Spatial, a company founded in 2017 by Agarawala and Jinha Lee, has experienced significant changes in its business model over the past seven years. Despite the challenges, CEO Anu Loewenstein remains optimistic about the company’s pivot towards a new category of games. “The games, as an experience, are not super different from a really great mobile game,” explains Loewenstein. “The difference is in distribution. It is a new kind of category of games.”
This latest pivot represents the third time that Spatial has pivoted its business model. While some may view it as a Hail Mary pass, Loewenstein sees it as a necessary move to ensure the startup’s success. With $48 million in venture capital funding and a recent $25 million investment from Korea Investment Partners, Lerer Hippeau, White Star Capital, and Balaji Srinivasan, among others, Spatial is poised to make its mark in the gaming industry.
“I think it’s good for tech companies to be real,” says Loewenstein. “Earlier this year we had a conversation as a leadership team and with our board about where we were from a runway standpoint. But in this case, because we had already proven the browser-based social tech, and because we had use cases in Spatial that validated the thesis that games were sticky, I think they were willing to give us the vote of confidence.”
Despite the challenges, Spatial’s move into the gaming industry could prove to be auspicious. The global gaming market is projected to reach $187.7 billion in revenue this year, and consumer spending on games in the US was up 12 percent year over year midway through 2023, totaling $4 billion for the second quarter. This data suggests that the gaming industry continues to thrive despite the shifting consumer behaviors in a post-pandemic world.
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While Spatial’s pivot into the gaming industry may seem bold, it draws inspiration from the success of platforms like Roblox, which has seen a surge in user hours spent on the app. Eddie Lee, general partner at White Star Capital, acknowledges the influence of Roblox, stating, “Roblox’s success with user-generated games definitely served as a source of inspiration.”
However, with the move into user-generated games, Spatial must also consider the challenge of content moderation. As the browser-based experience rapidly became the most popular mode in Spatial, the need for effective content moderation tools becomes crucial. While the company currently offers a reporting system for games or spaces on its platform, its content moderation strategy is still evolving.
Both Eddie Lee and Loewenstein acknowledge the significance of content moderation and the need for guardrails. However, Spatial is still in the early stages of hosting user-generated games and has yet to finalize its content moderation strategy. Currently, reports from users feed directly to two Spatial employees who manually decide whether to suspend or block a user or specific content. As the platform scales up, Spatial plans to incorporate more AI tools to support content moderation.
Despite the challenges, scaling is crucial for Spatial’s success in the gaming industry. As a startup, the company must navigate the complexities of the gaming market and continue to adapt to meet the needs of its user base. However, with the support of investors and a clear vision for the future, Spatial remains optimistic about its trajectory in the gaming industry.
