Social virtual-reality startup AltspaceVR is closing its doors, after a new round of funding fell through. The company had launched an app for people to meet up and chat within virtual reality, with music one of its potential areas.

“The company has run into unforeseen financial difficulty and we can’t afford to keep the virtual lights on anymore,” explained a blog post overnight about the shutdown, which is scheduled for 3 August.

“We had a supportive group of investors that last gave us money in 2015. It looked like we had a deal for our next round of funding, and it fell through. Some combination of this deal falling through and the general slowness of VR market growth made most of our investors reluctant to fund us further.”

AltspaceVR says it had 35,000 monthly users – “pretty good for the size of the VR market” – spending 35 minutes a day in the app.

The news reminds us of a panel session at the MIPTV conference in April in which the CEO of one of AltspaceVR’s rivals, vTime, was candid about the market.

“The biggest challenge our company – and the vast number of companies I know in virtual reality – is facing is survival until such time as any of us can actually make some money out of this,” he said.

“The vast majority of it is reliant on reach and distribution, and a large user base… that’s not going to happen until 2019, 2020… the challenge is survival until then.”

AltspaceVR won’t be the last VR startup to topple in the face of that challenge. Music Ally’s question is how many of the music-focused VR startups will last the distance.

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