Square Peg-backed HR Tech Startup Retrain.ai Shuts Down
Retrain.ai, a New York-based startup specializing in AI-driven employee management solutions, has ceased operations this year. The company laid off all 20 employees and is reportedly seeking buyers for its technology. Founded in 2020 by Dr. Shay David, Isabelle Bichler-Eliasaf, and Avi Simon, Retrain.ai developed a platform that analyzed labor market data, identified skill gaps, and recommended workforce development strategies, including personalized training and internal mobility.
Despite raising $34 million from investors such as Radical Ventures, Hetz Ventures, Square Peg, TechAviv, and Splunk Ventures, Retrain.ai shut down after five years in the market.
Food for Thought
- AI startup failure rates remain high despite strong funding.
Retrain.ai’s closure reflects a wider trend where nearly 90% of AI startups fail within their first five years, even with significant investment. The main reasons include lack of product-market fit (42%), unsustainable business models (22%), and high development costs (16%). Although Retrain.ai secured $34 million, it struggled to achieve sustainable growth. AI startups face unique challenges such as inflated expectations of AI capabilities, data management difficulties, and the high cost of specialized talent. HR tech companies, in particular, face pressure to prove immediate ROI as many executives remain skeptical about AI’s practical benefits for workforce management. - The HR technology market is saturated with AI-powered solutions.
Retrain.ai entered a highly competitive space crowded with established players like Workday, BambooHR, and Leapsome. By 2025, many major HR platforms had incorporated AI features, offering tools for skills analysis, workforce planning, and employee development at competitive prices—some as low as $4 per user per month. This commoditization put pressure on startups to justify premium pricing. Enterprise buyers tend to prefer proven vendors with track records, making it difficult for newer companies like Retrain.ai to scale quickly enough to meet investor expectations. - Israel’s tech ecosystem remains resilient despite individual company closures.
Retrain.ai’s shutdown affects its employees but takes place within Israel’s mature tech ecosystem. Since the 1960s, Israel has built a significant technology sector with over 4,000 high-tech companies and hundreds of thousands of employees. The venture capital infrastructure, strengthened by programs like Yozma in 1993, has raised billions from overseas and generated substantial exits. This ecosystem offers displaced tech workers alternative opportunities, especially with many global R&D centers based in Israel. Despite startup failures, the sector’s exports and economic contributions continue to grow.
For HR professionals exploring AI tools and workforce upskilling strategies, understanding these market dynamics is critical. If you want to strengthen your AI skills for HR applications, consider exploring relevant courses on Complete AI Training to stay informed about practical AI uses in workforce management.
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