Mercor, a company that links organizations such as OpenAI and Meta with the expert professionals needed to develop and fine-tune advanced AI systems, is reportedly negotiating a Series C funding round with investors, according to two individuals with knowledge of the discussions and a marketing memo reviewed by TechCrunch.
Felicis, which has previously backed Mercor, is weighing the possibility of significantly increasing its investment in the Series C round, two sources indicated. Felicis chose not to comment.
According to one source, Mercor is seeking a valuation of at least $10 billion in this round, which is an increase from the $8 billion target discussed a few months earlier. Nonetheless, the final terms of the deal may still be subject to change.
The company has informed prospective investors that it has already received several proposals. Venture capitalists have proactively approached Mercor, offering valuations as high as $10 billion, as previously reported by the Information.
TechCrunch has also learned that Mercor has enlisted at least two new backers to help secure financing for this possible deal via special purpose vehicles (SPVs).
Mercor’s last funding round, a $100 million Series B led by Felicis at a $2 billion valuation, was announced in February.
Established in 2022, Mercor is nearing an annualized revenue run rate of $450 million, according to one individual. The company told TechCrunch in February that its yearly revenue (projected by multiplying the most recent month by 12) was at $75 million at that point. In March, CEO Brendan Foody shared on X that the ARR had climbed to $100 million.
Mercor has told investors it expects to reach $500 million in ARR faster than Anysphere, the startup behind the AI coding tool Cursor, according to a person familiar. Anysphere notably hit the $500 million ARR mark about a year after its product launch. Unlike Anysphere, which remains unprofitable, Mercor generated $6 million in profit in the first half of the year, Forbes reported.
Mercor’s revenue comes from connecting organizations with domain specialists—such as legal, medical, and scientific professionals—to support AI model training, charging hourly placement and matching fees for these services.
The company says it provides data annotation contractors for five major AI organizations—Amazon, Google, Meta, Microsoft, and OpenAI—as well as for Tesla and Nvidia. Sources indicate that a significant share of Mercor’s revenue comes from a few of these companies, including OpenAI.
To broaden its business approach, Mercor is positioning itself as a provider of additional software infrastructure for reinforcement learning—a method in which a model’s actions are assessed and adjusted, allowing it to improve based on ongoing feedback. The company is also planning to launch a recruiting platform powered by AI in the future.
Despite these moves, Mercor competes with firms such as Surge AI, which is said to be negotiating fundraising at a $25 billion valuation, as well as Turing Labs and other data annotation providers like Scale AI, which are also expanding into reinforcement learning offerings. There is speculation that OpenAI’s new hiring platform could result in the company developing its own expert-driven RL training services.
When contacted, Foody told TechCrunch, “We haven’t been trying to raise at all,” and, “We turn down offers every month.” He further stated that the company’s ARR surpasses $450 million. However, he clarified that Mercor’s revenue figures reflect the total amounts paid by clients for services before contractors are compensated. He added that this accounting approach is commonly recommended by audit firms and is also used by competitors such as Surge AI and Scale AI.
Mercor was co-founded in 2023 by Brendan Foody (CEO), Adarsh Hiremath (CTO), and Surya Midha (COO), all of whom are Thiel Fellows and former Harvard students in their early twenties. To help drive further growth, the company recently named Sundeep Jain—Uber’s former chief product officer with decades of experience—as its inaugural president, according to Forbes.
The company recently became the subject of a lawsuit filed by competitor Scale AI, alleging misappropriation of trade secrets. Scale AI claims that a former employee who moved to Mercor “took over 100 confidential files related to Scale’s client strategies and proprietary information,” according to legal documents previously reviewed by TechCrunch.
Reporting by Maxwell Zeff
