Co-founder Jason Smith says the coming layoffs could affect up to 50 per cent of the company.NELSON MOUELLIC/Supplied
Vancouver software company Klue Labs Inc. is preparing to lay off up to half its work force, or about 100 people, to reposition itself for the artificial intelligence age.
Co-founder and chief executive Jason Smith told The Globe and Mail that he informed staff about the restructuring last week and said that Klue is finalizing plans for layoffs to be implemented this coming Wednesday.
“We need to do this because it’s a wake-up call for companies that aren’t AI native to start to think that way,” he said, adding that the restructuring is not because of financial concerns or a lack of funding.
While the number of layoffs could change, Mr. Smith said that it could affect between 40 per cent and 50 per cent of the company.
Klue, which makes AI-powered business intelligence tools for sales professionals to gather information on competitors, has to reboot as a result of AI, according to Mr. Smith. Generative AI tools have become more adept since the release of ChatGPT in late 2022, forcing software-as-a-service (SaaS) companies founded before that date to drastically rethink operations, he said.
Klue has already adopted AI to a large extent internally, but Mr. Smith felt that the company was not moving fast enough. After an employee responsible for writing help documentation left Klue recently, Mr. Smith realized that AI could handle much of the work before the company would need to hire a replacement.
“That became a pivotal moment for me to think that we need to do something more dramatic than inching our way to AI improvement,” he said. “My belief is you kind of need to shock the company.”
Klue was founded in 2015 and has raised US$80-million in funding, including from Tiger Global Management, and services customers such as Autodesk and Salesforce. Its platform uses AI to analyze millions of data points, including news articles and websites, to deliver insights to customers about the competition.
The impact of AI on the labour market is hotly debated and uncertain. Some executives, such as Anthropic’s Dario Amodei, have argued that AI could replace large swaths of entry-level office jobs. Others contend that AI will change the nature of work but allow people to focus on higher-value tasks, while also creating new roles.
Announcing layoffs beforehand was unusual, he acknowledged, but said he did so in order for employees to have time to process the news and ask questions and decide if they want to leave voluntarily. The company is offering voluntary exit packages to all employees with the same severance as involuntary layoffs.
Mr. Smith said the downsizing is not about replacing employees directly but equipping smaller teams to work faster and more efficiently with AI, particularly with agents, which are tools that complete a range of multi-step tasks such as coding and developing software prototypes. “This is about creating a reduction, so you can’t turn to an automatic hire. You have to turn to see if an AI agent can help you first,” he said.
A seasoned tech executive and entrepreneur, Mr. Smith said that if he were to start Klue today, he would begin with using AI agents and grow from there.
Klue is the latest Canadian company reckoning with the impact of AI. Shopify CEO Tobi Lütke told employees in April that using AI is a “fundamental expectation” and that before asking for more headcount or resources, employees will have to justify why the work cannot be done with AI.
Open Text Corp. has adopted an AI-first approach, too. “We will only hire new talent where the work cannot be done by AI,” CEO Mark Barrenechea said on a May earnings call.
In the U.S., Amazon CEO Andy Jassy said in a memo on Tuesday that adopting generative AI and agents “will reduce our total corporate workforce” in the next few years.
But at least one company is backtracking. Klarna, which is based in Sweden and offers buy-now-pay-later services, made headlines last year for its attempts to cut its work force in half, implementing a hiring freeze and replacing customer support agents with AI. The company is recruiting again.
Mr. Smith said that could be a possibility for Klue. “If we need to, we can ramp back up,” he said. “I want my company on the edge of knowing what it can and can’t do. If you don’t live on that edge, you’re not moving fast enough.”
With reports from Sean Silcoff