Fans of virtual reality felt a punch to the gut this week as AltspaceVR announced it would hold its last social VR gathering on August 3 and then shut down.

AltspaceVR was a social space in VR where people could gather in environments that resembled virtual worlds. They could create their own avatars and chat with friends. As such, AltspaceVR was like a harbinger of what the world would look like as a virtual society. Facebook followed up with its own version of social VR chat, while others — such as Rec Room, Roblox, Linden Lab, and TheWave VR — have offered their own takes on social VR.

In a 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.”

Eric Romo, CEO of AltspaceVR, started the company in his home office in 2013. 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.

Romo said in an interview with GamesBeat in April that AltspaceVR was hoping to monetize events that companies paid for, not unlike the way Linden Lab monetized corporations in its Second Life virtual world. But AltspaceVR’s traffic was relatively small, at about 35,000 users a month. That’s a sign of how small the overall base for VR is and it probably tells you why the company ran out of funds, as that number isn’t enough to get investors excited.

It’s not clear exactly what this means for other VR startups, but everybody knows that growth is slower than expected. (Mobile and PC-based VR units are expected to grow from 6.4 million globally in 2016 to 20.3 million in 2017, according to SuperData Research.) Other VR startups, such as enterprise-focused Envelop VR, have also shut down this year.

Image Credit: Dean Takahashi

“Altspace advanced VR as a medium and, while it may have been ahead of its time, it demonstrated the potential of social VR. Everyone working in VR should be grateful for their contributions to the space,” said Amitt Mahajan, cofounder of Presence Capital, which invests in AR and VR startups. “I think we’re likely to see a virtual world like Altspace eventually work, but it’ll likely be something that first starts off fairly constrained in what you can do with others and grows from there to a fully fledged social network.”