(TNS) — Just weeks after Meta invested $14.3 billion into Scale AI and tapped its founder, Alexandr Wang, to lead its new artificial intelligence initiative, the data-labeling startup is cutting roughly 200 full-time employees — about 14% of its staff — and parting ways with 500 contractors worldwide.
The cuts, announced in a company-wide memo on Wednesday by interim CEO Jason Droege, mark a dramatic shift for the once high-flying San Francisco startup, which has played a critical role in preparing data for major AI players including OpenAI, Google and Microsoft.
"The reasons for these changes are straightforward: we ramped up our GenAI capacity too quickly over the past year," Droege wrote in the memo obtained by multiple media outlets. "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 unhelpful confusion about the team's mission."
Scale AI's generative AI division — the unit at the heart of the layoffs — is being reorganized from 16 pods into five focused teams: code, languages, experts, experimental and audio. The company's go-to-market team will also be consolidated into a single "demand generation" group.
The company emphasized that it remains well-funded and is preparing to "significantly increase head count" in enterprise and government-facing business units later this year.
The layoffs follow an industry-wide reckoning over shifting partnerships.
Google and OpenAI are reportedly backing away from Scale AI following its deepened relationship with Meta.
"These changes will make us more nimble — enabling us to react more quickly to shifts in the market and customer needs," Droege assured his staff.
A spokesperson for the company said affected employees have been provided severance, with full-time roles paid through mid-September.
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Bay Area AI Company Cuts Staffing Following $14.3B Meta Investment
What to Know:- Scale AI is laying off approximately 200 full-time employees and 500 contractors just weeks after a $14.3 billion investment from Facebook parent company Meta.
- Despite the layoffs, Scale AI remains well-funded and plans to increase head count in its enterprise and government-facing business units later this year.
