AI Training Startup Mercor Discusses $20 Billion Valuation

Mercor, a startup that helps improve artificial intelligence models with rich specialized data, is discussing raising new funds at a roughly $20 billion valuation, according to people familiar with the matter.

Mercor has told investors that it received at least one term sheet at that valuation, said the people, who spoke on condition of anonymity as the information is not public. The fundraising discussions are early, and the company could end up not raising a round or deal terms could change.

The active fundraising talks, which have occurred over the past few weeks, come less than a year after Mercor last raised money at a $10 billion valuation. It also follows a turbulent period for the firm. In late March, Mercor was the victim of a security breach that put its customers and contractors at risk. Meta Platforms Inc., a customer at the time, reacted to the breach by pausing its work with the startup indefinitely.

Mercor, for its part, said that the impacts to customer and contractor data were “very limited,” according to findings from an investigation. OpenAI and Anthropic continue to be customers, according to a person familiar with the matter.Meta declined to comment. OpenAI and Anthropic did not respond to requests for comment.

Despite these challenges, Mercor is still fielding some investor interest and has seen its revenue surge. In a post on X this week, Mercor Chief Executive Officer Brendan Foody said the company hit $2 billion in annualized revenue run rate, up from $1 billion just four months ago. Part of the growth in revenue is an uptick from enterprise and application-layer companies looking to build their own models, which in turn rely on Mercor to provide data to speed up that process, one person said.Read more: The $10 Billion Startup Training AI to Replace the White-Collar WorkforceThe revenue figure doesn’t reflect what Mercor’s share of revenue is after it pays money to contractors, who earn 60-70% of the total amount billed, according to a person familiar with the matter.Founded in 2023, Mercor has emerged as one of the leading services to help AI developers build more sophisticated models. It faces competition from other data-labeling startups, including Surge AI and Scale AI, the latter of which was valued at more than $29 billion last year as part of an investment from Meta.

Mercor has been profitable since its inception, the company previously told Bloomberg, and pays more than $4 million per day to its contractors, one person said. The San Francisco-based startup has about 400 full-time employees.