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Scale AI lays off 20% of the workforce due to macroeconomic challenges

Scale AI lays off 20%

San Francisco-based Scale AI, a company that uses software and human labor to label image, text, voice, and video data for companies building machine learning algorithms, announced this week that Scale AI lays off 20% of its workforce.

The decision was made by the company’s founder and CEO, Alexandr Wang, who stated in a company blog post that the layoffs were a result of rapid hiring in 2021 and 2022 and the present-day macroeconomic challenges.

Although the company did not disclose its current headcount, in February 2022, Scale AI told SquaredTech that it employed around 450 people. The seven-year-old company, which was last valued at $7.3 billion and is backed by investors such as Tiger Global, Coatue Management, and Founders Fund, has been a rising star in the AI industry.

Scale AI originally began by supplying autonomous vehicle companies with labeled data to train machine learning models to develop and eventually commercialize self-driving trucks, robotaxis, and automated bots used in warehouses and on-demand delivery.

However, in 2020, it began to expand as e-commerce, enterprise automation, government, insurance, real estate, and robotics companies turned to Scale’s visual data labeling platform to develop and apply artificial intelligence to their respective businesses.

The company also expanded into synthetic data to enhance its real-world datasets. Its customer base is vast and varied, including the Department of Defense, Pinterest, Nuro, Zoox, and General Motors.

According to Wang, interest from enterprises and governments in AI has grown rapidly in recent years, and as a result, the company decided to grow its team aggressively to take advantage of what it thought was the new normal. However, the macro environment has changed dramatically in recent quarters, which the company did not predict.

Wang added that he takes full responsibility for the decisions that led to the current situation. Affected workers will receive a minimum of eight weeks of severance and three months of healthcare.

The company is also waiving the one-year equity cliff for employees with less than one year of tenure and providing immigration support for those on visas that require continued employment.

Additionally, Scale AI is cutting expenses, adjusting its hiring practices, and re-assessing new offices to address the current market conditions.

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