Seattle-based startup Rec Room, once valued at $3.5 billion, is laying off about half of its staff in a sweeping restructuring.
Co-founders Cameron Brown and Nick Fajt announced the layoffs Monday in a blog post, calling it “one of the toughest choices in Rec Room history.”
“This is a business necessity based on the financial trajectory of the company,” the founders wrote.
The gaming company now has just over 100 employees following the cuts, Fajt confirmed to GeekWire.
The cuts follow a separate round of layoffs earlier this year that impacted 16% of Rec Room’s workforce.
In their memo, Brown and Fajt said Rec Room became stretched too thin as it tried to build a user-generated content platform across VR, PC, consoles, and mobile.
While the company saw its most engaged creations come from PC and VR players, its efforts to expand to mobile and consoles never produced strong results. Millions of lower-quality creations also added heavy moderation and infrastructure burdens, while some attempts to simplify building frustrated the most impactful creators.
“So we ended up in a tough spot,” they said. “Too small to realize the ‘anyone can build anywhere’ vision, but too big to pivot to a more focused experience that was more reactive to what our players wanted and would pay for. The result was that we started to dig a financial hole that was getting larger every day.”
Rec Room will now shift focus to its strongest areas: supporting top PC and VR creators, improving its flagship in-house “Rec Room Originals” such as Paintball, and curating monthly events designed to re-engage players.
“The closest analogy is Sega stepping out of hardware to focus on games,” the founders wrote. “A large, painful, but necessary change.”
Founded in 2016, Rec Room became one of a handful of “unicorns” in Seattle’s startup scene when it raised $145 million at a $3.5 billion valuation in December 2021.
The company’s self-named app, which allows players to make and share games, virtual goods, and other experiences with one another, hit new heights during the pandemic in 2020.
Investors include Madrona, Sequoia Capital, Index Ventures, and others.
The company said it is providing affected workers three months of severance pay and six months of health benefits, as well as the option to keep laptops/desktops.
