AI Startup Mercor Targets $10B Valuation with $450 Million Run Rate
Mercor, a burgeoning startup that connects tech giants like OpenAI and Meta with specialized domain experts for AI model training, is currently in talks for a Series C funding round. According to a marketing document reviewed by TechCrunch and sources familiar with the negotiations, the company is aiming for a valuation exceeding $10 billion, a significant increase from its previous target of $8 billion. With multiple investment offers already on the table, Mercor is poised for substantial growth as it approaches a remarkable $450 million in annualized revenue.
Funding and Valuation Aspirations
Mercor is actively engaging with investors for its Series C funding round, with the goal of achieving a valuation of $10 billion or more. This marks a notable rise from the $8 billion valuation discussed just a few months ago. Felicis, a returning investor, is reportedly considering increasing its stake in the company. Although the final terms of the deal are still subject to change, the interest from venture capitalists has been robust, with several firms preemptively reaching out to Mercor with offers that value the company at around $10 billion. The startup has also onboarded at least two new investors through special purpose vehicles (SPVs) to facilitate this funding round.
Revenue Growth and Business Model
Founded in 2022, Mercor is on track to achieve an annualized run-rate revenue of approximately $450 million. The company previously reported a revenue of $75 million in February, which CEO Brendan Foody later updated to $100 million in March. Unlike some competitors, Mercor has managed to generate profits, reporting $6 million in profit during the first half of the year. The company’s revenue model revolves around providing specialized domain experts—such as scientists, doctors, and lawyers—to assist in AI model training. Mercor charges an hourly finder’s fee and matching rate for these experts, and it claims to supply data labeling contractors to leading AI labs, including Amazon, Google, and Microsoft.
Competitive Landscape and Future Plans
Despite its rapid growth, Mercor faces stiff competition from other companies in the AI space, such as Surge AI and Turing Labs, which are also expanding their services. Notably, Surge AI is reportedly in discussions for funding at a staggering $25 billion valuation. Additionally, there are concerns that OpenAI’s new hiring platform could lead to the development of its own human-expert-powered reinforcement learning training service. To diversify its offerings, Mercor is exploring the addition of software infrastructure for reinforcement learning, a method that allows models to improve through feedback. The company also has plans to create an AI-powered recruiting marketplace in the future.
Leadership and Legal Challenges
Mercor was co-founded by Brendan Foody, Adarsh Hiremath, and Surya Midha, all of whom are in their early twenties and are Thiel Fellows and Harvard dropouts. To bolster its leadership, the company recently appointed Sundeep Jain, a former chief product officer at Uber, as its first president. However, Mercor is currently facing legal challenges, having been sued by competitor Scale AI for alleged misappropriation of trade secrets. Scale AI claims that a former employee who joined Mercor took over 100 confidential documents related to its customer strategies. As the company navigates these challenges, it continues to focus on its ambitious growth trajectory and innovative business model.
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