Another high-profile Canadian startup has laid off employees in response to a deteriorating economic outlook.
Ada Support Inc. , the Toronto-based AI startup that has become the leading customer service “chatbot” provider for major brands in Silicon Valley, has laid off nearly 16 percent of its 500-plus employees, or 78 people, and announced its CEO Co-founder Mike Murchison on LinkedIn Tuesday.
In a note to employees, Mr. Murchison said, shared online, Ada made the decision due to “macroeconomic conditions in the tech industry” that have put pressure on “first digital brands that often rely on outside capital to fund their operations” and budgets are now being cut.
As a result, they are not buying up Ada’s offerings as quickly as the company expected. These companies account for about half of Ada’s business, with the other half coming from customers of more established companies or “enterprises” that the company is increasingly focused on winning.
Mr. Murchison echoed recent comments from other digital entrepreneurs, including Shopify Inc. Excess growth in each of the past five years will continue.
Ada’s headcount cuts are the latest in a series of large-scale layoffs that have affected notable Canadian tech startups as well as their global peers. Earlier this month, the parent company of Winnipeg-based SkipTheDishes said it would lay off 350 employees in the Canadian operation, while CubicFarm Systems Corp. said it would cut half its workforce, or 87 people. Other big Canadian names that have made big 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-cutting tracking website Layoffs.fyi.
“We have gone through a phase in the venture capital innovation ecosystem that is very focused on growth,” said Ada Board Member Boris Wertz, Managing Partner at Version One Ventures. “We have now entered a phase where we are focusing more on efficiency and profitability. Every startup has to adapt to that.”
Ada became one of Canada’s “unicorns” scrambling – companies that achieved a $1 billion valuation – in the spring of 2021 when it raised $120 million, backed by high-profile global investors including Spark Capital, Tiger Global Management, Accel and Bessemer Venture Partners and FirstMark Capital as well as the Canadian Fund Leaders Fund and First Edition. This gave Ada a valuation of US$1.2 billion.
Ada emerged as an early pioneer among a competitive field of chatbot service providers – makers of software that provide automated answers to customers’ online questions. It has hundreds of technology sector clients, including Facebook, Zoom Video Communications, Shopify, Coinbase Global, Square and Mailchimp, as well as Telus and AirAsia Group. The company automates most of the conversations its customers have with customers, freeing up customer service representatives to handle even more complex orders.
Ada generates annual revenues of between $50 million and $75 million and has plans to expand its workforce 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 affected” by the economic slowdown.
But over the summer, Ada saw potential customers in the digital industry back away from spending plans and slow new orders for its products. The company has also increasingly shifted its focus to serving more mature enterprise customers after the appointment of Zendesk Senior Vice President of Product Mike Gozo as product manager. Those two factors have led to layoffs, which are focused almost exclusively on marketing, sales and hiring, Mr. Murchison said in an interview on Wednesday.
Mr. Murchison said he remains “very optimistic about our growth” and said existing customers are relying more on the product to help control costs. He said the company still expects hiring in other areas of the business and a rapid increase in revenue this year, but not at the 100 percent level it has seen in the past.
“Middle market demand will return in line with the economy; we don’t know when, but we are very in line with the new product strategy and very optimistic about our future,” Mr. Murchison said.