SoftBank-backed Improbable slashes losses by 85%, says pivot to the metaverse has paid off

Virtual reality startup Improbable said Wednesday that it reduced losses by 85% in 2022, a year that saw the company pivot its focus to powering new “metaverse” experiences.

The British company said in a press release that its revenues more than doubled last year to £78 million ($95 million), as its work on metaverses expanded significantly.

It recorded a loss of £19 million in the 2022 fiscal year, but this compared to a £131 million loss the year prior.

Improbable CEO Herman Narula said the company had reported its “best financial year” on record which reflected how its bet on the metaverse had paid off.

Improbable has historically burned through lots of money as it attempts to make its vision for vast virtual worlds a success. Critics have raised questions about the commercial sustainability of the business.

Improbable said that part of the reason behind the company’s reduction in losses was a dramatic reduction in the cost of running mass-scale virtual events.

Whereas initially it took millions of pounds to host one event, it now takes hundreds of thousands of pounds, the company said, and it anticipates this to continue to fall.

The year also saw Improbable divest two of its games studios, Inflexion Games and Midwinter Entertainment, and sell off a business unit focused on servicing defense clients.

Improbable finished the year with £140 million cash in the bank, signaling ongoing support from shareholders, the company said.

Improbable’s backers include the likes of SoftBank, Andreessen Horowitz.

Full accounts for Improbable are yet to be released on Companies House, the U.K.’s official register of companies.

In 2022, Improbable unveiled its ambition to become a major player in the so-called “metaverse” — the concept for a vast world, or worlds, in the digital sphere where people can work, buy and sell things, or just hang out.

The company has been working with players in the digital asset sphere, including Yuga Labs, which it worked with to build out the Otherside metaverse, where people can make their own digital avatars, attend events, and more.

The company doubled down on its metaverse strategy earlier this year with a white paper detailing its vision for MSquared, a “network of interoperable Web3 metaverses.”

MSquared, which is a separate business entity from Improbable, raised $150 million from investors last year.

The service — a complex piece of technical engineering with significant computing requirements — is intended to be accessible via cloud streaming, meaning you won’t have to download any software to jump into one of its worlds, similar to how movies and TV shows are accessed on Netflix. 

It’s drawn interest from big names in sports and entertainment, like Major League Baseball (MLB).

The company struck a major deal with MLB to launch a new virtual ballpark based on Improbable’s metaverse technology. People in the MLB metaverse can choose any seat they’d like to watch a game, or pick a camera spot to focus on a particular player.

The tech industry has been betting that virtual and augmented reality will prove to be something of a “paradigm” shift in technology akin to the invention of the internet or the smartphone.

Some are calling it the technology’s “iPhone moment,” in reference to effect Apple’s now ubiquitous handset had on consumers and businesses globally.

Apple recently announced its first virtual and augmented reality headset, called the Vision Pro, while Meta unveiled its Quest 3 headset in June. 

Improbable is taking a different route to companies like Apple, Meta, and Microsoft, which is behind the HoloLens mixed reality products.

For one, you won’t need a headset to enter an MSquared space, as the software will be desktop-based. The experience is also intended to be more decentralized and interoperable, with the ability to take content from one metaverse to another.

Founded in 2012, Improbable has for years been attempting to build vast, continuously rendering worlds in which thousands of people can play games and interact with each other.

The London-headquartered firm, one of Japanese tech investment giant SoftBank’s biggest bets in Britain, was founded by Cambridge computer science students Narula and Rob Whitehead with the ambition of developing large-scale computer simulations and “synthetic environments.”