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Writer's pictureRISHI KORDE

Startup Investors Have Fled The Metaverse

Updated: Jan 19




Few individuals are currently dedicating a significant amount of their free time to the metaverse, and there is a notable lack of investor support for emerging startups focused on developing the next wave of virtual worlds. This conclusion stems from our recent examination of venture funding in connection to the metaverse, virtual worlds, and augmented reality. Funding in these areas reached a multiyear low in 2023, primarily due to waning backing for startups targeting consumer-oriented applications. To provide context, we've outlined the funding trends over the past six years.

Investment related to the U.S. metaverse also experienced a significant contraction. In 2023, the largest late-stage venture round in this space amounted to $82 million, supporting Augmedics, a company specializing in augmented reality image guidance technology for surgery. Although intriguing, this application is far from a recreational one. On the other hand, there were no U.S. funding rounds of $100 million or more in 2023 for consumer-focused companies developing virtual worlds, as illustrated in the six-year funding chart, which clearly depicts a downward trajectory.

The diminished funding scenario contributes to a narrative portraying the metaverse as another overhyped technological breakthrough that has failed to achieve mainstream adoption. Just over two years ago, Mark Zuckerberg rebranded Facebook as Meta, envisioning a future where individuals could teleport as holograms for various purposes. However, Meta's Horizon Worlds metaverse has not gained significant popularity, resulting in substantial financial losses for the company. This trend extends beyond Meta, with reports of declining U.S. sales for VR headsets and augmented reality glasses across brands. In the startup landscape, Magic Leap, the most heavily funded company, with $3.5 billion raised to date, has struggled to demonstrate traction.

Even the term "metaverse" appears to be losing favor, as marketers of headsets and related software opt for alternatives like "spatial computing" and "three-dimensional user interface." Despite these challenges, there may still be hope for the vision of a headset-enabled, immersive digital reality, with Apple poised to make a significant impact.

In a recent announcement, Apple, the world's most valuable technology company, revealed a February 2 public release for its highly anticipated Apple Vision Pro headset, priced at over $3,500. CEO Tim Cook described it as "the most advanced consumer electronics device ever created." Interestingly, Apple's promotional materials for Vision Pro omit references to the terms "metaverse," "virtual reality," or "augmented reality." Instead, the company emphasizes "spatial computing" eight times and uses the term "magical" four times. Apple's deliberate word choices may reflect a recognition that the term "metaverse" does not resonate well with consumers.

Notably, Apple is marketing the appeal of a headset that facilitates a seamless transition between 3D digital environments and the real world. The Vision Pro is designed to appear transparent when someone approaches the wearer, revealing the wearer's eyes and allowing interaction with the approaching person. This feature addresses concerns about the isolating nature of virtual worlds and aims to provide a more immersive yet socially connected experience. The success of Vision Pro in addressing these concerns, including potential discomfort or nausea associated with immersive 3D computing, remains to be seen.


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