Scale AI's life after Meta deal has been rocky, but CFO insists it's not a 'zombie company'

In June, Meta's stunning announcement of a $14.3 billion investment in Scale AI sent shockwaves through the tech industry, casting a shadow over the startup's future. This deal was primarily aimed at securing the services of Scale's founder, Alexandr Wang, and several of his team members. Following this announcement, OpenAI revealed it was reducing its collaboration with Scale, leading to concerns about the company’s viability. Reports indicated that other major players like Google and Elon Musk's xAI also paused their partnerships with Scale amid the uncertainty. However, Scale AI’s Chief Financial Officer, Dennis Cinelli, has a different narrative to share nearly five months post-announcement. He asserts that the 1,000-plus employee company is thriving. "There’s a misconception that this deal is merely an acquihire or a licensing agreement, which is far from the truth," Cinelli stated in a recent interview. He emphasized that Scale has secured some of its most significant contracts in recent months, showcasing the company’s robust position. Founded in 2016, Scale AI is well-known for its data services, competing against firms like Appen and Surge AI. The startup also develops custom AI solutions for government and enterprise clients. Recently, it secured a $99 million contract with the U.S. Department of Defense in August, followed by another $100 million deal in September. Cinelli reported that both segments of Scale’s business are flourishing and generating substantial revenue, although he refrained from disclosing exact figures. As of last year, Scale was nearing $1 billion in revenue prior to the Meta deal. Silicon Valley has been buzzing with speculation about Scale’s future since the Meta investment. This transaction was often grouped with other acquihires in the tech sector, albeit at a higher valuation. Major companies like Microsoft and Google have been actively recruiting top AI talent, often opting for agreements that avoid the complexities of full acquisitions. For instance, Google’s recent $2.4 billion deal to hire Windsurf's co-founder and key R&D staff did not involve a direct investment. Industry analyst Greg Martin described the Meta-Scale arrangement as a "quasi-acquihire," suggesting that investors remain puzzled about Scale's potential for a public offering. He indicated a growing interest in other AI companies such as Anthropic and xAI, questioning the exit strategy for Scale. In an effort to reassure stakeholders, Jason Droege, who stepped in as interim CEO after Wang's exit, stressed that Scale is not winding down or changing direction. Cinelli echoed this sentiment, stating that the company continues to engage with all major AI laboratories and tech firms, remaining independent of Meta's influence. Although OpenAI, Google, and xAI are not currently listed as clients on Scale's website, Meta is identified as a customer. Despite Wang's departure, which was a significant loss, Cinelli highlighted that the majority of the team remains intact. With Meta holding a 49% stake in Scale, valued at approximately $29 billion, the dynamics between the two companies are intriguing, particularly since Meta lacks voting rights and there is no product integration. Cinelli pointed out that Scale's data division continues to expand monthly, while its applications sector has seen a remarkable doubling in growth compared to earlier in the year. Looking ahead, Scale anticipates that its applications division will be a key revenue driver. Despite the challenges, including a recent layoff of 200 employees representing about 14% of its workforce, Scale is actively recruiting for new positions and expanding its office space in major cities like New York and London. Cinelli expressed confidence in Scale’s growth trajectory, revealing that the company has a solid financial foundation with $1 billion in reserves, reducing the immediate need for further funding. The startup has also redefined its mission to focus on developing reliable AI systems for crucial decision-making, a shift that has positively influenced recruitment efforts. Cinelli's remarks reflect a company determined to dispel the notion of being a 'zombie company,' asserting that their performance and strategic direction tell a different story altogether.