Rec Room Raises $145M at $3.5B Valuation

Rec Room Secures $145 Million to Expand User-Generated Immersive Platform

Following the success of Roblox and its user-created gaming ecosystem, another startup is experiencing substantial investment to develop a similar platform focused on immersive experiences. Rec Room, a free-to-play, cross-platform social gaming enterprise, has obtained $145 million in funding. These resources will be allocated to further refine its tools and broaden its user base, enabling them to construct their own experiences across a variety of devices, including mobile phones, gaming consoles, PCs, and VR headsets. Supported operating systems and platforms encompass iOS, Xbox, PlayStation, Oculus, Steam, and Android (added in August).

Funding Details and Valuation

Coatue Management is leading this funding round, with contributions from current investors Sequoia Capital, Index Ventures, and Madrona Venture Group. The investment results in a company valuation of $3.5 billion.

This represents a considerable increase from its valuation in March of this year, when it secured $100 million led by Sequoia Capital at a $1.25 billion valuation. During this timeframe, the company has demonstrated remarkable expansion. It reported 2 million users actively playing and creating content in March; currently, that number has risen to 37 million.

Growth Amidst Rising Interest in Immersive Technologies

The funding arrives during a period of significant growth and scale for Rec Room, coinciding with increased attention on VR and immersive experiences. Specifically, companies that are developing content – or the means to create content – that engages users within these mediums are attracting considerable focus. A key challenge previously has been the lack of sufficiently compelling content to justify investment in, and adoption of, often cumbersome VR headsets and advanced technologies.

Rec Room's Unique Social Gaming Approach

Rec Room distinguishes itself as a “social gaming” company in several ways. Its growth is notably driven not only by the capacity to create and play user-generated games and participate in collaborative gameplay, but also by its provision of a popular virtual social space for users to interact beyond gaming activities.

Unlike many other social gaming companies that depend on platforms like Facebook for their social features, Rec Room has already facilitated virtual events such as weddings, business conferences, and informal gatherings. These activities have likely been amplified by the COVID-19 pandemic and its impact on in-person social interactions and travel. The platform’s diverse range of experiences, catering to both beginners and seasoned gamers, creates a low barrier to entry for all user groups, contributing to the success of its “Rec Life” concept.

Company History and User Base

Established in 2016 in Seattle, Rec Room has, thus far, avoided the typical trajectory of rapid ascent followed by a swift decline seen in many other social gaming ventures. It currently boasts 37 million users who both build and play games within “rooms,” where they connect virtually with others. The platform already hosts approximately 12 million individual rooms.

While the number of monthly active users isn't explicitly stated, Rec Room reports a nearly 450% increase in monthly user count since November 2020. Mobile users are a significant driver of this growth, experiencing a tenfold increase during the same period.

Future Plans and Vision

“Watching Rec Room evolve from a small collection of mini-games into a global platform with millions of community-created experiences has been incredible,” stated Rec Room co-founder and CEO Nick Fajt. “The platform has become a hub where individuals can connect, build communities, and express their creativity. We have much more planned, and as we move into 2022, we are eager to develop more experiences, expand to new platforms, invest in top-tier trust and safety systems, and continue enhancing our creator tools.”

Financial Performance and Investor Confidence

The company is currently not disclosing specific revenue figures, but in March, it announced payouts totaling $1 million to game creators on its platform.

“We admire the world Rec Room has built, fostering a space for friends to create and play together,” commented Matt Mazzeo of Coatue Management. “Millions of players are engaging in Rec Room across phones and VR, and we are thrilled to partner with the team as they make the digital world more enjoyable and immersive.”