Metaverse Firm Shadow Creator Reportedly Facing Salary Arrears

Shadow Creator, one of the earliest companies in China to engage in the metaverse field, was reported by social media users on August 23 to be owing wages of more than 200 employees. An online discussion about whether the metaverse has now entered into a cold winter ensued.

In response, Sun Li, the CEO of Shadow Creator, said that the company only stopped paying some employees’ performance pay for a few months due to the pandemic, and that it also has made some staffing adjustments. The main business is still operating. The company is negotiating with employees on the pace of payroll replacement, and plans to reimburse them within 120 days.

The whistleblower claimed to be a former development engineer at Shadow Creator. He said the company owed 100,000 yuan ($14,607) in wages per affected staff member, and that it had cut social security. The WeChat group was dissolved by company founder Sun Li. Even HR employees had asked for unpaid wages. Employees that demanded unpaid salary have also applied for labor arbitration one after another.

Also, on workplace social media platforms in China, since June this year, many reports came in about unpaid wages from Shadow Creator. The earliest reports of unpaid wages date back to April this year.

Shadow Creator is a VR/AR equipment manufacturer and the only firm in China that provides VR/AR full-stack product-level algorithms and systems. Since its establishment in 2014, the company has obtained investment from many capital institutions, such as Koala Fund, and it has completed six rounds of financing. It raised as much as 80 million yuan in the round A alone. Shadow Creator is one of the earliest metaverse companies. It once claimed that its related shipments and technology was second only to Meta, and that it was determined to develop as Microsoft in the metaverse.

Sun Li said that the company is headquartered in Shanghai, and its business was greatly affected by logistics and production in the first half of the year due to the pandemic. In particular, it was unable to carry out the OEM business for third-party companies. In terms of financing, the negotiated institutions also could not come in for due diligence. He admitted there was a previous equity dispute between the company and an investor, which was settled in February this year, but the company still missed the right time for financing.

Sun also said that to sustain operations, the company has optimized its staff in the first half of the year, and now the company has about a hundred employees. At present, the company mainly engages in the R&D and sales of AR glasses and AR algorithm licensing business, with relatively small cash flow consumption, and that it can generate profits every month.

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Despite some difficulties encountered by the company, and although the metaverse sector has cooled down recently, Sun Li said, “Some have always made speculation in the sector, but we have been very down-to-earth. Regardless of whether the industry is hot or cold, we are still doing it according to the actual business situation, which will not affect our judgment of the general environment.”

Some analysts held that the difficulties of Shadow Creator reflect the current situation of VR technology and even the development of metaverse. Although VR and other smart terminals are expected to replace smartphones as a new generation of smart terminals, there is still a high price threshold for related products.