VR/AR Funding Falls As Metaverse Mass Adoption Still Not Reality – Crunchbase News

One day, perhaps, we will spurn the two-dimensional screens that now dominate our attention in favor of the more immersive world of the metaverse.
At present, however, that isn’t happening en masse. And as Meta’s staggering share price plunge on the heels of its pricey metaverse investments demonstrates, there’s lots of money to be lost in pursuit of that futuristic vision.
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Venture investors appear to be growing increasingly sensitive regarding those risks. That, at least, is one easy explanation for why funding to companies in the VR, augmented reality and virtual worlds categories has been dropping quarter over quarter since their peak in late 2021.
How far down? Below, we chart out startup funding to the broader metaverse category for the last five quarters.

Since hitting over $2.1 billion in the fourth quarter of 2021, metaverse-related funding has fallen to around $760 million in the most recent full quarter. The third quarter was also lower than Q1 and Q2 of 2022.
On an annual basis, it also looks like 2022 is on track to come in well below 2021 for metaverse- and VR-related venture funding. Below, we look at funding to the category for this year and the prior five calendar years:

Overall global venture funding, of course, has also been down sharply, so augmented and virtual reality categories are by no means isolated examples of investors’ rising risk-aversion. Still, hot sectors have been known to buck trends, and that isn’t happening here.
However, investors clearly aren’t abandoning the category. At least seven metaverse- and augmented reality-related rounds of $100 million and up have closed so far this year. The largest include:
We’re also seeing multiple deals across some similar themes, including avatars, health applications of VR, and gaming.
On the health front, Mindmaze, a digital therapeutics platform that employs VR in some technology, secured $105 million in a February financing. And Proximie and Osso VR, two companies that apply VR technology to the practice of surgery, raised $80 million and $66 million, respectively, in funding rounds this year.
On the entertainment side, investors recognized that virtual worlds usually require an avatar to get around. Multiple companies focused on avatar development raised 2022 rounds. The aforementioned Genie was the largest, followed by Soul Machines, a developer of “digital people” who interact in virtual worlds and other online settings, which closed on $70 million in February. Another, Ready Player Me, an Estonian startup working on cross-app avatars, snagged a $56 million Series B in August.
Meanwhile, on the public markets, investors seem bearish lately on companies most closely associated with the metaverse and 3D content.
It’s not just Meta (which, incidentally, has shed over two-thirds its value since changing its name from Facebook one year ago.)
Unity Software, a platform for 3D content creation whose software is used in building many top mobile games, is down 85% from its peak last year. After the company rejected a $20 billion August takeover bid from AppLovin, shares have trended lower, with Unity recently valued just under $9 billion.
Matterport, a provider of technology to create digital renditions of physical spaces in the real world, has also been trending lower in recent months, after going public via a SPAC merger in July 2021. After peaking roughly a year ago, shares are now down over 80% and close to an all-time low.
Still, we’ve seen these cycles before. The highest year for AR/VR funding, per Crunchbase, was actually 2018, which saw over $4.6 billion thanks to some large rounds by companies like Magic Leap and SenseTime.
Investment was lower in 2019 and 2020 before rebounding in 2021. Now, this year, we’re down again.
The up-and-down nature of funding indicates that the concept of immersive digital technologies that draw us deeper into virtual worlds remains a compelling one. But investors are apparently only willing to lose so much in pursuit of that vision.
Illustration: Dom Guzman
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Editorial Partners: Verizon Media Tech
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