Vancouver-based Klue has slashed just over 40 percent of its workforce as it contends with growing competition from businesses experimenting with artificial intelligence (AI) internally, BetaKit has learned.
Klue sells AI-powered business intelligence software products to help sales professionals at other tech firms gather information on competitors and win more deals. Klue co-founder and CEO Jason Smith told BetaKit that the startup proactively made these cuts to increase efficiency and hasten a path to profitability amid increasing uncertainty as to what companies are willing to pay for versus building themselves in the age of AI.
“There is ambiguity about what people will pay for.”
Jason Smith
Klue CEO
The restructuring took place June 25 and included layoffs and voluntary departures, impacting approximately 85 of the startup’s employees across teams and locations, Smith said. He noted that AI, both as an external competitor and an internal replacement for some of the work done by staff, was “the common thread” necessitating the decision, adding that Klue hopes to become “AI-first operationally” through this reorganization.
“A layoff of this magnitude acts as a kind of forcing function for us as a company—to find efficiencies, one has to look to AI apps and agents,” Smith said over email. As part of this restructuring, Klue is also consolidating its engineering operations in Canada and reducing its compute spending.
Klue informed employees of the impending layoffs on June 13, offering them the opportunity to leave voluntarily for the same severance package. Smith said Klue also held one-on-ones and other sessions for staff leading up to June 25. The Globe and Mail first reported Klue’s staff reduction plans.
The CEO said Klue is providing everyone impacted by these layoffs with “generous severance packages, extended benefits, and support for their transition,” noting that “every individual affected has contributed meaningfully to building Klue.”
The ChatGPT effect
A frequently asked question (FAQ) document Klue compiled for staff in the leadup to the layoffs viewed by BetaKit indicated that the startup had failed to reach its topline revenue growth targets while seeing increasing customer churn this year. The FAQ noted that Klue has been facing difficulty competing against OpenAI’s ChatGPT offering.
The FAQ stated specifically that Klue has been “losing more deals to ChatGPT (AI-disruption),” and is building a new product to address this and help the company “re-find product-market fit—with AI at the core.”
The document also said that Klue has burned $28 million since 2023 to grow $2.5 million, and that the startup would run out of cash in two years if it were to continue at its current rate and team size without layoffs. BetaKit has not confirmed the accuracy of the burn and revenue growth rate numbers originally included in the FAQ. Once source familiar with the company’s operations confirmed to BetaKit that the burn and revenue growth numbers were eventually removed from the document after it was shared with employees.
In an interview with BetaKit earlier this week, Smith disputed some of the information obtained by BetaKit—including information related to the company’s financial health—adding that he had not yet looked at the document.
“[Klue] was screaming product-market fit in the early days … and then AI comes along with internal experimentation, and there’s a higher bar for what quality looks like,” Smith told BetaKit. “We as a company are just looking at that realistically, and saying we need to maintain an even higher bar than what you can get out of the box by throwing your regular data into it.”
Smith acknowledged that ChatGPT is powerful, and said Klue uses OpenAI’s latest models and others in its own Compete AI product. But the CEO argued that seasoned sellers and others with specific expertise often find ChatGPT’s answers “lacking nuance and concrete outputs.”
He denied that Klue has been losing deals to OpenAI, but did say Klue has faced increased competition from companies creating their own AI solutions. Today, Smith said many businesses are evaluating their paid subscriptions to products like Klue and experimenting with developing internal AI agents to do the same work. He claimed this trend has slowed deal cycles across the software industry.
Many of these large-language models (LLMs) and agent-building products are inexpensive or even free to try. At the moment, Smith said, “There is ambiguity about what people will pay for.”
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Smith expects the tech world to go through a “clunky phase” where companies spin up thousands of their own agents before deciding which ones to build versus buy.
“We think quality will rise to the top, but we will go through two years of thrashing, which is why I’m cautious on the spend,” he said.
Smith told BetaKit that the burn and revenue growth figures contained in the FAQ are inaccurate, claiming that someone had “mixed up burn with projected future spend.” He asserted that Klue has generated more than $25 million CAD in new and expansion revenue on top of its existing recurring base since 2023.
Contrary to the FAQ, Smith also claimed that Klue hit its first-quarter targets without increasing churn. However, he said the startup is “uncertain” about what the rest of 2025 will look like as more companies experiment with AI. “We actually expected to grow significantly faster than 2024, and now we think we’ll grow at a similar pace” with low double-digit growth, Smith said.
Smith claimed that the FAQ’s assertion of a two-year runway was “patently false,” adding he had “no idea where that’s coming from.” He believed a five-year estimate would be “more appropriate.”
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Klue raised nearly $80-million CAD in Series B funding from Tiger Global and Salesforce Ventures in 2021, bringing its total funding to more than $100 million. Smith maintained that Klue still has “much of” that amount in the bank today.
“We are well-funded, spend judiciously and strategically, and never have to raise outside capital again,” he said.
The CEO declined to disclose Klue’s exact sales or how much the startup currently holds in cash, but he did indicate that Klue is currently generating somewhere between $25 million and $50 million CAD in annual revenue.
Smith confirmed that the staff reduction would help Klue become profitable for the first time, granting it the flexibility to wait out any further economic headwinds as it reorients for the era of AI and builds “Klue 2.0.” He noted that Klue decided to make deep cuts now instead of dragging things out over a series of smaller layoffs, and said he expects this restructuring to give Klue more options in the future, including a greater capacity to make acquisitions.
Despite this market uncertainty, Smith said Klue has “never had more conviction” in its roadmap and continues to see rising demand, leads, and opportunities for its products.
Competing in the “AI-first era”
Smith claimed that Klue differed from other tech startups in 2023 by refraining from layoffs, instead investing aggressively in AI for its product. This came despite increased churn and single-digit growth that year amid a market downturn. He said Klue has also been leveraging AI to improve its internal operations, and that these efforts have already saved employees a great deal of time completing tedious tasks.
Smith envisions a “smaller, nimbler” Klue.
Smith still noted that AI has become a “threat” on both the product and operational sides, highlighting that many younger startups today are growing with far fewer employees thanks to AI.
“It’s imperative for companies like Klue, founded before GPT-3 and agent possibilities, to rejig operational structures and approaches to compete in the AI-first era.”
Post-layoffs, the CEO envisions a “smaller, nimbler” Klue with engineering and go-to-market teams that leverage AI tools to operate more efficiently and ship products faster.
Recent data from Statistics Canada suggests increased business AI adoption has had a limited effect on corporate headcounts in Canada. However, data from Carta indicates that the rise of AI has coincided with a decline in the size of tech startup teams.
Going forward, Smith said he wants Klue staff to consider whether AI agents could complete enough of a given role’s work before hiring someone to fill it. He likened his approach to that of Shopify co-founder and CEO Tobi Lütke, whose recent memo told employees to prove AI cannot do a job before asking for additional resources or staff.
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As BetaKit first reported, fellow Canadian tech company OpenText recently cut 1,600 jobs while making internal AI use a “baseline expectation.” South of the border, Amazon CEO Andy Jassy recently told employees that AI will reduce its headcount.
On the product front, Smith said Klue is betting its more focused AI tools will help clients win deals more reliably than either do-it-yourself solutions, baseline ChatGPT, or generalized options.
“I think narrow wins,” he said. “Anything wide, anything that’s trying to compete with just the basic LLM, will get crushed. But if you can provide additional data, additional full workflow wrappers and program impact and sophisticated prompting … You will have a better quality output, and companies will always pay for quality.”
Feature image courtesy Klue.
Updated (06/29/25): This story has been updated with additional information related to Klue’s FAQ document.