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The Dragos Blog

06.06.23 | 4 min read

Dragos CEO's Email to Employees on Layoff

Dragos, Inc.

Our CEO Robert M. Lee sent the following email to the company today, to share the difficult news about a layoff of 50 Dragos employees. Details include why this decision, as hard as it was, was necessary to maintain our trajectory as a business, ensure long-term continued growth and success, and continue to deliver on our mission for our customers.   

Team, 

Today I am sharing with you a hard decision related to adjustments Dragos must make to our annual plan. As you are aware, we have been working to slow growth and increase efficiencies in light of economic conditions that are affecting the industry and our customers. Q1 of this year brought additional pressures on the business. After painstaking deliberation, we are implementing a layoff of roughly 9% of the company’s employees, which equals 50 of our teammates, as well as making other adjustments to the business described below.   

First, I want you to know as CEO, I bear full responsibility for the actions we take as a company. I and the executive team considered each and every avenue before coming to the very difficult decisions I outline here.  Keeping with our tenet of transparency, I’ll do my best to explain what brought us here, what actions we’re taking as a result, and our way forward. 

What Brought Us Here: 

It may come as a surprise that we are conducting layoffs when we’ve consistently maintained high levels of funding at fair and supportable valuations even in down markets. But our focus is not simply about money and stability. It is also about independence so that we maintain the ability to be true to our mission. Unforeseen circumstances have changed core metrics and fundamentals of the business that, if left unchecked, would not ensure our ability to maintain that independence through a successful IPO or Series E in the coming years. 

When the economic downturn began I made the choice to slow down growth potential by asking the executive team to prepare scenarios to reduce future hiring and work on efficiencies across the company. While other companies moved quickly to perform layoffs, we aimed to slow growth and become more efficient in other ways. As an example, we significantly reduced future hiring to only core investments, reviewed every backfill, and cut discretionary budgets. During this time our customers were not impacted by the economy to the point of cutting or delaying OT cybersecurity projects. They prioritized OT cybersecurity given its importance and we still maintained 100%+ year over year growth which meant our plans were supportable. 

However, in Q1 of this year we missed our targets. This prompted us to dig into the reasons for the miss and evaluate the potential impact on our full year forecast. Among our findings was the beginning of trends related to customer behavior due to the sustained economic pressures they were feeling. We continued to win our forecasted deals, but sales cycles lengthened. While OT cybersecurity technology buying continued at a high rate, many new customers reduced the initial deployment size of our technology. Following a review of our pipeline and bookings forecast, we lowered our base forecast for the year.  

We decided we needed to make cuts to align our spending with financial goals that would allow us to continue to grow at a high rate in future years. The executive team, in communication with the board, spent the last four weeks evaluating every cost reduction option at our disposal. We examined every line item of the budget; travel, training, software, hardware, employee benefits, consulting, office space, etc., and reduced planned spending in every category. However, our largest expense is salaries. Salaries plus benefits are over 9x greater than the next largest expense line, so to make the necessary cost reductions, we unfortunately had to review our current staffing. 

Today’s Actions:

Effective today we will be laying off 50 of our teammates, which represents roughly 9% of our workforce. The HR team will be reaching out to affected employees soon today with notification and details on next steps.   

To those who will be affected, I am very sorry. This decision in no way diminishes the value of what each of you has brought to Dragos, to our customers, and to your colleagues during your time here. The decision instead reflects our need to adjust our spending to match our new business plan for the conditions described above. 

Though nothing will make being laid off easier we are attempting to lessen the burden through some actions. Each of the affected individuals will receive:  

  • 2 months of severance  
  • Their elected healthcare coverage through June, plus Dragos will pay for 2 additional months of health care through COBRA  
  • Waiver of the year cliff for vesting equity (if they were here less than a year the cliff is waived and they will vest equity equal to the months they were here)  
  • An extended period of buying their equity from the standard 90 days to 12 months   
  • Help from our recruitment team in finding potential positions, preparing their resumes, and providing recommendations  
  • The option to have an executive sponsor from one of the VPs on the team to be their coach in addition to the recruitment team to support their success in finding another job   

In addition to the layoff, budgets have been restricted in core areas include travel, training, marketing expenditures, and tool and data consolidation and prioritization across the company.   

What Happens Next:

While we have cut budgets and are performing a difficult layoff, we have done this carefully so as not to impact our customers. Customers will continue to experience the support, development, and engagement they have come to appreciate. Our mission to safeguard industrial organizations–our customers—and the people they serve is at the heart of our decisions. 

As for our employees, we as a team will continue to advance our mission. There are still those out there who seek to harm people through ever-evolving cyber attacks on industrial infrastructure. We have a new annual plan and growth forecast that I will detail to the company in the upcoming company-wide call. You are all shareholders in the company and deserve, equally as any other investor, to understand our future and why, despite the actions we must take today, our investors and board members remain optimistic and excited about the future of Dragos. So long as we stay focused on that plan and achieve it there will be no further layoffs. It is my view that as the market recovers, we will continue to see OT cybersecurity prioritized by global companies and the sales cycles, payment timelines, and project sizes will return and exceed their pre-downturn levels. 

Thank you  

Rob

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