About 30 employees of the virtual spaces platform Gather disappeared abruptly from their virtual office on June 2. Video chats are typically enabled when users move near one another in the virtual world. However, they stopped connecting. Some users believed their software was experiencing an outage.
Gather’s “metaverse” purge, they quickly discovered, was deliberate–the result of real-world layoffs at the startup of two years. Phillip Wang, a co-founder of Gather and CEO, wrote an email to terminated employees that “nearly one third” of the company’s 90 employees were being fired. According to a copy of this note viewed by Forbes.
According to three people familiar, the layoffs were a surprise to employees. In November, Gather received $50 million from Sequoia Ventures and Index Ventures. The company was valued at $700 million. Three weeks before the layoffs, Gather’s leadership team informed employees at a Chicago company retreat that there were three to four years of runway. This is enough cash to sustain operations for the period. Two people stated that employees were assured they didn’t need to be concerned about being laid off because of the runway. Gather seemed well-positioned to weather the storm at a time other startups are having trouble raising capital.
In an email to Forbes, Wang denied the claims regarding the offsite meeting. He stated that the conference’s central theme was “change” and that it would be necessary to have a more focused strategy. Also, he suggested that they should be conscientious about their bets to ensure the runway of three to four years is used to its full potential. “A large percentage of our employees foresaw the reduction of force coming after that.” Wang also stated last week, in a separate interview–after the layoffs but before Forbes heard about them–that the startup might consider delaying raising another round of funding until it achieves profitability.
In an earlier interview, Wang stated to Forbes that the company had shifted its focus to developing its product for remote working, which is its highest-traction use case. The company internally used the same reasoning as the June layoffs. Wang sent an email to his laid-off employees, saying, “During Covid lockdowns, we were able prove out hundreds of use cases for future Metaverse”, but market conditions now require us to concentrate hard on what will get us to the next Chapter.”
According to Gather operations experts, some employees didn’t know about the company-restructuring pivot. Two people who spoke on Gather’s behalf said that the layoffs impacted employees in multiple departments. This included people whose jobs were directly related to remote work features. Wang had stated that these would be the company’s main focus. Wang replied in an email to Forbes that the vast majority of those who were cut weren’t working on remote work.
Gather was founded in 2020 by four college graduates. It offers an accessible version of the futuristic “metaverse” and allows users to meet up and have chance conversations.
Forbes profiled Gather during a feature article in Feb. Wang stated that over 15,000,000 people had used the software at least once. This included 100,000 workers using it as a replacement for physical office space. According to Forbes estimates, the company will earn about $10 million in revenue by 2021. Gather raised $77 million from Sequoia Index, Y Combinator, and Index.
“In terms of building a team and culture, they were doing in six months what we did for five years,” Dylan Field, CEO, and co-founder of Figma, said to Forbes.
However, such optimism and progress couldn’t withstand a sea change in capital markets and how startups prioritize growth overspending. Even though Gather raised funding before the market dried up, many of its employees are now looking for new jobs six months later.
