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Tag: Mercor

  • Exclusive: AI training startup Mercor eyes $10B+ valuation on $450 million run rate, sources say

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    Mercor, a startup that connects companies like OpenAI and Meta with domain experts needed to train and refine their foundational AI models, is in discussions with investors for a Series C round, according to a marketing document viewed by TechCrunch and two sources familiar with the deal talks.

    Felicis, a returning investor, is considering doubling down on the company for the Series C, according to two sources. Felicis declined to comment. 

    The company is currently targeting a valuation of $10 billion or more, one person said. That’s up from an $8 billion target valuation that the company discussed a couple of months ago, one person said. However, terms of the final deal could still change.

    The company has told potential investors that it already has multiple offers. VCs have been reaching out to Mercor preemptively with offers valuing the company at as much as $10 billion, the Information previously reported.

    TechCrunch also understands that the company has brought on at least two new investors to raise funds for the potential deal through special purpose vehicles (SPVs).

    The company’s previous round was announced in February – a $100 million Series B at a $2 billion valuation led by Felicis.

    Founded in 2022, Mercor is approaching $450 million in annualized run-rate revenue, one person said. The company told TechCrunch in February that its annual revenue (calculated by multiplying the latest month by 12) had reached $75 million at that time. In March, Mercor CEO Brendan Foody posted on X that ARR was $100 million. 

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    The company has told investors it is on track to hit the $500 million ARR milestone faster than Anysphere, the startup that makes AI coding assistant Cursor, according to one source familiar with the situation. Anysphere famously hit $500 million in ARR about a year after its product launched. Unlike Anysphere, which is still burning cash, Mercor generated $6 million in profit in the first half of the year, Forbes reported.

    Mercor earns revenue by providing companies with specialized domain experts to  perform AI model training — such as scientists, doctors, and lawyers — and charging an hourly finder’s fee and matching rate for their work. 

    The company claims to supply data labeling contractors to five top AI labs, including Amazon, Google, Meta, Microsoft, and OpenAI, as well as to Tesla and Nvidia. According to sources, an outsized portion of its revenue is coming from a subset of those brands, including OpenAI. 

    To further diversify its business model, Mercor has been telling investors that it is adding more software infrastructure for reinforcement learning –  a training method where a model or agent’s decisions are verified or disputed, enabling it to incorporate feedback and improve over time. The company also intends to eventually build an AI-powered recruiting marketplace.

    Still, Mercor faces competition from companies like Surge AI, which is reportedly in talks to raise funding at a $25 billion valuation, as well as from Turing Labs and other data labeling firms like Scale AI that are also expanding into RL services. Some believe that OpenAI’s recently launched hiring platform could lead the AI giant to create its own human-expert-powered RL training service.

    When reached for comment, Foody told TechCrunch, “We haven’t been trying to raise at all,” and, “We turn down offers every month.” He also said the company’s ARR is higher than $450 million. However, he clarified that the company’s revenue includes the total amount that customers pay Mercor for services before its contractors receive their portion. He added this is a common accounting practice recommended by audit firms and used by competitors Surge AI and Scale AI. 

    The startup was co-founded in 2023 by Thiel Fellows and Harvard dropouts Brendan Foody (CEO), Adarsh Hiremath (CTO), and Surya Midha (COO). All three co-founders are still in their early twenties. To take the company to the next level, Mercor recently appointed Sundeep Jain, a former chief product officer at Uber with decades of experience, as its first president, Forbes reported.

    Mercor was recently sued by competitor Scale AI for misappropriation of trade secrets. Scale AI alleges that one of its former employees who later joined Mercor “stole more than 100 confidential documents concerning Scale’s customer strategies and other proprietary information,” according to a copy of the lawsuit TechCrunch previously reviewed.

    Maxwell Zeff contributed reporting

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    Marina Temkin

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  • Scale AI is suing a former employee and rival Mercor, alleging they tried to steal its biggest customers   | TechCrunch

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    Scale AI, which helps tech companies prepare data to train their AI models, filed a lawsuit against one of its former sales employees and its rival Mercor on Wednesday. The suit claims the employee, who was hired by Mercor, “stole more than 100 confidential documents concerning Scale’s customer strategies and other proprietary information,” according to a copy seen by TechCrunch.

    Scale is suing Mercor for misappropriation of trade secrets and is suing the former employee, Eugene Ling, for breach of contract. The suit also claims the employee was trying to pitch Mercor to one of Scale’s largest customers before he officially left his former job. The suit calls this company “Customer A.”

    Mercor co-founder Surya Midha denies that his company used any data from Scale, although he admits that Ling may have been in possession of some.

    “While Mercor has hired many people who departed Scale, we have no interest in any of Scale’s trade secrets and in fact are intentionally running our business in a different way. Eugene informed us that he had old documents in a personal Google Drive, which we have never accessed and are now investigating,” Midha told TechCrunch in an emailed statement. 

    “We reached out to Scale six days ago offering to have Eugene destroy the files or reach a different resolution, and we are now awaiting their response,” Midha said.

    Scale alleges that these documents contained the specific data that would allow Mercor to serve Customer A, as well as several other of Scale’s most important clients.

    Scale wanted Mercor to give it a full list of the files in the drive, and to prevent Ling from working with Customer A. It alleges in the suit that Mercor refused. Ling did not immediately respond to TechCrunch’s request for comment, but he later wrote on X: “Just heard I’m getting sued by Scale. Last month, I left Scale to work at Mercor. I know this was frustrating for my old team, and I feel bad about that.”

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    Continued Ling, “When Scale reached out about some files I had in my personal drive, I asked if I could just delete them. But Scale asked that I not do anything with them, so I’m still waiting for guidance on how to resolve this. I’ve never used any of them in this role. It sounds like Scale wants to sue me and that’s up to them. But I just wanted to say that there truly was no nefarious intent here. I’m really sorry to my new team at Mercor for having to deal with this.”

    There are scant clues in the suit about the identity of Customer A. The suit does say that if Scale’s rival did win this customer away, it would be a contract “worth millions of dollars to Mercor.”

    Whatever the details of this suit, it does show one thing: Scale is clearly concerned enough about the threat of Mercor to pursue legal action. As TechCrunch previously reported, even with Meta’s multibillion-dollar investment into Scale, TBD Labs — the core unit within Meta tasked with building AI superintelligence — is still using Mercor and other LLM data training service providers.

    Mercor is rising in the LLM training arena because it is known for hiring content specialists, often PhDs, to train LLM data in their areas of expertise.

    In June, Scale announced that Meta was investing $14.3 billion for a 49% stake in Scale and was hiring away its founder. Shortly after that, several of Scale AI’s largest data customers, who are competitors to Meta’s efforts, reportedly cut ties with it.

    Updated with comments on social media from Eugene Ling.

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    Julie Bort

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