In a difficult turn of events, Ultraleap, the Tencent-backed startup based in Bristol, has sold parts of its business and laid off more than half of its workforce. The move comes after the company faced significant commercial challenges amid a global decline in sales within the extended reality (XR) sector.
Ultraleap, known for its innovative work in haptics and hand tracking technology, had been seeking buyers for parts of its business for months. According to sources close to the situation, the company has now found buyers for key portions of its operations.
The company has sold its hand-tracking division to Roli, a musical instrument company, marking a significant pivot. Additionally, the intellectual property related to haptics and hand tracking has been acquired by SIM IP, a U.S.-based intellectual property financing firm. This deal is expected to close in March, after being officially announced last month.
To make matters worse, Ultraleap also announced a round of layoffs, reducing its workforce by 30 employees last Friday. This leaves the company with around 24 remaining staff members, some of whom will join Roli as part of the business sale, according to insiders.
Ultraleap has declined to comment on the developments.
Underperformance in the XR Market
Since its inception in 2013, Ultraleap has raised over $200 million from notable investors such as Tencent, IP Group, and British Patient Capital. The startup aimed to commercialize its cutting-edge XR technologies for applications in industries such as healthcare and automotive. However, despite strong backing and innovative technology, the company has struggled to thrive in the XR market.
The broader XR sector, which encompasses augmented reality (AR) and virtual reality (VR), has been in a state of decline. According to International Data Corporation (IDC), AR/VR headset shipments fell by more than 67% globally in the first quarter of 2024. Last year, Meta discontinued its VR headset, and Apple scaled back production of its own, signaling that the AR/VR market may not be meeting the optimistic projections set by companies and investors.
Ultraleap made an initial round of layoffs in the summer of 2024 and acknowledged that its market performance had fallen short of expectations. In its most recent financial report, covering the year 2023, the company revealed that the AR/VR sector underperformed during 2024, and it was facing significant financial difficulties.
The report noted that Ultraleap had breached the terms of a £15 million loan and indicated that it might need to sell off more assets to raise funds, underscoring the company’s ongoing struggles.
Struggles of UK DeepTech Startups
Ultraleap’s challenges reflect the broader issues faced by UK-based deeptech startups, which focus on developing technologies rooted in scientific and engineering research. These companies often encounter difficulties in translating innovative R&D into commercially viable products.
In February 2024, Arrival, an electric van maker, entered administration after missing its commercial targets, and Graphcore, a chip company, was sold for less than the $700 million invested in it. Ultraleap’s situation adds to the growing list of deeptech companies in the UK facing financial turmoil despite initial promise.
