Qumulo and Chef, two of Seattle’s most heavily-funded software startups, laid off employees this week in a possible sign of a cooling market for tech companies.
A source tells GeekWire that 24 people were laid off from Qumulo on Tuesday, but the company declined to comment when asked for more details about the cuts or why they occurred.
Qumulo officially came out of stealth mode about a year ago after it announced a $40 million Series B round. The 3-year-old company, which has raised $67 million to date from firms like Kleiner Perkins Caufield & Byers and Highland Capital Partners, helps clients store, manage, and curate data.
Qumulo is led by CEO Peter Godman, who co-founded the startup with fellow Isilon Systems colleagues Aaron Passey and Neal Fachan. As of February, it employed 90 people. Update: Qumulo confirmed on April 18 that the company employed 160 people before the job cuts last week.
Chef, meanwhile, laid off a “small number” of employees, CEO Barry Crist confirmed with GeekWire today.
“A small number of employees’ job functions were eliminated as part of streamlining our operations to eliminate overlap of various customer facing engagement teams,” Crist said in an email. “To put it in perspective, this impacted two employees in the state of Washington. These sort of minor adjustments are part of running a dynamic, high performing business. As our product portfolio expands, we are shifting additional people to our product and UX teams. We’re growing and hiring rapidly and as I stated in a recent company-wide meeting I’ve never been more bullish about our business prospects.”
Crist sent a company-wide memo to employees this week (posted below and obtained independently by GeekWire) that explained the impetus behind “changes that both streamline Chef’s operations and also free up operating expense both for additional investment and to bolster our long-term cash reserves.”
A source tells GeekWire that seven employees were let go. In the memo, CEO Barry Crist noted that the Solution and Customer Engineering teams have been consolidated, while cuts were made to the Customer Account Management team.
Here’s Crist’s email in full:
First of all, I want to share some changes that both streamline Chef’s operations and also free up operating expense both for additional investment and to bolster our long-term cash reserves.
These changes mean that a few of our team members will no longer be with Chef. This is of course unfortunate, painful, and something we don’t take lightly. These are hard choices made in the best interest of our customers, community, and of course Chef.
Great organizations continually experiment, invest, evaluate, and rapidly make changes to adjust and improve. The changes we are making are in this spirit. These include combining our Solution and Customer Engineering teams, and scaling back our Customer Account Management team. In evaluating our business, we determined that we over-invested in the CAM function, which, while an important part of our engagement model, has not made the revenue impact through account expansion we had hypothesized. These changes resulted in a small staff reduction impacting members of the CAM, Customer Engineering, Solutions Engineering, and Training teams.
We have an opportunity to become one of the top companies in the software industry. For us to realize our full potential we have to, among other things, make difficult decisions and in particular land our bold product roadmap. In part, the expense freed through these changes will be shifted to achieve other top priorities such as product and user experience. We also want to continue to invest heavily in our customer-facing teams including our field sales organization.
Chef has raised $103 million to date, most recently reeling in a $40 million Series E round this past September. Leading investors in Chef include Draper Fisher Jurvetson (DFJ), Battery Ventures, and Ignition Partners. Founded in 2008, the company — formerly known as OpsCode — has several Fortune 50 customers like Facebook, Nordstrom, and Target using its products that help automate their DevOps workflow.
In September, Crist said that 2015 was a record year for Chef as far as revenue, customers, and partnerships — and noted that its growth rate was accelerating, too. The company also moved moved into a new 36,000 square-foot headquarters in Seattle in 2014. It employed 230 people as of September 2015.
The layoffs at both companies could be a sign of a more conservative tech industry in 2016, particularly with capital markets under pressure and VC activity slowing. Many venture capitalists and startup leaders have spoken of an impending bust — or at least cooling period — in recent months. At GeekWire Startup Day in February, VCs and angel investors shared tips for surviving a downturn, and nearly all of the panelists agreed that the venture financing climate is softening.
Madrona Venture Group, which invested in Qumulo’s Series A and B rounds, penned a letter to its investors earlier this year that advised startups to take conservative approach in 2016 amid an uncertain economic climate.