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. This information comes from 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 is up from an $8 billion target valuation that the company discussed a couple of months ago. 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, as 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, or 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 had reached $75 million at that time. In March, Mercor CEO Brendan Foody posted that annual run rate revenue was $100 million.
The company has told investors it is on track to hit the $500 million annual run rate revenue milestone faster than Anysphere, the startup that makes AI coding assistant Cursor. Anysphere famously hit $500 million in annual run rate revenue 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, according to a Forbes report.
Mercor earns revenue by providing companies with specialized domain experts, such as scientists, doctors, and lawyers, to perform AI model training. The company charges 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. This is 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 reinforcement learning services. Some believe that OpenAI’s recently launched hiring platform could lead the AI giant to create its own human-expert-powered reinforcement learning training service.
When reached for comment, CEO Brendan 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 annual run rate revenue 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, Adarsh Hiremath, and Surya Midha. 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, according to a Forbes report.
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.