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On June 2, about 30 employees at the virtual spaces platform Gather abruptly disappeared from the company’s own virtual office. Video chats, typically enabled when users move into proximity of one another in the digital world, stopped connecting. Some thought their software was suffering from an outage or glitch.

But the purge in Gather’s “metaverse,” they soon learned, was intentional—the result of real world layoffs at the two-year-old startup. Gather cofounder and CEO Phillip Wang wrote in an email to the terminated staff that “nearly one-third” of the company’s 90 employees were being laid off, according to a copy of the note viewed by Forbes.

The layoffs came as a surprise to employees, according to three people familiar with the matter. Gather had raised $50 million in a funding round led by Sequoia and Index Ventures in November, valuing the company at $700 million. At a company offsite retreat in Chicago just three weeks before the layoffs, Gather’s leadership team told employees it had three to four years of runway (enough cash reserves to maintain operations during that period) and would continue hiring, the three people said. The employees were reassured they did not need to worry about layoffs due to the runway, two of the people said. At a time when other startups are struggling to raise capital, Gather looked well positioned to weather the storm.

In an email to Forbes, Wang refuted the claims about the offsite meeting. “The whole theme of the offsite was change and that we would need to adopt a way more focused strategy [and] be really diligent about our bets so the three to four years of runway [are] used as best as possible,” he said. “A large number of our employee base actually foresaw the reduction in force coming after that.” In a separate interview last week—after the layoffs, but before Forbes learned of them—Wang also said the startup may consider holding off on raising another funding round until it reaches profitability.

Wang told Forbes in the earlier interview that the company had pivoted to focus solely on developing its product for remote work, its highest traction use case, instead of other functionalities such as hosting virtual events. Internally, the company used the same rationale as reasoning for its layoffs in June. “During Covid lockdowns, we were able to prove out hundreds of use cases for the future of the Metaverse, but market conditions today require us to focus really hard on what will really get us to the next chapter,” Wang said in his email to laid-off staff.

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Still, some employees were not aware of such a company-reshaping pivot, according to two of the people with knowledge of Gather’s operations. When they came, the layoffs affected employees across multiple departments, two of the people said, including people whose jobs were directly relevant to the company’s remote work features—the same ones Wang had said would now be the company’s focus. “The overwhelming majority of the 30 people cut were not working on anything related to remote work,” Wang responded in his email to Forbes.

Founded in 2020 by four recent college graduates, Gather bills itself as an immediately accessible iteration of the futuristic “metaverse.” The software has a pixel art aesthetic reminiscent of a retro Pokémon video game, and gives users a sense of space in its virtual world to hold meetings and strike up chance conversations.

Forbes profiled Gather in a feature story in February, at which time Wang said more than 15 million people had used the software at least once, including 100,000 workers who were using it regularly as a substitute for a physical office space. The company generated about $10 million in revenue in 2021, Forbes estimates. Gather has raised $77 million in total from Sequoia, Index and Y Combinator.

“In terms of building the team and building culture, they were doing in six months what we did in five years,” Figma cofounder and CEO Dylan Field, who is an investor in Gather, told Forbes in February.

Such progress and optimism, however, couldn’t survive a sea change in the capital markets, and in how startups prioritize spendings versus growth, that has swept across the startup landscape since. And despite Gather raising funding before sources dried up, many of its team now find themselves looking for new jobs just six months later.

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