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(Rec Room Image)
The eponymous Seattle-based company behind the virtual hangout app Rec Room has cut 16% of its workforce.
“This wasn’t an easy decision, but ultimately it’s one we had to make for the long term success of Rec Room,” CEO Nick Fajt wrote in a memo to employees posted to the company’s blog.
The memo blames the layoffs on changes in video game market growth, higher interest rates, and a “more challenging” fundraising environment.
“When we last raised money, we budgeted for 5+ years because the economic outlook seemed uncertain for late stage private companies,” Fajt wrote. “It remains uncertain three years later. Our current assumption is that we need to become self-sustaining using our current cash and not plan on any future fundraises.”
Rec Room has 372 employees, according to LinkedIn. GeekWire reached out to the company for further comment.
Rec Room, founded in 2016, 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 COVID lockdown in 2020 as a substitute for face-to-face interaction.
Fajt’s plans for Rec Room moving forward are to make the company “look and feel like a startup again,” by cutting down on hybrid roles, a reorganization towards a flatter company structure, and continuing to optimize internal workflow, including more of a reliance on building internal tools.
Fajt also noted that its upcoming next version of Rec Room, “Rooms 2.0,” is the “largest bet we’ve made as a company.”
PitchBook noted in its end-of-year report for 2024 that many would-be investors had departed the gaming sector, due to factors such as lengthy development cycles — it can take five years or longer to make a mainstream “AAA” blockbuster, which forces investors to take the long view — and rising interest rates.
