Five months ago, Crunchbase CEO Jager McConnell was telling me over Zoom how he had been cutting costs across the company: They had canceled the holiday party. Hiring was frozen. But no layoffs—that would be a last resort.
Obviously, a lot has changed since the end of February—and especially at Crunchbase, the Mayfield and OMERS Ventures-backed startup that has become a go-to provider for data and fundraising information on private companies and investors. Three weeks ago, McConnell posted on LinkedIn that he had laid off at least 49 of the 241 staffers Crunchbase had in March—predominately in its go-to-market teams, including sales and marketing. (In total, 63 employees were impacted—as McConnell says some voluntarily left when he warned employees layoffs were coming a month prior, and others didn’t want to be added to the list he shared on his social media profile.)
So what happened? In the five months since our last conversation, McConnell says he had come to a major realization: Because of recent developments in artificial intelligence (so-called generative A.I.) Crunchbase’s executive team had determined at an offsite that the company needed to hire more data scientists and engineers and rethink every layer of its business—how they sourced data, how they interpreted the data, and then how they delivered it to the end user—"or we would have been left behind,” he says.
“It's an existential threat to your business if you don't think of things as in an A.I.-first world,” McConnell says, equating the changes they are making to building a “new department in a lot of ways from what we had before.”
Right now, Crunchbase pulls data from its platform users, from 4,000 data partnerships, and from A.I. tools Crunchbase's data teams have already built, which perform tasks like identifying new companies that should be added to Crunchbase or verifying whether a company is still in business. Now Crunchbase is planning to double its data engineering teams—from two to four—with plans to hire machine learning engineers, data engineers, data scientists, data project managers, and data engineering managers. To be able to afford those new staffers, McConnell says they had to let other staffers go.
Crunchbase is currently developing a model to write short company descriptions for its site—which, at the moment, costs about 50 cents a pop for humans to put together, making it the most expensive task for their software. McConnell says they are also planning to build a new search function for more intuitive user interactions with Crunchbase data, and even some new predictive capabilities, such as when companies will be fundraising soon, or which companies people are talking about at the moment (or should be).
Crunchbase hired Chief Product Officer Megh Gautam at the end of May—the focus being how the company can better push into the direction of A.I.
Crunchbase is likely not an outlier with the generative A.I. wave crashing across the entire business ecosystem right now: Every company is strategizing how they can utilize large language models to transform the way their business functions. But it’s a stark reminder of exactly what people have been warning about—that the newfound obsession with A.I. will come at a cost for preexisting jobs. In coming months, I’m expecting to see many more iterations of what Crunchbase is doing. Likely more layoffs, too—not because of pressure from investors to free up cash, but because businesses are rethinking the very structure of how they run.
That’s yet another burden to the tens of thousands of people who have already been laid off due to rampant cost cutting across the tech and startup ecosystem.
“I wish I had a better sense of this happening and how it was going to impact us,” McConnell says. “Maybe that would have changed our hiring decisions earlier…[This was certainly hard] on our employees and the people that were impacted, and that's on me, and that means I was making mistakes.”
Form D chatter…Lone View Capital, the new Los Angeles-based private equity firm started by 19-year Golden Gate Capital vet Rishi Chandna, that we mentioned in yesterday’s newsletter filed another amended SEC filing, disclosing it has raised more than $466 million for its very first fund. This wasn’t the final close, a person familiar with the matter told Term Sheet.
Annuity, annuity, annuity…While some private equity and alternative investment firm businesses are floundering, Apollo Global yesterday reported that its second-quarter adjusted net income bumped up 75% from the same period last year. Apollo can thank growth in its retirement products for a good bit of that.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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