Sources: AI training startup Mercor eyes $10B+ valuation on $450 million run rate

Mercor, an innovative startup that connects major tech companies like OpenAI and Meta with specialized domain experts for AI model training, is currently in talks with investors regarding a Series C funding round. According to sources familiar with the negotiations and a marketing document reviewed by TechCrunch, the company is aiming for a valuation exceeding $10 billion, which marks an increase from an earlier target of $8 billion discussed just a few months back. Felicis, a previous investor, is reportedly considering a significant investment in this new round, although they have not publicly commented on the matter. The startup has indicated to potential investors that it has received multiple offers, with venture capitalists actively seeking to invest at valuations around the $10 billion mark. Additionally, Mercor has onboarded at least two new investors to facilitate funding through special purpose vehicles (SPVs). Founded in 2022, Mercor is on the verge of achieving an annual run-rate revenue of approximately $450 million, with its CEO, Brendan Foody, having previously announced on X that the annual revenue had reached $100 million earlier this year. The company has expressed confidence in surpassing a $500 million annual revenue milestone more swiftly than its competitor Anysphere, which provides AI coding assistance. In contrast to Anysphere, which is still incurring losses, Mercor reported a profit of $6 million in the first half of the year. The startup generates revenue by matching companies with experts—such as scientists, doctors, and lawyers—for AI training, charging a finder’s fee for their services. Notably, a considerable portion of its revenue is derived from collaborations with major AI labs, including Amazon, Google, and Microsoft, with OpenAI being a significant contributor. To enhance its business model, Mercor is planning to expand its software infrastructure for reinforcement learning—a training technique that helps models improve through feedback. Moreover, the company has ambitions to establish an AI-driven recruiting marketplace. Despite its rapid ascent, Mercor faces stiff competition from firms like Surge AI, which is reportedly seeking funding at a staggering $25 billion valuation, and other data labeling businesses like Scale AI, which are also venturing into reinforcement learning services. Concerns have been raised regarding a potential hiring platform from OpenAI that could lead to the development of its own training service powered by human experts. In response to inquiries about their funding strategy, Foody stated that the company has not been actively seeking investment and routinely declines offers. He also clarified that their reported ARR reflects the total revenue before contractor payments, in line with common accounting practices. Mercor was co-founded by Brendan Foody, Adarsh Hiremath, and Surya Midha, all in their twenties and former Thiel Fellows. To further strengthen its leadership, the company has appointed Sundeep Jain, a seasoned former chief product officer at Uber, as its first president. However, Mercor is currently embroiled in a legal dispute with Scale AI, which alleges that a former employee misappropriated confidential information, adding another layer of complexity to its burgeoning operations.