Conversational AI Startup Yellow.ai Joins Layoffs Spree, Fires 15% Employees

Conversational AI startup Yellow.ai has joined the growing list of startups doing layoffs, having fired 15% of its workforce over the past six months.

A Yellow.ai spokesperson confirmed the development with Inc42, stating that the startup laid off employees and carried out restructuring between November 2022 and January 2023. The San Mateo, US-based startup has 1,063 employees, according to its LinkedIn profile.

“The global macroeconomic conditions have led to a strong shift in the market context, and due to the receding tailwinds, we had to take the rather hard decision of reorganising ourselves in November last year to stay sustainable,” the startup said.

The startup added, “While we have seen the business grow over the last year, we have had to tone down our expectations and make significant changes across functions to continue building on our efficiency. We had to reorganise some of the teams to double down on high-priority, high-growth areas, which in turn has affected 15% of the company.”

The SaaS startup said it announced the layoffs via company-wide communication, in an email from the CEO to the employees, along with multiple meetings and one-on-one discussions with the impacted employees.

“Our Yellow Tribe has always been our priority, and this has been the toughest decision for us as a company. We are deeply committed to helping and supporting our impacted colleagues in every manner possible,” the startup said.

Yellow.ai said that the impacted employees were offered severance benefits, along with assistance for career support, health benefits, mentorship by the leadership team and access to courses for upskilling.

While media reports alleged that many employees were made to resign by the startup, a spokesperson told Inc42 that it was a voluntary choice made by some of the impacted employees.

“During one-on-one discussions with employees, they indicated their preference to resign instead. The company at all times honoured the employment contract and applicable law,” the spokesperson said.

The layoffs at Yellow.ai come at a time when the startup had been planning to increase its employee base to more than 1,000 by the end of 2022 and expand across geographies including Australia, Africa, Japan, Latin America, and the US. Interestingly, in October, Yellow.ai introduced an employee stock option plan (ESOP) worth $43 Mn.

Interestingly, Yellow.ai is heavily reliant on Asia-Pacific and India, with 70% of its customers based in APAC, followed by 15% in EMEA and 15% in the Americas, including Latin America. Since SaaS companies get lower margins from Asia-Pacific than they would in the US, the startup had plans to expand across multiple geographies, including the US.

In a press note shared with Inc42 in November 2022, Yellow.ai said that it was aiming to hit an ARR of $100 Mn by 2024, with more than 1,000 customers in 85 countries.

Yellow.ai said that it has a healthy ARR right now, as it scaled up across major markets. “With the continued uncertainty of market conditions, our focus is to significantly improve the efficiency with which we drive our growth and sustain ourselves as a business,” the startup added.

Founded by Raghu Ravinutala, Jaya Kishore Gollareddy and Rashid Khan in 2016, the SaaS startup allows companies to deliver human-like interactions to their customers across multiple platforms. 

Before the layoffs, Yellow.ai had raised more than $102 Mn across funding rounds so far, with the latest round coming in August 2021 when it raised $78.15 Mn from the likes of WestBridge Capital, Sapphire Ventures and Salesforce Ventures.

The adverse macroeconomic environment across the world since the beginning of 2022, paired with a funding winter, has seen Indian startups firing thousands of employees. According to Inc42’s ‘Indian Startup Layoff Tracker’, almost 80 Indian startups have fired around 23,000 employees since the beginning of 2022.

The development was first reported by YourStory.

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Update | March 2, 2023, 8:10 PM

The story has been updated to include Yellow.ai’s comments on the matter.