Vreal

What did it do?

Vreal was a live-streaming platform that let streamers playing virtual reality games share the 3D environment of the game world with their viewers. Viewers wearing VR headsets could create their own avatars and stand next to the streamer, or explore the scene as passive observers.

Why did it shut down?

At its Series A round in February 2018 the platform was still in closed alpha, and it only opened in early access on Steam in June 2018. The full experience required both streamer and viewer to own VR hardware, narrowing an already small audience even further. An option to watch from a web browser was added experimentally only about two months before the closure. Around 18 months after the investment, in August 2019, the company closed, saying the VR market had not developed as fast as it had hoped and that it had been ahead of its time.

The story

Vreal was founded in Seattle in 2015 by Todd Hooper and set out to answer an ambitious question: what if, instead of watching a gamer on a screen, you could step inside the virtual world they were playing in? The platform streamed the entire 3D environment of a streamer playing a virtual reality game to viewers. Viewers wearing a VR headset could stand beside the streamer with their own avatars or wander the scene as passive observers. UploadVR described it as a Twitch for virtual reality.

The idea excited investors. After a $3.3 million seed round in 2015, an $11.7 million Series A followed in February 2018, led by Axioma Ventures with participation from Intel Capital, AET Fund, Upfront Ventures, Vulcan Capital and CRCM Ventures. That brought total investment to $15 million. At the time the platform was still in closed alpha and supported the Oculus Rift, HTC Vive and Google Daydream. In June 2018 it opened in early access on Steam.

The problem was the size of the target audience. The full experience required both streamer and viewer to own VR hardware, and virtual reality headsets did not spread as fast as expected. The company only managed to add an experimental option to watch from a web browser, for those without a headset, about two months before it closed.

In August 2019, around 18 months after its Series A, Vreal announced that it was closing and laying off its staff. The company's statement stressed that the VR market had not developed as fast as it had hoped and that it had been ahead of its time. The team added that it had wanted to share the magic of virtual reality with everyone and had achieved that vision technically. Vreal's story shows how expensive the right technology at the wrong time can be.

Lessons for founders

• For a product that depends on hardware adoption, calculate market size not from the number of devices sold but from the number of people who use them regularly.
• In a model that requires both creator and consumer to own the same expensive hardware, open a door from day one for users without it.
• If you raise a big round on an optimistic assumption about market timing, recalibrate your burn rate frequently against the market's actual growth.

Sources

1. Virtual reality game-streaming platform Vreal shuts down (TechCrunch, 2019-08-07)
2. Vreal VR Broadcasting Startup Shuts Down (UploadVR)
3. Vreal raises $11.7M to take virtual reality game streaming mainstream (SiliconANGLE, 2018-02-07)

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