Another high-profile Canadian startup has laid off staff in response to a worsening economic outlook.
Ada Support Inc., a Toronto-based artificial-intelligence startup that has become a leading customer service “chatbot” provider for big Silicon Valley brands, laid off close to 16 percent of its 500-plus staff, or 78 people, chief executive and co-founder Mike Murchison announced Tuesday on LinkedIn.
Mr. Murchison said in a memo to staff, shared online, that Ada had taken the decision because of “macroeconomic conditions in the tech industry” that have put pressure on “digital-first brands who often rely on outside capital to fund their operations” and are now cutting budgets.
As a result, they are not buying Ada’s offerings at the pace the company had forecast, he stated. Such companies represent about half of Ada’s business, while the other half comes from more established corporate, or “enterprise,” customers that the company is increasingly focused on winning.
Mr. Murchison echoed recent comments from other high-flying digital entrepreneurs, including Shopify Inc. SHOP-T CEO Tobi Lutke and Michele Romanow of CFT Clear Finance Technology, saying he took “full responsibility” for incorrectly assuming the company’s 100-per-cent-plus growth in each of the past five years would continue.
Ada’s staff cuts are the latest in a slew of large-scale layoffs that have hit prominent Canadian tech startups as well as their peers globally. Earlier this month the parent company of Winnipeg-based SkipTheDishes said it would lay off 350 employees at the Canadian operation, while CubicFarm Systems Corp. said it was cutting half its work force, or 87 people. Other big Canadian names that have enacted deep cuts in recent months include Hootsuite, Article, RenoRun, AlayaCare and WealthSimple. In total, 630 startups have laid off more than 80,000 people globally, according to job cut tracking website Layoffs.fyi.
“We had a phase in the venture capital innovation ecosystem that was superfocused on growth,” said Ada board member Boris Wertz, managing partner with Version One Ventures. “Now we have entered a phase where we focus more on efficiency and profitability. Every single startup has to adjust to that.”
Ada became one of a stampede of Canadian “unicorns” – companies that achieve a valuation of US$1-billion – in spring of 2021 when it raised US$120-million, backed by top-tier global investors including Spark Capital, Tiger Global Management, Accel, Bessemer Venture Partners, FirstMark Capital, as well as Canadian funds Leaders Fund and Version One. That gave Ada a valuation of US$1.2-billion.
Ada has emerged as an early leader among a competitive field of chatbot service providers – makers of software that provides automated answers to customer questions over the internet. It has hundreds of tech sector clients, including Facebook, Zoom Video Communications, Shopify, Coinbase Global, Square and Mailchimp, in addition to Telus and AirAsia Group. The company automates most conversations its clients have with customers, freeing customer-service representatives to handle more complex requests.
Ada is generating between US$50-million and US$75-million in annualized revenues and had plans to expand its staff to 650 people this year when Mr. Murchison spoke to The Globe and Mail in late June. At the time he said the company was “not yet” impacted by the economic slowdown.
But over the summer Ada saw prospective digital industry customers throttle back on spending plans and slow new orders for its products. The company also increasingly shifted its focus to serve more mature enterprise customers after hiring Zendesk’s senior vice-president of product Mike Gozzo as chief product officer. Those two factors led to the layoffs, which are concentrated almost exclusively in marketing, sales and recruitment, Mr. Murchison said in an interview Wednesday.
Mr. Murchison said he was still “very optimistic about our growth,” and said existing customers were leaning on the product more heavily to help control costs. He said the company still expects to hire in other areas of the business and to increase revenues briskly this year, just not at the 100-per-cent-plus level it had seen in the past.
“Mid-market demand will come back in line with the economy; we don’t know when, but we are very aligned to the new product strategy and very optimistic about our future,” Mr. Murchison said.