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Virtual Worlds Startup High Fidelity Lays Off 25% of Staff, Pivots to Enterprise Communication

High Fidelity, the virtual worlds startup led by Second Life founder Philip Rosedale, laid off 20 staffers, or about 25% of its staff, this week. Rosedale said in a blog post that the company was changing course to focus on enterprise communication, and blamed lower-than-expected VR headset adoption for the decision.

“If you had asked me when we started the company in 2014, I’d have said that by now there would be several million people using (VR headsets) daily, and we’d be competing with both big and small companies to provide the best platform—but I was wrong,” Rosedale wrote.

“Daily headset use is only in the tens of thousands, almost all for entertainment and media consumption, with very little in the way of general communication, work, or education,” he added.

High Fidelity launched as a kind of VR-based successor to Second Life in 2016. The company pitched its platform as open and decentralized, giving artists and others a chance to create their own virtual worlds. It also briefly experimented with original content production, ordering a season of a VR talk show exclusively for High Fidelity.

Now, High Fidelity wants to focus on virtual world meeting spaces for teams and enterprises. These spaces don’t have to be used with VR headsets, with users also being able to join with regular PCs, and headphones for 3D audio.

In a post geared towards developers, High Fidelity further explained their reasoning for the pivot: “At the moment, there just aren’t enough people using VR headsets to sustain a business that makes a little money from a lot of users. There will be, but it will take a few years. In the meantime, we need to focus on a more specific use case for VR.”

High Fidelity shut down its own public spaces in its virtual world effective immediately, but the company will continue to support third-party developers who are working on their own spaces. High Fidelity will also continue to support its marketplace, which is powered by an in-world currency based on Blockchain technology.

The company raised around $73 million from funders including IDG Capital, Vulcan Capital and True Ventures.

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