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Microsoft announced today that it has acquired the AltspaceVR team as it announced its big initiative to created a hardware and software ecosystem around Windows mixed reality headsets.

Microsoft didn’t explain the terms of the deal, saying only that AltspaceVR is joining Microsoft. Microsoft calls the emerging technology “mixed reality” to encompass both augmented reality headsets, such as its own HoloLens, and virtual reality headsets.

When AltspaceVR shut down in July, it seemed like the glory days of VR were over, as other well-known startups such as Envelop VR were also closing. But the fledgling industry is full of winners and losers, some of which are still raising money. Now it seems like the glory days are back, with Microsoft moving in to save the day.

AltspaceVR was founded by Eric Romo in his home office in 2013. He wanted to create a social space in the emerging medium of virtual reality.

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The company raised $10.3 million in 2015 from Comcast Ventures, Tencent, Dolby Family Ventures, Raine Ventures, Lux Capital, Western Technology Investments, Maven Ventures, Promus Ventures, Streamlined Ventures, and Rothenberg Ventures. Rivals include Rec Room, Roblox, Linden Lab, and TheWaveVR.

Above: Eric Romo, CEO of AltspaceVR at SVVR.

Image Credit: Dean Takahashi

Things seemed to be going well at first, but VR itself had a big hiccup. VR didn’t meet expectations for sales, since PC-based systems were pretty expensive during the launch year of 2016. VR mobile and PC headsets are forecast to grow from 6.4 million units to 20.3 million in 2017, according to SuperData Research. All told, AltspaceVR had only 35,000 users a month using its app.

In a July 28 blog post, the company said it ran into “unforeseen financial difficulty” and couldn’t afford to “keep the virtual lights on anymore.” The post said the company tried to raise a new round of funding but a deal fell through and it ran out of time and money. It added: “We’d love to see this technology, if not the company, live on in some way, and we’re working on that.”

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