UPDATED: Digital Railroad Makes Major Layoffs

Yesterday, rounds of meetings took place in Digital Railroads' offices with staff who were to be kept having early meetings (and they then departed the office) and staff to be laid off went into meetings where they were told, en masse, that they were being laid off. Charles Mauzy, the CEO, writes in a letter "DRR is in the process of re-structuring our company and the team along with all of our employees want to make sure we keep key partners/associations/press informed of the changes taking place. "

Layoffs are reported to be between 22 people and up to 1/2 of the Digital Railroad staff, even while sales staff recently hired for the LA office are still being trained. Some uncertainty remains about the actual number of employees laid off though, as some who remain are contractors and technically not staff. Digital Railroad would not confirm the percentage of staffers or even the total number of staffers laid off. Mauzy notes in his letter, of those departing "The friends and colleagues that we say farewell to today have laid the foundation for our mutual success now and in the future."

(Full post after the Jump)

Indications in December were such that, internally, it was determined that if significant changes were not made by December 31st, the company, reportedly strapped for cash and with a high burn rate, would be in serious jeopardy. Outreach to their current investors saved them from a third round of funding, which is always a risky maneuver. Their last round, reportedly $10M (PopPhoto - 2/5/07 - Digital Railroad Receives Fresh Funds) almost a year ago, infused them with significant resources to move forward. Much of their initial investments came from Morgenthaler Ventures and Venrock Associates. With an additional infusion from them, coupled with a Series B investment round led by London-based venture firm DN Capital, Digital Railroad was set to move forward.

Mauzy writes in the letter “While change is always difficult we are confident that the change we make today will allow us to have long term success. Our investors have tremendous confidence in our leadership team, our strategy and have renewed their financial support with additional investments in capital this month." He then goes on to say "With the support of our investors, founders, board of directors and most importantly our employees, we are necessarily reducing costs not directly related to growth of Marketplace including a reduction in force." This does make sense. However, there were significant departures in their support department, which, hopefully, is because more and more people are becoming familiar with how to use the service, from both a buyers and sellers end, and a reduced call volume was an indicator that cuts could be made there. It should be hoped that these weren't cut because it was easy to reduce customer service. This is doubtful, but possible.

Debate about their major expansion and push into the Research Network, which has been flooded with requests of late from major corporations, the National Geographic, and many others and seems to be poised to do well (as indicated by recent sales department hires being trained as laid off staffers were packing their things), suggest that perhaps Digital Railroad may have expanded more than it was capable of doing. An email sent 2 days ago noted "...we've got over 130 open requests looking for ship point-of-views, local scenics, people, architecture, and more from every corner of Europe."

Mauzy goes on to say "In 2008 our goal is to build on this success and fulfill our mission to drive significantly greater revenue to our members through image licensing in Marketplace. In order to achieve this objective, we are focusing 100% of our resources to attracting top creative professionals—both buyers and photographers—to Digital Railroad and growing sales in Marketplace...[o]ur key leadership team including our newly appointed CEO, Charles Mauzy, Maris Berzins, Mark Ippolito, Andy Parsons and Tom Tinervin all remain with Digital Railroad and have collaborated closely on setting our strategy for 2008 and beyond."

I believe (with a degree of hope) that this will make Digital Railroad leaner and meaner for their "fight" with Getty, et al. There are formidable forces looking to derail them. In 8 months, they have amassed over 2,000,000 images, and those numbers continue to grow and accelerate. I for one have thousands of images there, and use it to serve client assignment imagery, alongside my use of PhotoShelter's Personal Archive solution.


Let's wait and see. More updates as we get them.

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