Gaming technology startup Improbable is set to raise a new funding round of $100 million as it sets its sights on creating metaverse worlds for buzzy Web3 firms like Bored Ape Yacht Club-creator Yuga Labs.
The hyped, Softbank-backed company is finally close to achieving “operating profitability,” its CEO Herman Narula said, after struggling to market its technology built to deliver huge virtual worlds where thousands of players could interact at the same time.
“We are now a financially sustainable business with a really interesting growth rate because we found product-market fit in a new sector,” Narula told the Financial Times.
The CEO said its venture with Yuga Labs, where it and Animoca Brands were tapped to create the "Otherside" metaverse, will contribute a big part of its revenue in 2022. The latest round would value the company at $3 billion.
According to documents, the company recorded a $170.4 million (£152 million) loss in 2021, which left it with $ 63.9 million (£57 million) in the bank as of the end of last year.
In 2017, Improbable raised the then-largest funding round ever for a British startup when it amassed $502 million in a round led by Softbank.
Improbable’s cash-burn rate mimics that of Meta, which rebranded from Facebook last year as it set its sights on developing its version of the metaverse, which refers to a vision of the future internet in which users will interact via 3D avatars across immersive environments.
The tech giant reported a $10 billion loss for 2021 from its Reality Labs division, with a further $5.7 billion burned through the end of July.
Metaverse moves in an uncertain climate
Improbable had already made moves towards rejigging its technology for the metaverse over the past few months.
In April, it launched M², a Web3 infrastructure entity to provide the tech for interconnected metaverse worlds. The separate entity was valued at $1 billion after receiving $150 million from Softbank and a16z, among others.
The jury is still out, though, on just how much appetite consumers have left for the metaverse and its related technologies.
NFT transaction volumes, for example, have hit a fresh new low in Q3, according to DappRadar, while major tokens like Bitcoin and Ethereum sit at one-year lows.
An uncertain global economy and rising interest rates have also put many VCs off from throwing money at unproven technologies, with CrunchBase reporting that Q2 VC funding fell 26% year on year.
Improbable backer Softbank is facing the impact of several technology investments gone wrong, too, with reports emerging last week that the investment giant will cut 30% of its workforce.
In August, CEO Masayoshi Son pledged to cut costs after a record $50 billion loss in the six months through June, driven by cratering tech valuations in its portfolio companies, like Bytedance and Klarna.
Editor's Note: On October 7, 2022, at 3 am ET, this article was updated to reflect that the amount raised was $100 million and Improbable's valuation is now $3 billion.