In October, the hot automation startup UiPath laid off about 400 people â and parted ways with its chief financial officer â just months after raising $568 million at a $7 billion valuation.The news has stoked fears of "irrational exuberance" at the startup, which is seen as the leader in the field of robotic process automation.Sources have told Business Insider that CFO Marie Myers was forced out after she tried to rein in what they described as rampant overspending, including excessive travel and expensive meals.UiPath declined to comment on specific allegations related to spending, Myers' departure, and the impact of the layoffs on its finance team. But the company told Business Insider: "There is a lot of false information in the market being shared by competitors and others."
Click here for more BI Prime stories.UiPath kicked off 2019 as the hottest startup of a hot market with a catchy name: robotic process automation.
RPA refers to software that helps businesses automate common, repetitive computer tasks. UiPath appeared to own that space in January when it announced a whopping $568 million in venture-capital funding, boosting its valuation to $7 billion.
"UiPath sits in the cockpit of the RPA rocket ship," the Forrester analyst Craig Le Clair wrote in a report on the market last month. "UiPath's financial backing and savvy development and marketing make it hard to bet against."
But then the rocket ship ran into heavy turbulence.
Just nine months after the monster funding round, and the same week it got that rave review from Forrester, the company said it was slashing about 400 jobs. Even more stunning, it said at the same time that its chief financial officer, Marie Myers, who had joined the company only in January, was leaving "to pursue other opportunities."
Suddenly, the glow around UiPath turned into a harsh spotlight on a startup that Le Clair now says apparently went through a phase of "irrational exuberance," as its strategy of growing at all costs runs into harsh business reality.
Two people familiar with UiPath's business paint a grimmer portrait of the startup, which they say forced out an effective CFO because she tried to rein in rampant overspending.
They say that the company had loose policies that led to excessive travel and that it had leased a jet for use by executives, covered frequent steak dinners priced at $200 a plate, and exceeded by about $3 million its budget for a major Las Vegas event last month. They say many members of the finance team Myers set up in the US, which had tried to implement more stringent policies, were among those let go.
The event in question, UiPath's third annual Forward user conference, was held at the Bellagio, a prominent hotel on the Las Vegas strip. It featured speakers from UiPath, Amazon, and Morgan Stanley and even Le Clair, representing Forrester. The layoffs were announced about a week after the event.
The layoffs also comes as a persistent rumor holds that Microsoft is interested in purchasing UiPath â rumors that are only exacerbated by the cuts. The company said it did not comment on speculation.
UiPath declined to comment on specific allegations related to spending, Myers' departure, and the impact of the layoffs on its finance team.
"There is a lot of false information in the market being shared by competitors and others," the company told Business Insider in a statement. "We will not comment on that false information. As a company, we are past the news of last week and are squarely focused on growing the business and continuing to lead the market."
Myers has "agreed to stay on in a transitional role" through the end of the year, the company said. Myers declined to comment to Business Insider.
'Why would you get rid of a highly competent CFO?'
When UiPath introduced Myers as its CFO in January, the company's cofounder and CEO, Daniel Dines, said in a press statement that the startup was "excited to have someone of her caliber and experience to lead our financial operations as we prepare for the next phase."
Before joining UiPath, Myers had spent more than a decade with Hewlett-Packard, serving as the tech giant's global controller, CFO of its PC and printer business, and chief audit executive.
Her hiring came to many as one more sign that UiPath, backed by venture-capital all-stars like CapitalG (formerly Google Capital), Accel, and Kleiner Perkins, was making the right investments to go from fast-growing startup to mature enterprise vendor.
In his original report, Le Clair had said that, in the eyes of customers, "UiPath is handling its growth spurt in a well-organized fashion as it attempts to cover today's and tomorrow's rich RPA frontier."
And so, Ray Wang, the principal analyst with Constellation Research, a technology market research firm, said the sudden departure of a veteran and highly respected CFO was clearly staggering and raised many questions.
"Why would you get rid of a highly competent CFO?" Wang told Business Insider. "It is interesting that a highly respected CFO was let go in the middle of their accelerated growth, who is known to have put in governance and financial controls."
Le Clair said he was also puzzled by Myers' sudden departure. "I thought she was very professional," he said. "But I have no idea why or what's going on with that. I was surprised."
'Irrational exuberance'
UiPath had 3,300 employees before the layoffs. The company stressed that even with the job cuts its workforce was still about 50% bigger than it was at the beginning of the year.
There was no formal press announcement on Myers' departure. In an official blog post addressing the layoffs, however, Dines said: "I pushed UiPath to work harder and faster, and pushed us to hire at blazing speeds."
"In the last 10 months, we grew our workforce by 60%⦠sort of a 'blitz scaling' approach," he said, adding: "Through the waves of our recent hiring, we have worried that we could become less agile and responsive to customers."
Le Clair said his take on the company was more subdued after the layoffs, which were more extensive than he would have guessed.
"I was a little surprised by the numbers," Le Clair told Business Insider. "You had a kind of a classic venture-based Silicon Valley mentality of let's accrue market share, let's boast about the number of customers, which fueled a somewhat irrational hiring of people."
In a way, he said it was typical of emerging markets, especially at a time when artificial intelligence and automation have become hot trends in tech.
"There is sort of an irrational-exuberance phase, and then the VCs see tremendous opportunity and there's a lot of money pouring in and that's used to evangelize the new market," he said.
A small but fast-growing and evolving market
RPA is a small market, with total revenue of about $850 million in 2018, according to the analyst firm Gartner. But it is fast-growing, and Gartner estimated the RPA segment posted a year-over-year growth of 63% in 2018. Le Clair estimates that in three to four years, the RPA software market could be worth $4 billion, while RPA services would be worth $12 billion â and argues in a book that the market is only just getting started.
It has become a competitive arena. Rivals quickly sought to distance themselves from the hypergrowth strategy at UiPath, which they blamed for the company's surprising management upheaval, though it should be noted that they compete in the same market for presumably many of the same customers.
Pat Geary, the chief technology evangelist at the UK-based Blue Prism â which, incidentally, first coined the term robotic process automation â says he steered clear of the "hypergrowth hire as many people and cover as many markets as quickly as you can" strategy that UiPath embraced.
"We take a more managed approach to growth," he told Business Insider.
Mihir Shukla, the CEO of the Silicon Valley-based rival Automation Anywhere, said the startup "adopted a very different business strategy."
"It's clear that our competitor has taken a different approach than our own," he told Business Insider. "As we expand into new geographies and grow our customer base, our strategy has always been to nail it before we scale it and maintain a strategic, stable approach to growth."
Asked whether he agreed with observers saying there'd been too much hype around RPA, Shukla responded: "Absolutely not. We remain bullish on the strength of the RPA market."
Eric Johnson, the CEO of Nintex, told Business Insider, "There's definitely been a ton of hype."
"There's never been a better time to be an automation company," he said, but he argued that RPA was just one of a growing number of tools businesses could use to automate networks. Nintex offers multiple automation products and services, including RPA.
Is the squeeze coming?
Wang echoes a similar view, saying RPA is just one component of a bigger market that is consolidating into a market in which the major software players are also entering.
On Monday, Microsoft said it had added RPA features to Flow, its cloud-based automation software, which has been renamed as Power Automate. Le Clair also said SAP had just launched an RPA product based on its acquisition of Contextor. Le Clair said he expected that "there will be more" mergers and acquisitions in the space.
Dines, UiPath's CEO, wrote that the startup remained "on a sound path-to-profitability in 2020." But Wang offered a less upbeat view of the $7 billion startup that just went through jolting changes while competing in a fast-changing market.
"We think the valuation is going to drop by half," he said, "because the market is consolidating."
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