MDR and Asset Management Startups Lay Off Significant Portions of Workforce
In a notable trend within the cybersecurity sector, two late-stage startups have announced sweeping layoffs this month, reportedly eliminating double-digit percentages of their employees. These reductions come amidst ongoing economic challenges and a push towards incorporating artificial intelligence (AI) into their operations.
Deepwatch, a managed detection and response (MDR) provider, has executed layoffs affecting between 60 and 80 employees from a staff of 250, as reported by TechCrunch. This strategic decision aims to streamline the organization in light of significant investments in AI and automation. Concurrently, Axonius, an asset management vendor, cut nearly 100 positions, equating to approximately 11% of its workforce, as part of a broader initiative to sharpen its corporate focus.
Deepwatch’s CEO, John DiLullo, emphasized in an email to Information Security Media Group that the layoffs are part of aligning the company’s resources for accelerated investments in AI and automation. Although Deepwatch did not confirm specific figures, reports suggest that around 80 employees were impacted. The company has seen a fluctuating workforce over the years after securing $180 million in Series C funding in February 2023, indicating a concerning trend in employee retention.
Deepwatch Confronts Business Challenges Following Major Funding
Despite the infusion of capital, Deepwatch has struggled to maintain momentum. After a notable increase in employee count in 2021 and 2022, the company experienced a decline in 2023 and continued to struggle in subsequent years. The departure of founding CEO Charlie Thomas in July 2024 marked a significant leadership change, with DiLullo, who has a history of overseeing substantial cuts in previous roles, taking the helm.
The concern for Deepwatch is compounded by its geographical concentration, with nearly 94% of its workforce based in the United States. Although the company expanded its offerings through acquisition, its growth has not translated into stability in headcount or industry recognition.
Axonius Faces Setbacks After Period of Growth
In contrast, Axonius experienced more robust growth in recent years, increasing staffing by 12% last year and 29% this year before the recent layoffs. These growth spurts were bolstered by a $200 million funding round earlier in 2024 and a strategic acquisition of Cynerio, a medical device security company. Following the layoffs, the firm described its decision as a “strategic business choice” aimed at future growth and expressed appreciation for the contributions made by departing employees.
Axonius benefits from a more geographically dispersed workforce, with 53% of its employees in the United States and notable representation in Israel and the United Kingdom. Since its inception, it has been led by Dean Sysman, a military intelligence veteran, reflecting the firm’s commitment to innovative cybersecurity solutions.
The layoffs at both firms align with broader industry trends, as other cybersecurity vendors like Varonis and CrowdStrike implement workforce reductions to adapt to shifting market dynamics and declining renewal rates in subscription models. These actions underscore a significant pivot within the sector as companies reassess their operational strategies in response to the evolving landscape characterized by increased reliance on AI technologies.
