Turmoil at DataRobot

DataRobot markets a top-notch product, and employs hundreds of talented and capable people, many of whom I think of as friends. The company just earned recognition as a Leader in Forrester’s Wave for AI and Machine Learning Platforms. That’s great to see.

DataRobot is also in turmoil. On Dan Wright’s watch, the company has delivered two mass layoffs, parted ways with its founders, fired the Chairman of the Board and churned the management team. The company repeatedly missed sales targets, forcing the company to cancel a planned IPO.?

Plus, there is the scandal of the AppDynamics Five: top executives who secretly sold stock while hyping a potential valuation of $30 billion.

DataRobot can’t blame its troubles on the economy, COVID, or Putin’s war. Dataiku, DataRobot’s top competitor, beat sales targets last year, in every region. So did other competitors. I'm aware of no other company in the AI and machine learning industry that has laid off workers.

When the Board brought in Dan Wright in 2020 to serve as COO, it seemed like a good move. Dan has a certain presence, and he had a good track record at AppDynamics. I figured that if he could do for DataRobot what he did for AppDynamics, we would all be better off.?

A few things soon became clear. Every nationwide search for a top executive yielded an AppDynamics vet. The AppDynamics folks knew nothing about the DataRobot business and industry. And some of the execs seemed proud of their ignorance.

Chief Go-To-Market Officer Tom Levey gutted the sales force of experienced sellers and replaced them with young adults "in the early stages of their careers," or so went the euphemism. Don’t worry, we were told. With the AppDynamics playbook and Tom Levey’s crack sales enablement team, anyone can sell frozen crystalized water to the indigenous Inuit and Yupik peoples of eastern Siberia and Alaska.

Founders often clash with investors over exits. The founders feel a sense of ownership for the company, and want to build it to maturity. Investors, on the other hand, want liquidity, sooner rather than later.?

We don’t know for sure why DataRobot founder Jeremy Achin clashed with the Board. All we know is that Dan Wright’s team made up a ridiculous story about Jeremy leaving to pursue his passion for government work or some such nonsense.

There’s a chapter on gaslighting in the AppDynamics playbook.

In the summer of 2021, DataRobot announced a Series G funding round and a valuation of $6 billion. It was an unusual round. Someone leaked details? to Axios a month in advance. If you believe the announcement, DataRobot’s valuation had more than doubled in six months since the Series F round – but the company raised less money.??

In truth, DataRobot was never worth $6 billion. There are two kinds of startup valuations: 409A valuations, and bullshit valuations. General Counsel Brian Brown personally told me that the $6 billion figure wasn’t the product of a 409A “safe harbor” valuation. So that kind of narrows it down.

Also in the summer of 2021, managers spread the word: buckle your seatbelts, this rocket ship is ready for blastoff. Lean in, nose to the grindstone, we’re getting ready for an IPO.??

After the second quarter closed, IPO talk suddenly stopped. The Federal government canceled a major contract. That hurt, but any Wall Street analyst would look beyond a single contract. The problem was in the core sales operation. Upsells were good (thanks to the experienced sellers that hadn’t left yet). But DataRobot wasn’t closing new logos, a critical measure for an aspiring growth company. ?

Apparently, the AppDynamics playbook works great if you want to sell snow to eskimos. For DataRobot, not so much.?

Meanwhile, DataRobot leaders spent a lot of time dreaming up the “AI Cloud” branding. Announcement of that campaign left people scratching their heads. What product are they talking about? It’s like a two-skill ball player who changes his name to “Roberto Clemente”, figuring that will make him a star.

On a personal note, when I resigned from DataRobot, the company countered and offered me a role in Product Marketing. I listened to a pitch from the hiring manager. The role sounded promising, and I’m sure that the money was good. I was tempted.

Then the hiring manager killed the deal. “Of course, you’ll have to work within the DataRobot AI Cloud framework,” he said. LOL. You can’t do product marketing within a brand that is unconnected from the actual product. It would be like trying to sell a floor wax that Marketing brands as a dessert topping.

In May, DataRobot laid off 7% of the workforce. Leadership blamed layoffs on acquisitions made in 2021. Fact check: DataRobot added about 140 people from the acquisitions of Algorithmia and Zepl. After the acquisitions closed, the company went on a hiring spree and added another 300 people.?

What starts with a “G” and rhymes with “asslighting”?

DataRobot apologized for the “bad optics” of doing layoffs immediately after a highly visible sales party in the British Virgin Islands. Not that DataRobot leaders care about bad optics. They planned those layoffs for several months; if they cared about optics, they would have told BVI attendees to STFU on social media.

The real question: after a year of mediocre sales performance, why throw a posh sales party at all? An evening at the Ramada on Route 1 in Saugus would have been more apt.

A few thoughts on where to go from here:

Dan Wright should go. Can you imagine Dan Wright doing an IPO roadshow? I can’t. All of the questions would be about that bogus $6 billion valuation and his personal stock sales. Insider sales are a bear signal in public companies; nobody will buy DataRobot as long as Wright is the CEO.

Dan Wright apologized for the "bad optics" of his stock sales. The issue is ethics, not optics. Wright and his cronies sold shares in the secondary market while blocking DataRobot employees from doing the same, and exhorting the team to be "all in." I hear that most of the company’s Engineering staff recently delivered an ultimatum to the Board: either Wright goes or we go. That’s an easy choice for the Board. Wright cannot lead DataRobot.

Tom Levey should go. Some executives are toxic, but you keep them around because they deliver the numbers. Some executives are just toxic. Sorry Tom; coffee is for closers.

Wright and Levey already collected their golden parachutes, they don’t need more. What are they going to do, add more wings to their third homes?

DataRobot’s AI Cloud branding should go. That campaign was ideally suited for Wall Street’s AI bubble, which deflated faster than the Hindenburg. Whatever comes next for DataRobot, it shouldn’t be more hype.

McLaren should go. All that money spent on advertising hasn’t moved the metrics in DataRobot’s favor. Is anyone surprised? McLaren is a perpetual loser that last won a Constructor’s Championship in 1998. Last year, McLaren landed in fourth place. This year, with all that help from DataRobot, McLaren is in fourth place. What kind of message is that? Spend a ton of money on DataRobot for…no improvement.?

Oh, but DataRobot has a long-term contract with McLaren? DataRobot now employs more lawyers than Kubernetes architects. Put some of them to work on the deal, I’m sure they will think of something.

For the benefit of my former colleagues, I would like to see DataRobot prosper. For me, too. I own 18,957 shares, which I earned from 42 months of service. Their cost, together with a whopping Alternative Minimum Tax bill, are a big chunk of my savings. I would like to believe those shares will be worth something while I’m still young.