NextVR, a Newport Beach virtual reality firm, laid off more than 50 employees on Monday, as the industry continues to grapple with a pullback in investor funding, according to former employees.
The company, which has a deal with the NBA to show games in virtual reality, is one of several California virtual and augmented reality start-ups that have cut staff or shut down because of lackluster headset sales.
Venture capital investments in virtual and augmented reality start-ups in L.A. and Orange counties plunged 81% to $24.7 million in 2018 compared with a year earlier, according to the PwC/CB Insights MoneyTree Report. That was just 10% of the amount investors poured into the local category in 2016, the peak of investment, according to the report.
The company confirmed there were layoffs but declined to provide information on the number of people affected or its staff size. Three former employees who asked not to be identified said at least 50 people were laid off out of about 120 to 130 who worked there.
Chief Executive David Cole declined to disclose the number of layoffs but said “significantly less than half of the company was impacted.”
Cole said the layoffs were due to slower-than-anticipated sales of virtual reality headsets.
“The company was really staffed for a pretty explosive growth curve to happen” in 2016 and 2017, Cole said.
But many consumers didn’t embrace virtual reality. Early headsets were expensive, with some costing hundreds of dollars, and there wasn’t enough compelling content to persuade consumers to buy them, analysts said.
Most of NextVR’s content requires a virtual reality headset. The company, founded in 2009, shows sports and other live events in virtual reality and makes money through sponsorships. It has raised $115 million in funding, Cole said.
The layoffs did not come as a surprise to some employees, who noted the company’s holiday gathering was less lavish in 2018. The party was originally planned to be at a Huntington Beach hotel, but it was changed to the office patio, where people could drink beer on tap.
On Monday morning, NextVR’s staff was called to a meeting and told to check their email to find out their job status, according to former employees.
Cole said he still believes in virtual reality’s future growth, and encouraged other entrepreneurs to keep pushing ahead. He said that technology in VR headsets is continuing to improve and that the growth of 5G wireless technology will make it easier to consume immersive content.
“You will be able to capitalize on that,” he said.