Meta Forced to Furlough After Chinese Lead Backs Out of New Investment

Meta, makers of an AR headset dev kit, was close to raising a new round of funding before a Chinese lead investor backed out, Bloomberg reports. The Chinese investment firm had reportedly put up $20 million for the deal. Meta claims that the Chinese government urged the investment firm to reconsider the deal following trade tensions brought on by the Trump administration.

Meta, makers of the Meta 2, a tethered AR headset dev kit with a notably wide field of view, last raised $50 million in Series B funding back in mid 2016. According to Bloomberg the company had secured a lead investor for its next funding round, a Chinese private-equity firm and real estate entity which agreed to bring $20 million to the deal, with additional funding to be filled out likely in lesser increments from other investors.

But the deal hit a stumbling block when the lead investor backed out of the deal. Meta claims that the reversal was a result of trade tensions incited by the Trump administration.

“The Chinese government sent an official request to our lead investor to re-evaluate the deal based on the recent actions from the Trump administration,” Gribetz told Bloomberg. “This was a big shock to us.”

The stagnanting deal led Meta to furlough two thirds of the company’s roughly 100 employees, Bloomberg reports, suggesting the startup is short on cash.

The Meta 2 AR headset is bulky compared to other AR headsets on the market but offers a much wider field of view| Photo by Road to VR

Chinese investment in the US startup and tech space has been growing steadily, and has been a key source of capital for AR and VR companies like Magic Leap, which saw investment in both its Series C and Series D rounds from Chinese online mega-retailer Alibaba. Those rounds totaled nearly $1.3 billion, according to Crunchbase.

Meta itself counts China-based Tencent and Lenovo among its existing investors.

Over the last year the US has imposed tariffs on products from China, Mexico, Canada and the EU in an effort to make international goods less competitive in favor of domestic ones, according to BBC. President Trump says the goal of the tariffs on Chinese goods is to stop the “unfair transfers of American technology and intellectual property to China” and protect US jobs. All of the aforementioned countries, including China, have initiated retaliatory trade policies.

Meta, like any other US company, has to try to survive despite bumpy trade relations between the US and China. According to Bloomberg, the company plans to establish a Chinese subsidiary independent from its US operations which would allow the Chinese lead investor to back the company without making an investment in the US.

Exclusive: Meta 2 AR Demos Revealed in Full

As the VR and AR sector goes, Meta has been around for quite a long time. Founded in 2012, the company ran a successful Kickstarter in 2013 for an early AR development headset. In the company went on to raise $73 million between its Series A and Series B investments. In 2016 Meta announced its newest AR dev kit, the Meta 2, a tethered AR headset development kit with a wide field of view, which the company currently sells for $1,500.

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