AI startup Deepgram cuts 20% of its workforce as high Intrerest Rate environment makes financing difficult.

Artificial intelligence startup Deepgram recently announced it would lay off about 20 employees, accounting for 20% of its total workforce. This marks the company's second round of layoffs this year. Deepgram's CEO stated that the main reason for the layoffs is the high Intrerest Rate environment, which has made it difficult for startups to secure funding.

Deepgram was founded in 2015 and has received support from several well-known investment firms. Currently, the company is competing with the open-source speech recognition software of a well-known AI company and several tech giants.

In the layoff notification email sent to employees, Deepgram executives mentioned the difficulties in the startup fundraising environment, macroeconomic challenges, and the company's performance over the past year. The employees being laid off include data scientists, researchers, and engineers.

Although this layoff incident has not been widely reported, it reflects the significant pressure that AI startups are facing in this rapidly changing era.

The CEO of Deepgram stated in a statement: "In light of the Federal Reserve signaling that 'high Interest Rates will last longer', we must adopt a conservative strategy to control cost growth and focus on the company's benefits."

Despite the fact that the company just experienced its "best quarter" since its founding, the CEO refused to disclose specific revenue figures. Last fall, Deepgram announced it raised $47 million, bringing its total funding to $86 million when combined with its 2021 financing, and the company is now valued at $267 million.

In the past year, although many private software startups have been laying off employees, the AI sector has remained a highlight for startup financing. However, as market competition intensifies, some once high-performing AI startups are beginning to face challenges.

For example, a certain AI startup, an early winner in the generative AI wave, had to lower its revenue expectations after a well-known AI company launched a competing product. The two co-founders of the company also resigned last month.

Deepgram's challenges also reflect the potential impact of open-source software on proprietary AI. While large open-source language models are currently not as powerful as proprietary models, the gap is narrowing.

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

However, as tech giants improve their voice-to-text generation services and other 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 challenges, Deepgram's CEO remains confident that the company can cope with competition due to its higher quality and more accurate products. He also believes that the launch of open-source speech recognition software by a well-known AI company will help the entire industry understand the potential of AI speech recognition software.