AI startup Deepgram lays off 20%, CEO states high Intrerest Rate causes financing difficulties

Recently, an artificial intelligence startup focused on voice recognition software, Deepgram, announced it would lay off about 20 employees, accounting for 20% of its total workforce. This is the company's second round of layoffs this year. The company's CEO, Scott Stephenson, stated that the main reason for the layoffs is the high Intrerest Rate environment, which has made it more difficult for startups to secure funding.

Deepgram was founded in 2015 and has received support from several well-known investment institutions. Currently, the company is competing with products including OpenAI's open-source Whisper speech recognition software and other tech giants.

In an email sent to employees, Deepgram's executives mentioned the difficulties in the startup financing environment, macroeconomic challenges, and the company's performance over the past year. The layoffs involve employees including data scientists, researchers, and engineers.

Although this round of layoffs has not attracted widespread attention, it reflects the significant pressure that AI startups are facing in this rapidly changing era.

Stephenson stated in a statement: "Given that the Federal Reserve has indicated that high Intrerest Rates may persist for a longer time, I do not want to bet on whether the market will provide us with additional funding in the short term. We must adopt a conservative strategy to control cost growth as much as possible and focus on the company's benefits."

Although Stephenson mentioned that the company has just experienced "the best quarter since its inception," he refused to disclose specific revenue figures. Last fall, the company announced it raised $47 million, bringing the total funding to $86 million when combined with 2021's financing, and the company's valuation reached $267 million.

Over the past year, despite many private software startups laying off employees, the AI sector has remained a highlight for startup financing. However, as more companies flood the market, some previously outstanding AI startups are beginning to face challenges.

Deepgram's predicament also reflects the potential impact of open-source software on proprietary AI. This is one of the hottest topics in the industry, involving huge sums of money. Although open-source large language models are currently not as powerful as proprietary models, the gap is gradually closing.

Unlike large language models, speech recognition software has been commercialized for decades and is widely used through various voice assistants. Deepgram offers speech recognition services for enterprise clients, claiming that its solutions are more accurate, faster, and better suited to business needs than existing options.

However, as tech giants continue to improve their voice-to-text generation services and other venture-backed startups launch similar products, enterprise clients are starting to cut their software spending budgets, making it difficult for software providers to secure new business.

Despite facing various challenges, Stephenson remains confident that Deepgram can handle the competition, as its product quality and accuracy surpass many competitors. He also believes that OpenAI's launch of Whisper helps the entire industry understand the potential of AI voice recognition software.