Meta’s funding suspension for VR app developers sparks startup layoffs

Meta’s recent actions have created ripples in its virtual reality ecosystem. The company is becoming more selective about investments in apps and games for its Quest mixed-reality headsets

According to a report from The Information, citing an insider with direct knowledge of the matter, Dutch startup Monks reportedly cut its team of 100 in half that had been dedicated to creating VR and mixed-reality projects for Meta.

“Monks, a Dutch company, has halved its team of 100 people that were dedicated to mixed reality and virtual reality projects for Meta, including building new “worlds” for Meta’s Horizon Worlds app, according to a person with direct knowledge of the matter,” The Information reported.

Similarly, Paris-based startup Atlas V, known for titles like Wallace & Gromit in The Grand Getaway and Jamtastic!, also halved its content production teams after Meta halted new funding. While Meta has stated that it plans to allocate more funds to developers this year compared to last, specific details about the distribution remain unclear.

Shifting Priorities

Over the past year, Meta has reassessed its spending on VR app development amid weakening sales in the mixed-reality market. The company has closed an internal VR studio and reduced funding for some external developers, refocusing its efforts on genres and projects showing greater potential for success.

Despite these budgetary adjustments, Meta has continued to push forward technologically. The company showcased its Orion prototype AR glasses in September, a promising step in augmented reality. Yet, the financial strain is undeniable. In the third quarter, Meta’s Reality Labs, responsible for VR and AR technologies, reported an operating loss of $4.4 billion.

To date, Meta’s Reality Labs has racked up losses exceeding $25 billion, underscoring the costly fallout of its ambitious but struggling metaverse venture.

Recent Cuts and Product Updates

Meta’s cost-cutting measures extend beyond app development. In August 2024, the company closed Ready at Dawn, the studio behind popular VR games such as Echo VR and Lone Echo. This was part of a broader 20% budget reduction in the Reality Labs division, which Meta described as a move toward long-term efficiency rather than immediate savings.

In another controversial decision, Meta ended support for its original Meta Quest VR headset in July 2024. Users were warned that continuing to use the device could pose data security risks as the headset would no longer receive bug fixes or updates after August 31. While this decision aims to prioritize newer models like the Meta Quest 3, it left some users frustrated.

The Bigger Picture

Meta’s recalibration reflects the challenges of balancing innovation with financial sustainability in an emerging market. While its commitment to AR and VR technologies remains evident, the company appears to be narrowing its focus, seeking more targeted investments that align with its long-term goals. Whether this strategy pays off for Meta—and the developers who rely on its funding—remains to be seen.