Once heralded, Boston AI startup DataRobot struggles under West Coast leadership

Dan Wright, chief executive of DataRobot.DataRobot

It was once one of the region’s fastest-growing startups.

Now, Boston artificial intelligence software firm DataRobot is in turmoil, with a group of employees revolting against the management team and the board of directors facing questions about alleged overspending and ignoring feedback from workers.

At the heart of the dispute is a split between the company’s longtime East Coast workers and its more recent West Coast investors and leadership team, according to interviews with more than a dozen current and former employees. The turmoil could lead to an exodus of talent and jeopardize the future of a company once on its way to becoming the next big thing.

The company was founded in 2012 in Boston, where most of its US employees still work, with the goal of making easy-to-use AI software for businesses. DataRobot has raised over $1 billion and grew to almost 2,000 employees and a $6.3 billion private valuation last year.

But over the past two years, DataRobot took on new investors from Silicon Valley, pushed out its two founders and original board chairman, and hired top executives who are based on the West Coast, including chief executive Dan Wright, chief financial officer Damon Fletcher, general counsel Brian Brown, and chief people and administrative officer Elise Cole.

Wright and the team he hired talked up the opportunity for employees to become wealthy when the company went public, even creating a special e-mail address for answering questions about the expected deal.

The company’s business has since run into turbulence amid the plummeting stock market, war in Ukraine, and worsening economic conditions. The plan for an initial public offering was put on hold and Wright laid off 7 percent of the company in May after it missed its quarterly sales goals several times — despite raising $300 million last year.

Similar tech companies on the public market have seen their stock prices plummet. Data analytics company Snowflake’s stock has lost 46 percent and AI software developer C3.ai is down 66 percent since DataRobot was valued at $6.3 billion a year ago. Other tech companies have also laid off employees in recent months. But the DataRobot cuts have exploded into a storm of public criticism from employees on social media sites like LinkedIn and Glassdoor, as well as on internal messaging app Slack.

The criticism has focused on marketing expenses, such as a multi-year sponsorship of the F1 McLaren Racing team that will cost $20 million, according to two former employees familiar with the deal, and a retreat for executives and salespeople in the British Virgin Islands. Wright began using a company-funded private jet for some business travel, an expense his predecessor avoided, according to people who worked at the company. Employees are also upset about revelations that Wright and four other top executives were permitted by the board to sell $32 million worth of stock in the company last year at a time when other employees could not.

“Should the leadership team be replaced? Yes,” said Tom Coyle, former director of strategic initiatives at DataRobot, who was laid off last year, summing up the opinion of many of his peers. “Will they be replaced? Not likely.”

Others say the once-promising startup is being run into the ground. “The company is going to be sold off for parts in order for investors to recoup their money,” said Greg Michaelson, who worked at DataRobot for almost seven years before leaving last fall. “It’s sad,” the former chief customer officer added.

The company said it remains one of the region’s fastest-growing startups, with revenue increasing by 38 percent in its most recent fiscal year, but has made some cuts due to economic conditions. “Like any healthy business, we’re always evaluating how we optimize operations based on customer needs and market conditions, particularly in a market as complex and unpredictable as we’re all facing globally,” a spokesperson said.

Former chief executive Jeremy Achin first brought in a group of a dozen mostly California-based investors in a 2019 fund-raising deal. He since went on to found two new startups. Keith Bedford

Current and former employees said that resentments have been simmering since Wright and his West Coast team took over for cofounder and former chief executive Jeremy Achin, who was pressured to resign in March 2021. Cofounder and chief technology officer Tom de Godoy was pushed out a few months later, former employees and the company said. Both have moved on to new startups. And original board chair Chris Lynch was voted off of the board this year. Achin and Godoy did not respond to requests for comment. Lynch declined to comment.

Before joining DataRobot, Wright, a former practicing lawyer, was the chief operating officer at California software company AppDynamics. At AppDynamics, Wright worked with Cole and three C-level DataRobot executives who have since left: former chief customer officer Steve Jenner, former chief revenue officer Parm Uppal, and former chief legal officer George Karamanos.

DataRobot said that until recently it was spending more on marketing coming out of COVID, as the business climate recovered, than it had in Achin’s final year.

The McLaren partnership has led to “massive” benefits with existing customers and prospects, while giving DataRobot’s brand global exposure, the company said. (The $20 million cost was “not an accurate characterization of DataRobot’s financial commitment,” the company said.) And the cost of the sales retreat was cut by 30 percent this year and top executives paid for their travel and other costs personally.

Wright “infrequently utilized” a private jet only when there was “no other way to honor important commitments to our customers,” the spokesperson said. He did not take international private flights, the company said.

Employees were last given a chance to sell shares in March 2021, the company said. “We will continue to look for the right opportunities to provide future liquidity to our employees,” a spokeswoman said.

It was former chief executive Achin who first brought in a group of a dozen mostly California-based investors in a 2019 fund-raising deal. The group urged hiring Wright in San Francisco as chief operating officer to bring more experience to Achin’s team.

In 2020, DataRobot connected with Brad Gerstner, founder and chief executive of hedge fund Altimeter Capital in San Francisco who had also been a lead investor in AppDynamics. A well-known tech investor, Gerstner has previously backed companies including travel startup Kayak and database company MongoDB. Gerstner then led two funding rounds in DataRobot, in 2020 and 2021, totaling almost $600 million.

But at DataRobot, the California investors and management team have alienated the workforce, current and former employees said.

Instead of working at a hot startup soon to go public, DataRobot employees are now dealing with executive turnover, allegations of poor spending judgment, and a bubble-era valuation that may be difficult to maintain.

“It’s starting to get a feeling like a ... WeWork kind of thing,” said Hannah Sigel, a former IT project manager who was laid off from DataRobot in May. (WeWork ballooned to a valuation of $47 billion in 2019 but went public last year at only $9 billion.)

DataRobot opened an office in the former Pacific Telephone building in San Francisco’s SoMa neighborhood at the end of 2021. Some Boston employees were upset at the expense of opening a large new office at a time when the company was looking to cut costs.

Managers in California held town hall meetings with staff in Massachusetts but ignored their complaints, Sigel said. “The employees were always honest and gave good feedback, but they never took it seriously.”

The company said it has consolidated its Bay Area offices this year and is listening to the complaints. “Providing our employees with a forum in which they can express their thoughts and provide candid feedback is critical to our success,” a spokeswoman said. “We have and continue to take a number of concrete steps to address employee feedback.”

Elise Leung Cole, chief people and administrative officer, and Michael Schmidt, chief technology officer, of DataRobot.Business Wire

Wright and his new team had a “strong tendency to hire friends versus the best possible candidate,” said former principal data scientist Rajiv Shah, who left the company last year. “The team [from AppDynamics] also didn’t integrate well and often brought their culture, terminology, and approach with them.”

DataRobot said Wright has hired senior executives from companies including Google, Bank of America, and Tableau and seeks “the most highly qualified professionals.” The company said it fully reopened its Boston office in May and Wright visited in June.

“We’re proud to call Boston our headquarters and it remains an important hub for DataRobot,” a spokeswoman said.