This start-up behind ChatGPT's success now has a $10B valuation
What's the story
Mercor, a start-up that plays a pivotal role in enhancing leading AI models, is closing in on a new funding round that would value the company at $10 billion. The valuation is five times higher than what it was worth in February. The company is raising $350 million from investors such as Felicis Capital, Benchmark and General Catalyst participating in the latest funding round.
Business model
Mercor's rapid ascent in the AI ecosystem
Founded in 2023 by three college dropouts, Mercor manages a global network of 30,000 contractors. These contractors perform tasks like image labeling and sentence writing to help AI chatbots learn human-like communication skills. The company's unique business model has made it an attractive option for top-tier AI companies such as OpenAI and Anthropic.
Strategic shift
From HR start-up to AI enabler
Initially, Mercor operated as an HR and recruiting start-up, using AI to automate resume screening and match candidates with suitable roles. However, as AI companies sought to improve their models, Mercor quickly scaled up its contractor network to include professionals such as lawyers, doctors, bankers, and journalists. The strategic shift was supported by the appointment of Uber's former Chief Product Officer Sundeep Jain as President in May.
Market impact
Legal battle with Scale AI looms over Mercor
Mercor's network value was highlighted when Meta Platforms acquired a 49% stake in data-labeling start-up Scale AI for $14 billion. The deal pushed Scale's valuation to an astonishing $29 billion. However, the competition among data-labeling start-ups intensified last month when Scale sued Mercor for allegedly stealing trade secrets. A spokesperson for Mercor said they would let the case play out through legal proceedings.