VRChat, the studio behind the virtual reality social platform of the same name, has laid off 30 percent of its workforce.
The company described the layoffs as a “proactive step towards securing the future success of our business, community, and mission.”
“We believe it positions us strongly for the years ahead, allowing us to navigate challenges effectively and continue delivering on our mission,” reads a statement posted on X.
“Our founders made this difficult choice to support VRChat’s future, and we are so deeply sorry for the impact this decision will have on our team.”
VRChat said it’s currently focused on supporting impacted employees by providing assistance including extended severance packages, extended healthcare coverage, and career placement assistance.
“Our responsibility is to maintain and grow the space we’ve created in VRChat, where so many people have found friends, family, and happiness–and most of all, to bring that opportunity to everyone. Although difficult, this decision enables us to uphold our responsibilities for many years to come,” continues the statement.
“We ask all of you to help support our departing team members during this transition and to respect their privacy as they figure out what’s next.”
Layoffs the result of over-hiring and fleeting growth
In an email sent to all VRChat employees, company CEO Graham Gaylor explained the redundancies are the result of taking too long to add a management layer to a flat organization, over-hiring individual contributors (ICs), running out of time to execute its five-year strategy, and needing different roles and expertise for the next part of that journey.
“As we modelled our five-year plan balancing profitability with business growth, we arrived at the hard conclusion that we needed to reduce the team by around 30 percent. We determined which critical skills, expertise, and roles matched our future business needs and based decisions on these criteria,” added Gaylor.
“These decisions are not a reflection of the quality of the team members who are leaving, but rather one of a changing business and market.”
Notably, Gaylor said VRChat saw “incredible growth” in 2021 and 2022, which is when it chose to expand its team. The company, however, struggled to maintain that growth and subsequently “shrank year over year.”
“Historically, we’ve been a flat organization, with most of the team being individual contributors (ICs). This appeared to work well, as we continued to see strong product growth with the market into 2022 without a management layer,” added Gaylor.
“Then VR growth slowed, and VRChat’s growth slowed and we found ourselves with a team of talented IC’s all doing their best to help achieve the company’s goals. It took us until mid-2023 to recognize that we needed a product and people management layer to help align all of our talented IC work towards our goals and what skill sets we needed to grow over time.”
Gaylor concluded the email by claiming the layoffs, while “painful,” will ultimately leave VRChat well placed to deliver “long-term success.”