Ultraleap, the extended reality startup backed by Tencent, is considering selling off parts of the business after breaching the terms of a £15m loan, casting doubt on the company’s future.
Extended reality (XR), a catch-all term for immersive technologies like virtual or augmented reality, has faced difficulties over the past year. Shipments of AR and VR headsets dropped more than 67% globally in Q1 of 2024, according to market intelligence company the International Data Corporation.
Bristol-based Ultraleap, which builds XR tools for real-world use cases such as healthcare and motoring, may have to sell parts of its business or intellectual property as it looks to raise funds, according to its financial accounts published earlier this week.
It comes after a tumultuous year for a company forced to make layoffs as it looked to slash spending amid falling revenue and rising losses.
Ultraleap declined to comment. “These circumstances represent a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern,” it said in its accounts. The company said it did still consider itself a going concern.
A source close to the company said it was actively exploring exit opportunities.
Ultraleap’s financial troubles are the latest example of a UK deeptech — a type of startup developing tech rooted in scientific or engineering innovation — struggling to convert promising research and development into a solid commercial proposition.
In February, e-van maker Arrival entered administration after missing commercial targets and chip company Graphcore was sold for less than the nearly $700m invested into it in July.
Struggles commercialising
Since launching in 2013, Ultraleap has raised hundreds of millions of dollars in investment, according to its accounts, from investors including IP Group and British Patient Capital.
But declining consumer demand for XR tech has seen investors and big tech companies pull back from the sector. Last year, Meta discontinued its VR headset and Apple scaled back production of its own.
“During 2024, the AR/VR market in which the group operates has underperformed in relation to expectations held at the year-end [in 2023],” Ultraleap said in its financial reporting, which covers accounts from 2023.
Revenue dropped from £4.5m in 2022 to £4.2m in 2023. Losses after tax, meanwhile, rose from £23.6m to £27m.
Finding funding
Ultraleap said that if it does not resolve the breach of its £15m debt facility, the lender has the right to bring forward the repayment date due of April 2026 and require immediate repayment.
In Q2 2024, the Group received additional funding from current investors totalling £9.75m in the form of a convertible loan note.
But Ultraleap’s “near term priority is to secure further investment into the business”, it said. “This fundraising activity includes the process towards raising further investment from existing and new investors, and the sale of one of its business divisions and/or realisation of value from its Intellectual Property through either licensing or sale.”
Ultraleap had more than 550 patents at the end of 2023. In June, Sky News reported the company was seeking a buyer for its hand tracking business. A source close to the company said this was still ongoing.
Read the orginal article: https://sifted.eu/articles/tencent-backed-ultraleap-financial-uncertainty/
