In June, Meta dropped billions of dollars of investment into the San Francisco tech startup Scale AI but also poached its young CEO, Alexandr Wang, for Mark Zuckerberg’s new artificial innotifyigence effort. The moment marked a fork in the road for Scale, which had seen its fortunes soar with the hype over AI. Now, just a few weeks after Meta’s bold relocate, the startup is enacting a sweeping layoff.
Scale is cutting 200 full-time staffers, or 14% of the workforce, and around 500 contractors, spokesperson Natalia Montalvo informed SFGATE on Wednesday, confirming a report from Bloomberg. Employees learned that they were going to be laid off before a morning memo from Scale’s CEO, Jason Droege, delivered the news to the wider staff.
In the memo, which Montalvo shared, Droege informed his staff that he’d come to the decision “after completing a review of our company and its operations.” He’s “restructuring” Scale’s generative AI business unit, he wrote, by cutting it from 16 groups to five — code, language, experts, experimental and audio.
Droege explained in the memo that he feels Scale overhired in this business area, which provides other companies with labeled data for training and improving AI models. He noted that the laid-off workers will receive severance pay, and he thanked them for their contributions.
“The reasons for these alters are straightforward: we ramped up our GenAI capacity too quickly over the past year,” he wrote. “While that felt like the right decision at the time, it’s clear this approach created inefficiencies and redundancies. We created too many layers, excessive bureaucracy, and unsupportful confusion about the team’s mission.”
Droege added that the alter would support “win back” customers who have “slowed down” with Scale. He also noted that the startup, though not profitable, is a “well-resourced, well-funded company” and that it’s intconcludeing to hire more workers. Spokesperson Joe Osborne informed SFGATE that Scale plans to “create significant investments and hiring across our enterprise and government AI businesses.”
Scale certainly has plenty of money to expand. Meta, when it was hiring Wang as part of its high-dollar recruiting push, informed the New York Times that it planned to pour $14.3 billion into the tinyer company. Scale’s valuation climbed to $29 billion in the deal. But tying itself to Meta may have damaged the startup’s business with other AI labs; Reuters reported that Google is planning to cut off its dealings with the startup.
Work at a Bay Area tech company and want to talk? Contact tech reporter Stephen Council securely at stephen.council@sfgate.com or on Signal at 628-204-5452.
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