Klue cuts 40 percent of workforce amid AI competition and internal restructuring

Vancouver-based Klue, an AI-powered business intelligence software firm, has laid off 40 percent of its workforce (approximately 85 employees) as it restructures to become an "AI-first" company. The move comes in response to increasing competition from businesses experimenting with internal AI solutions and the growing influence of tools like ChatGPT.

Key Points:

• CEO Jason Smith cited AI disruption as a primary driver for the layoffs, noting that companies are increasingly building their own AI tools rather than paying for external solutions.
• Klue is consolidating its engineering operations in Canada and reducing compute spending to streamline costs.
• The company is providing generous severance packages and extended benefits to affected employees.

The ChatGPT Effect

Klue has faced increased customer churn and competition from OpenAI’s ChatGPT, which some clients are using as a DIY alternative. A leaked internal FAQ revealed that Klue has been "losing more deals to ChatGPT" and is now developing a new AI-centric product to regain market fit.

• Klue reportedly burned $28 million since 2023 to grow revenue by $2.5 million, with a projected two-year runway if no changes were made (a claim Smith disputes).
• Smith countered that Klue has generated over $25 million CAD in new and expansion revenue since 2023 and has a five-year runway.

Competing in the AI-First Era

Smith emphasized Klue’s shift to a "smaller, nimbler" operation, leveraging AI tools to improve efficiency. He compared Klue’s approach to Shopify CEO Tobi Lütke’s memo, which urged employees to prove AI couldn’t do a job before requesting additional resources.

• Klue’s Series B funding in 2021 totaled $80 million CAD, and Smith claims the company still holds "much of" that capital.
• The layoffs aim to make Klue profitable for the first time, allowing it to weather economic uncertainty and focus on "Klue 2.0."

Broader Industry Trends

The move reflects a wider trend in tech, where AI adoption is leading to smaller teams and operational restructuring. Companies like OpenText and Amazon have also cited AI as a reason for headcount reductions.

• Smith believes "narrow" AI solutions (like Klue’s specialized tools) will outperform generalized AI offerings in the long run.
• Klue remains confident in its roadmap and sees rising demand for its products despite market challenges.

Read more about Klue’s funding

Feature image courtesy of Klue.