Rec Room
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Rec Room raises at $1.25B valuation from Sequoia and Index as VCs push to find another Roblox
Investor FOMO following Roblox’s blockbuster public debut is pushing venture capitalists who missed out on that gaming giant to invest in competing platforms.
Today, Rec Room announced it has raised $100 million from Sequoia and Index, with participation from Madrona Venture Group. The deal is a huge influx of capital for Rec Room, which had raised less than $50 million before this round, including a $20 million Series C that closed in December. In 2019, we reported that the company had raised its Series B at a $126 million valuation, this latest deal values the company at $1.25 billion, showcasing how investor sentiment for the gaming space has shifted in the wake of Roblox’s monster growth.
Rec Room launched as a VR-only platform, but as headset sales creeped along slowly, the company embraced traditional game consoles, PC and mobile to expand its reach.
In a press release accompanying today’s funding announcement, Rec Room detailed it has surpassed 15 million “lifetime users” and had shown 566% year-over-year revenue growth. In December, CEO Nick Fajt told TechCrunch that the company has tripled its player base in the past 12 months.
The company has been following in Roblox’s footsteps in many ways as it build out its creator tools and seeks to build out an on-platform economy for game creators. The company says that 2 million players have created content on the platform and that Rec Room is on track to pay out more than $1 million to them this year.
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Social gaming platform Rec Room scores $20 million Series C
Social gaming platform Rec Room has scored some new funding as it aims to bring its once VR-centric world to every major gaming platform out there.
The startup has closed a $20 million Series C led by Madrona Venture Group . Existing investors, including First Round Capital, Index, Sequoia and DAG, also participated in the round. They’ve raised just shy of $50 million to date.
The platform has been around for years serving as a social hub and gaming platform for virtual reality users. In recent years, the company has tried to scale its ambitions past being known as the “Roblox of VR” and scale its capabilities to meet its young user base. This year was big for the platform doing just that.
CEO Nick Fajt estimates that the company has tripled its total audience since this time last year as the company has made a concerted drive on new platforms. While a substantial portion of Rec Room’s audience still comes from its bread-and-butter VR audience, the platform’s base of console users has grown substantially in 2020 and, by the end of next year, Fajt expects that mobile will have grown to be Rec Room’s most common point of entry. Meanwhile, mobile Android remains one of the last major gaming platforms on which Rec Room still doesn’t have a home.
One of the company’s big aims heading into the new year is scaling their creation tools, which allow players to build their own experiences inside the game. More than 1 million of the platform’s 10 million registered users have engaged with creator tools, building 4 million distinct rooms on the platform. Next year, Fajt plans to scale up creator payments estimating that by the end of 2021 they’ll have paid out $1 million to their network.
Fajt says he wants creation tools on Rec Room to be more accessible to the general player base than other platforms, including Roblox, aiming to keep tools simple for now and push everyday users to invest time in the creation platform.
Image via Rec Room
“Roblox has an incredible business, that’s certainly no secret,” Fajt tells TechCrunch. “We want breadth of expression over depth of expression; we want anyone who comes into to Rec Room to be able to build.”
Despite the slow maturation of the VR market, Fajt says the company doesn’t plan on moving away from its VR roots anytime soon. The company has just updated its popular battle royale mode Rec Royale for the new Quest 2, as well as on iOS.
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Not all is predictable on Facebook’s social Horizon
Most of the people I spoke with at Facebook’s Oculus Connect see the proliferation of virtual reality as a foregone conclusion, one that’s just a matter of timing at this point. For Facebook, the conference’s “The Time is Now” catchphrase showcased that they feel their hardware is ready for everyone.
But despite the success they feel like they’ve tapped into when it comes to hardware iterations, the company’s bread and butter social networking prowess feels like it’s barely improved in-headset in the past several years of VR experimentations.
“On the social side, looking back, it’s kind of embarrassing all of the stages we’ve gone through at Oculus,” Oculus CTO and veteran programmer John Carmack conceded onstage during his signature rambling annual keynote, noting that his own social APK was followed by Oculus Rooms, Oculus Venues, Facebook Spaces and now the company’s latest shiny pearl Facebook Horizon.
Horizon’s debut this year included a flashy trailer for what quickly seemed to be the company’s biggest gamble and first potential social hit, a massive multi-player online world. In introducing the software, Zuckerberg talked about people-centric software as Facebook’s “bread-and-butter,” noting, “We build a lot of the best social experiences for phones and computers, and we want to do this for virtual reality as well.”
But Facebook does not actually appear to hold that much of an advantage over much smaller game studios in terms of understanding how to make social virtual reality experience take off.
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Against Gravity is building a VR world that won’t stop growing
The quest to create a social auditorium in virtual reality has eaten many VC dollars over the years. While plenty of contenders have emerged, it’s likely Against Gravity’s href=”https://rec.net/”> Rec Room has been the most creative in its approach to capturing a niche market while plotting how to build a sustainable business based on users in VR headsets talking to one another.
The Seattle startup has told TechCrunch exclusively that it has bagged $24 million over two rounds of funding. The studio’s Series A was led by Sequoia and their Series B, which just recently closed, was led by Index Ventures . Against Gravity has a bevy of top investors that also participated in the rounds, including First Round Capital, Maveron, Anorak Ventures, Acequia Capital, Betaworks and DAG Ventures.
The company didn’t break down the specific details of the rounds. Against Gravity was authorized to raise up to $15.4 in its Series B at up to a $126 million post-money valuation, according to Delaware stock authorization docs we got from PitchBook. The company didn’t comment on the valuation.
Rec Room is hardly a household name compared to some major console titles, but among virtual reality users, the title has been a standby known for the diversity of gameplay available inside its walls and its wide support for hardware. Users are able to create experiences or “rooms” that can be accessed by other users. They don’t need any coding knowledge to build these spaces, as creation all happens within the game and can be done by multiple users simultaneously.
Rec Room is also about to surpass one million rooms created by users on the platform. The company says these environments include “sports games, shooters, adventure quests, nightclubs, club houses, and escape rooms.”
While companies like Linden Labs, the creator of Second Life, have focused their VR efforts on realistic but unvarying user-created environments, Against Gravity has seemingly one-upped their strategy by focusing on dynamic gameplay modes where the emphasis is on user interactions as opposed to graphic fidelity.
The Seattle startup, which was founded in 2016, now has 35 employees building out and maintaining Rec Room. The company is playable on a variety of platforms, and is about to add iOS support to its roster, an expansion that could bring a lot more users onto the VR-centric platform.
Rec Room’s content isn’t monetized too aggressively at the moment. CEO Nick Fajt thinks some of the user-generated experiences are going to offer an interesting opportunity down the road, prompting users to spend in-game tokens on more than just upgrades to the platform’s Playmobil-like avatars.
“I think a direction that we’re actually excited about is that we want to let the users creating some of this content charge tokens to play them,” Fajt tells TechCrunch. “I think that’s one that we’re kind of on the cusp of doing and we’re hoping to get that out later this year.”
For Against Gravity, timing has always been a key consideration for expansion, especially inside the slow-growing VR market, which has only recently seemed to hit a stride. I chatted with Fajt back in 2017, and he told me that the key for VR startups surviving was staying lean and biding their time until standalone mobile headsets with positional tracking and motion controllers were released. Facebook’s Oculus Quest headset, which came out less than a month ago, is perhaps the first clear device to fit that vision.
One of Facebook’s head AR/VR executives shared earlier this week that more than $5 million in Quest content had been sold in the company’s store in the first two weeks after the device’s launch. That’s a major development for an industry that hasn’t seen many smash hits, but for free-to-play game makers like Against Gravity, which has now raised $29 million to date, there’s plenty of maturation in the VR market that still needs to happen.
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