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This story was updated July 21, 2022.
Turmoil has intensified at the AI startup that grew to challenge the dominance of the tech giants.
DataRobot CEO Dan Wright resigned on Wednesday in the wake of reports that top executives at the AI vendor, including Wright, cashed out stocks that longtime employees could not sell.
Wright will be replaced by interim CEO Debanjan Saha, currently president and COO, the company said in a press release. Saha, a former vice president and general manager of data analytics at Google, joined DataRobot in February.
The company said it has started a search for a permanent successor to Wright, who started at DataRobot in 2020 as president and COO and was appointed CEO in March 2021. He and other top DataRobot executives came from application performance management vendor App Dynamics after the departure of co-founder Jeremy Achin.
Wright will stay on in an “advisory role,” DataRobot said.
Wright's resignation came a few days after DataRobot's chief AI evangelist, Ben Taylor, resigned in protest, punctuating a season of bad news for the Boston-based AI vendor. Taylor's fiery resignation letter, obtained by SearchEnterpriseAI, cited plunging employee morale, layoffs and issues with recently-appointed top executives who reportedly sold millions of dollars in company stock, despite negative financial forecasts.
While it is too early to know what affect leadership change – with two CEOs leaving in the last two years -- will have on DataRobot’s customers, R&D and sales and marketing efforts, the executive churn is unsettling, said Andy Thurai, an analyst at Constellation Research.
“They are struggling with growth, competition is catching up, acquisitions are not well integrated yet, and there seems be a cultural problem which will drive away lot of employees -- too many exec changes,” Thurai said. “This is going to regress them a lot in the next few years. Maybe they can recover from this. Only time can tell.”
DataRobot envisioned going public before the coronavirus pandemic but remains privately held. Executives buy and sell private shares in the company. And, like at other companies, authorized employees can sell stock, and even borrow money to buy stock at a certain price.
"The amount of stock [executives] sold implies that they knew the company wasn't growing, and yet they were running it," chief AI evangelist Taylor wrote in the 1,160-word document he sent to some DataRobot employees last week. "What they did was immoral."
Taylor co-founded deep learning vendor Zeff.ai, which was bought by DataRobot in 2020 as part of a string of acquisitions DataRobot used to build itself into one of the biggest independent AI, machine learning and software automation vendors.
DataRobot responded to Taylor's resignation and allegations in a prepared statement that said the company is growing quickly and had 38% year-over-year revenue growth this past fiscal year, "which speaks to the strength of our strategic plan."
"We have a strong financial foundation, with a sizable cash runway to support our operations for several years," the statement, attributed to a spokesperson, said. "Any suggestion to the contrary is not supported by the facts."
Taylor's resignation, effective Aug. 20, came after DataRobot laid off about 70 employees in May.
The vendor had also conducted a round of layoffs in March 2020, but raised $300 million in June 2021, bringing its market valuation to $6.3 billion at the time. The vendor has raised more than $1 billion since it was founded in 2012, but an IPO executives had anticipated hasn't materialized.
“Their growth was crazy before the pandemic,” Thurai said. But “as with any fast-growing company, they have growing pains.”
Taylor's departure followed stories in The Information and The Boston Globe that detailed trouble at DataRobot. Top executives including Wright and CFO Damon Fletcher -- both relatively recent hires -- sold millions of dollars in stock in 2021 while most employees, including veterans, were not allowed to sell their stock, according to those reports.
DataRobot’s financial situation in some ways mirrors the challenges faced by public companies, and executive stock-selling that could be seen as normal during upbeat times can take on more negative perceptions in a down market, said Kashyap Kompella, CEO and analyst at RPA2AI.
“When market conditions shift like this, expectations about executive behavior also change,” Kompella said. "Executives have more leeway during exuberant times but when the outlook turns negative, many controversies related to differential treatment, self-dealing, and wasteful spend arise. Upholding not just the letter of the law but also the spirit of the law becomes important.”
DataRobot has drawn considerable attention as it and many other tech vendors cope with more hesitant customers and a slowdown in venture financing and tech IPOs.
However, the vendor's technologies and business fundamentals remain strong, and executive stock sales don't necessarily indicate problems, said Mike Gualtieri, a Forrester Research analyst.
DataRobot gained momentum with its 2019 acquisition of data prep vendor Paxata and appointed Paxata's co-founder Nenshad Bardoliwalla chief product officer in 2021. Forrester named DataRobot as an industry leader this year.
DataRobot broadened its suite of products beyond its core automated machine learning platform and now offers coding and data prep tools. It has been successful in securing big contracts in vertical industries, such as healthcare.
"They have a portfolio of strong products that customers want now," Gualtieri said. "We also evaluated their strategy and that's on the high side as well, and mostly because of their strategy of industry [platforms]."
As for Taylor's departure, "that's not going to hurt the company at all," he said. "It's probably good for the company that he left because if there's that much bad blood at the company at a high level, that's not good."
Taylor, an admirer of Achin, alleged in his at-times emotional letter that DataRobot's valuing of financial incentives over passion for its technology has "killed morale," and he portended dire consequences for the vendor unless there are "drastic changes in leadership."
"Employees missed family events, worked family vacations with the promise that their paper millions would be converted to cash," Taylor wrote. "The employees stayed at DataRobot and worked harder while executives that had been there for months, not years, were cashing out."
Among other accusations, Taylor also decried the predicament of some DataRobot employees who he said took out loans to buy company stock and lost significant amounts of money -- a risky move that also is not unusual in corporate stock option plans, Gualtieri noted.
"Promising employees and family riches, if they stay, will no longer work," Taylor wrote. "As an AI company, that means we're terminal."
Taylor declined to comment for this story.