Gaming startup Rec Room, known for its cross-platform social app where players can build and share games and experiences, announced a sweeping personnel reduction.
Co-founders Nick Fajt and Cameron Brown announced on Aug. 25 that the company cut roughly half its team that day, calling the decision "one of the toughest choices in Rec Room history."
A Worker Adjustment and Retraining Notification filing with the Washington State Employment Security Department confirmed 141 employees were impacted. Leadership framed the move as a business decision meant to stabilize operations and preserve the long-term future of the platform.
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From Unicorn Momentum to a Strategic Reset
Founded in 2016 and based in Seattle, Rec Room has become a breakout social gaming and creation platform, known for its cross-device play and tools that enable users to build worlds, games, and digital goods.
Investor enthusiasm culminated in December 2021, when the company raised $145 million at a $3.5 billion valuation. This capital injection followed a $100 million funding round in May 2021 at a $1.25 billion valuation, which made Rec Room one of the first virtual reality unicorns.
Those milestones cemented Rec Room as a standard-bearer for social user-generated content in virtual and mixed reality ecosystems. According to GeekWire, the company had already trimmed headcount by 16% in March, a sign that growth plans were being recalibrated months before this week's larger action.
Why the Company Is Refocusing Now
Fajt and Brown said in their announcement that the team invested heavily in creation tools across personal computers, virtual reality, consoles, and mobile, but the most impactful content continues to come from PC and VR creators.
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They added that attempts to bridge device gaps, including Maker AI, frustrated core creators, while a flood of lower-powered device content increased review burdens and stretched the organization.
Fajt and Brown said the new plan centers on empowering the platform's top creators, stabilizing the app with less frequent client releases, and refreshing Rec Room Originals like Paintball with a mix of free and paid features if the economics work.
The company also said July delivered the highest player spending on user-generated content to date, a data point leadership cited to support a narrower focus on creators who already drive engagement and revenue.
What The Reset Means For Players, Creators, and Seattle's Startup Scene
Rec Room said it will expand curated monthly "fests," feature more content from top creators, reduce algorithmic churn, and aim to win back excitement through quality rather than volume.
Fajt and Brown emphasized that the decision reflects financial realities, not the talent of departing team members, and detailed severance and benefits, including three months of pay, six months of health coverage, and the option to keep company laptops or desktops.
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The latest filing with the Washington State Employment Security Department highlights how quickly fortunes can shift for consumer platforms that raised large sums during the 2020–2021 cycle, even for brands with strong communities and high-profile backers, GeekWire says.
Rec Room Says Finances Are Stable and UGC Revenue Rising
In a follow-up announcement on Aug. 28, Fajt said that the company remains financially stable, with "several years of runway" and no debt, despite the layoffs earlier this week.
He said overspending forced the reduction, adding that continuing on the same path would have exhausted funds within a few years. Acting now, he said, allows Rec Room to keep more than 100 employees and plan through 2029.
Fajt added that user-generated content is growing quickly, with July revenue up 70% year-over-year and creator payouts reaching record levels. He acknowledged UGC carries lower margins than first-party content but said the tradeoff supports scalability and rewards creators.
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