s product announcement for Vision Pro does not include a single mention of the terms “metaverse,” “virtual reality” or “augmented reality.” However, the company did use the term “spatial computing” eight times, and “magical” four times.

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Apple is famous for its marketing savvy, so we’ll have to assume these word choices to be deliberate. We can also take it as recognition that “metaverse” is not a buzzword that sells headsets.

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Notably, Apple is also pitching the appeal of a headset that allows users to transition with relative ease between 3D digital environments and actual reality. It has designed Vision Pro so that when a person approaches a wearer, the device looks transparent. The wearer’s eyes are revealed, and they can see the person approaching.

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A seamless transition from a digital world to the real one would go a long way to assuaging complaints that immersion in virtual worlds can be excessively isolating. This is one of the core reasons many of us prefer consuming content in 2D, as one need only look away from the screen to engage with immediate surroundings.

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As for another core complaint around immersive 3D computing — that it can be a physically uncomfortable and even nauseating experience — we’ll soon see if Vision Pro manages to assuage these qualms.

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Now back to startups

If Vision Pro does prove a hit, that should provide a boost for startups innovating around immersive digital worlds. While the initial audience size will be limited by the device’s hefty price tag, it’s reasonable to expect cheaper costs as the user base scales.

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But this time around, don’t be surprised if the hotter startups aren’t pitching themselves as metaverse companies. Instead, they’ll likely be talking up spatial computing and immersive digital environments. We’ll see if funding follows.

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Reference: https://news.crunchbase.com/venture/startup-investors-metaverse-funding-falls-aapl/