AI Startup Mercor in Talks for Funding at $20 Billion Valuation, Report Says

Artificial intelligence startup Mercor is in discussions to raise new capital at a valuation of approximately $20 billion, potentially doubling its value in less than a year, according to a report from Bloomberg. The potential funding round follows a period of rapid revenue growth for the company, which provides specialized data to improve AI models.

Valuation Soars on Growth

The fundraising discussions, which have been active for several weeks, could value Mercor at twice the $10 billion valuation it secured in its last funding round less than a year ago. Citing people familiar with the matter, Bloomberg reported that the company has received at least one term sheet at the $20 billion level.

Discussions are reportedly in the early stages, and the terms of a potential deal could change. It is also possible that the company may not proceed with a new funding round at this time.

Revenue and Business Model

The high valuation talks are underpinned by the company's explosive top-line growth. Mercor CEO Brendan Foody said in a post on X this week that the company had reached a $2 billion annualized revenue run rate, up from $1 billion just four months ago.

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However, this figure represents the total amount billed to clients. According to a person familiar with the matter cited by Bloomberg, Mercor's contractors, who perform the data work, earn 60-70% of that amount, meaning the company's net revenue share is significantly smaller.

Navigating Recent Challenges

The funding news comes after a turbulent period for the startup. In late March, Mercor experienced a security breach that exposed customer and contractor data. Following the incident, a key customer, Meta Platforms Inc. (NASDAQ:META), indefinitely paused its work with the firm.

Mercor stated that an investigation concluded the impact from the breach was "very limited." Despite the setback with Meta, other major AI developers, including OpenAI and Anthropic, have reportedly remained customers, signaling continued confidence in its services.