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Seattle VR startup Rec Room raises $145M, reaches $3.5B valuation

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(Rec Room Image)

Rec Room, the Seattle-based development studio behind the fast-growing VR application Rec Room, has raised $145 million in new funding, bringing its current valuation to $3.5 billion.

This is Rec Room’s second round of funding in 2021, following a $100 million raise in March that officially catapulted the company into “unicorn” status as a privately-held startup valued at over $1 billion. Coatue Management led the latest round, with participation from existing investors Sequoia Capital, Index Ventures and Madrona Venture Group. 

Rec Room’s self-named, flagship application is available on multiple platforms in both 2D and VR formats, including PC, Oculus, mobile devices, Xbox, and as of Dec. 16, the PlayStation 5. Rec Room is a free app described as a “universally accessible online community,” where users create a cartoony virtual avatar to participate in a variety of activities, many of which were designed by the application’s community.

While Rec Room has been available since 2016, when it first arrived on Steam, its community grew dramatically over the course of 2020. During the COVID-19 quarantine, users turned to Rec Room to simulate in-person activities, including school lessons, birthday parties, happy hours, and one-on-one therapy. By Sept. 2020, Rec Room’s userbase had tripled.

Rec Room is among a group of community-based social gaming and entertainment apps that rely on user-generated content and have seen huge upticks in growth during the pandemic. That group includes Minecraft and Roblox, the latter of which is worth $44 billion after going public earlier this year.

“I think it’s the nature of social apps to have a compounding effect,” said Cameron Brown, chief creative officer at Rec Room. “The more people are playing, the more people there are to play with. This means that Rec Room becomes more inviting as it scales, so I think we have that going for us.”

The metaverse’s been here since 2016, and it doesn’t have arms or legs. (Rec Room Image)

Rec Room’s momentum has continued throughout this year. It debuted on Android devices in September, alongside a new seven-player racing game called Rec Rally that can be played inside the application. The studio has grown from under 45 employees to nearly 200, and has reported a 450% increase in Rec Room’s monthly users year-over-year as of November. Its total player count is now over 37 million.

According to Rec Room’s internal data, Rec Room‘s biggest group of active users comes from mobile platforms. It’s also hitting “all-time highs” on console and VR devices, and is currently the largest sccial VR app.

Right now, at the end of 2021, one of the bigger takeaways from Rec Room is that it’s way, way out ahead of the metaverse curve; all of the exciting things that Meta or Microsoft have promised for the metaverse are things that are already happening to some extent in Rec Room.

Brown said the startup is focused on “a people-powered metaverse.”

“When I’m asked about our vision for the metaverse,” Brown said, “my answer is grounded in people, and the things they want and need to do every day. The technology is fascinating, of course, but at the end of the day, the people in the virtual world are really what makes it tick, and are the most interesting and meaningful aspect.”

Future plans for Rec Room’s continued expansion include further investments in its creator community. Much of Rec Room has been made by its users, including new outfits, activities, and decorations for a user’s private in-game quarters.

Some of those users are already making what Brown describes as “real money” off their in-game creations, as other users are willing to pay for the privilege of using them, and Rec Room hopes to expand that to an extent where someone could theoretically make a living off of virtual craftsmanship within Rec Room.

The startup is led by co-founder and CEO Nick Fajt, who previously was at Microsoft as a producer and program manager on HoloLens.

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