Drastic Cuts at Dataupia—Company Lays Off Majority of Staff While Hunting for New Investors

6/9/09Follow @wroush

Cambridge, MA-based data warehousing appliance maker Dataupia has laid off nearly two-thirds of its staff and scaled back its operations while it seeks new funders, Xconomy has learned.

We contacted Dataupia today after hearing a rumor that the four-year-old startup had shut down—a rumor that turns out to be exaggerated but not wholly unfounded. “Dataupia is very much still here, still operating, and supporting customers and growing our business,” says Samantha Stone, the company’s vice president of marketing. “We did, unfortunately, lay off a significant number of people, and we did that just a few weeks ago, but we have not closed down operations by any means, and we don’t have intentions of closing down operations.”

Stone said 23 people remain on active duty at Dataupia. She would not comment on how many people were laid off. But a data sheet published by the company in April indicated that Dataupia had 60 employees at that time, indicating that about 37 people have lost their jobs. (We’ve updated the Boston Tech Layoff Tracker accordingly.)

Dataupia sells servers specially designed to handle very large datasets that can be mined for business-intelligence purposes. (An e-retailer or a wireless provider might buy a Dataupia server to help plumb customer transaction records in order to create customized discount offers or rate plans, for example.) The startup’s backers include Polaris Venture Partners of Waltham, MA, Fairhaven Capital of Cambridge, MA, and Valhalla Partners of Vienna, VA. Altogether, the venture firms have put about $40 million into Dataupia; the most recent infusion was a $10 million extension of the company’s B round, closing in the fourth quarter of last year.

The cutbacks at Dataupia are evidently part of what’s becoming a familiar story among venture-backed technology startups: cash runs short, and the original funders aren’t willing to pony up more without seeing some changes, or without having a new investor to help share the load.

“What happened was that some of our investors have asked us to seek out additional funding from other sources,” Stone says. As a result, she says, “We have scaled back our operations so we can continue to support customers and continue to invest in some of the strategic development we had in place. But we basically scaled back all of our marketing initiatives and some of our development stuff, and we’re seeking additional new funding sources so that we can get back on track and grow again.”

The changes at Dataupia are also a marker of how quickly a startup’s financial fortunes can shift. When I last interviewed Dataupia CEO Tony Sirianni in late March, I specifically asked him how much of a financial runway the company had, and whether it would be able to raise a Series C round, should that become necessary.

The investors “would not have brought me on board without giving me the proper ramp-up to make the company successful,” Sirianni answered at that time. “The company brought me on board to scale the organization, and that takes money, and I believe the VCs are going to finance the company appropriately to give me the opportunity to succeed with that. I believe the story is so compelling that if we need to go to yet another [venture] round, whenever that might be, I’m confident we’ll be able to secure whatever we need. That is not a problem I am waking up each morning worrying about.”

Stone says Sirianni was speaking in earnest about the company’s growth plans at that time. “It was our intention to continue doing that and he said that with all honestness,” she says. But as it turns out, some of the company’s backers are now unwilling to contribute further venture funding unless Dataupia can line up additional new investors. Others, meanwhile, may be unwilling to join the round at all. (Stone didn’t identify which investors are which.) “Polaris as well as Valhalla and Fairhaven have been our investors, and some of those would like to continue to invest and are looking for new partners to do that, and others are looking at their whole portfolios,” she says.

Stone asserted that from a sales and marketing perspective, Dataupia has been performing well. The company exceeded its revenue goals for the first quarter of this year, and its server technology has recently won awards from publications such as RedHerring.com and Information Week. “We have accomplished a great deal, and we are looking forward to a chance to augment our financing and get back on track,” she says.

Customers who have bought Dataupia hardware still have a customer support and engineering team to service them, Stone adds.

In other company news, Stone confirmed information obtained by Xconomy that former CEO Foster Hinshaw, who now serves on Dataupia’s board, recently underwent serious surgery for a heart condition. “He has recovered from that and is doing remarkably well, and is an active member of the board of directors,” Stone says.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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