Mercor, debuting on the Forbes Cloud 100 list, built an AI recruiter to interview job candidates. Along the way, it discovered a more immediate cash cow: finding humans to train AI models.<\/p>\n
Sitting in a conference room at Mercor\u2019s office in San Francisco\u2019s South of Market district, CEO Brendan Foody recalls the day in June that changed everything. Meta had announced it was buying almost half of data labeling giant Scale AI for $14 billion and poaching its star CEO Alexandr Wang. Mercor, a smaller rival that recruits PhDs and other experts to train models for AI labs, saw an immediate opening.<\/p>\n
\u201cI was initially surprised,\u201d Foody tells Forbes. \u201cThen it slowly transitioned from surprise to excitement and enthusiasm around the future.\u201d His cofounder and CTO Adarsh Hiremath chimes in: \u201cIt just doesn’t happen too often in startups where your biggest competitor gets torpedoed overnight.\u201d That\u2019s because Scale\u2019s tie-up with Meta means many of the big AI labs, worried about a loss of neutrality, no longer want to work with them, the founders argue. During the conversation, Hiremath struggles to contain the excitement of his new pet, a 6-week-old Bernese Mountain Dog named Zeus.<\/p>\n
The puppy\u2019s exuberant energy is an apt metaphor for Mercor itself, a company that has become one of the AI era\u2019s poster children for Silicon Valley\u2019s twenty-something founders<\/a>. At age 22, Mercor\u2019s leaders Foody, Hiremath and Surya Midha are all Thiel Fellows, members of conservative billionaire investor Peter Thiel\u2019s program to dole out $100,000 grants every year to young people in exchange for foregoing college. The three longtime friends, who met on their Bay Area suburb\u2019s high school debate team, started Mercor in 2023 before their fellowships.<\/p>\n The buzzy startup, backed by heavy hitters including blueblood venture firm Benchmark, Twitter cofounder Jack Dorsey and former U.S. Treasury Secretary Larry Summers, is a company in transition. Last month, it hired former Uber product chief Sundeep Jain as the startup\u2019s first president, the company told Forbes, injecting tech-giant experience into the neophyte operation. Mercor will soon move to Instagram\u2019s old offices in downtown San Francisco, a bigger space for its fast growing team. And this year the company made its debut at No. 89 on Forbes\u2019 Cloud 100 list, our ranking of the world\u2019s top private cloud computing companies.<\/p>\n Even Mercor\u2019s primary business has changed \u2014 sort of. The company wasn\u2019t always focused on data labeling, and it\u2019s still not the long term goal. Its original conception<\/a> was modernizing recruiting with AI and high-tech matching algorithms. Mercor built a platform where applicants were interviewed by an AI avatar and placed with a company looking to hire talent, like a next-gen Deloitte or Accenture. Then OpenAI\u2019s ChatGPT, released only a few weeks before Mercor\u2019s founding, touched off a race among the tech giants to train the most advanced AI models. Mercor, which means \u201cmarket\u201d in Latin, found its sweet spot staffing people to train those AI models, and tilted the entire company in that direction.<\/p>\n Don\u2019t call it a pivot, Foody insists, saying Mercor still sees itself as a recruiter. Data labeling still fits with Meror\u2019s core purpose of matching workers with companies. Whatever you call it, it\u2019s clearly paid off. In March, Mercor said it had $100 million in annualized revenue run rate, and now tells Forbes it made $6 million in profit in the first half of the year. The company said it\u2019s grown nearly 60% every month for the past six months. Foody declined to reveal how much of the business data labeling now represents, but said it\u2019s the \u201ccore growth driver\u201d of the company.<\/p>\n The data labeling space is already crowded, even with Scale\u2019s diminished stature. Surge, an older company founded in 2016, is reportedly valued at $25 billion. Turing AI, valued at $2.2 billion, raised $110 million in July. And Invisible, a smaller firm last valued at $500 million in 2023, has become a go-to partner for OpenAI and Microsoft<\/a>.<\/p>\n Reached for comment, Scale AI pushed back against Mercor\u2019s assertions. \u201cIt\u2019s not surprising that Mercor is spreading lies about its biggest competitor,\u201d Scale AI spokesperson Joe Osborne said in a statement. \u201cWe remain independent and neutral, and have said so publicly many times.\u201d<\/p>\n Foody says Mercor stands out from the pack because of its focus on providing clients with highly-skilled experts, like PhDs or lawyers, who typically make between $90 and $150 an hour. That type of expertise is necessary for training the most advanced reasoning models, which often need domain experts to teach them how to \u201cthink\u201d through multi-step requests. (The founders\u2019 favorite staffing placements for AI model trainers include a chess grandmaster and private detective.) Foody also touts Mercor\u2019s matching algorithms, which allows the company to pick the best person for each specific project, he said.<\/p>\n Mercor says it\u2019s made inroads with the top AI labs seeking model trainers, including OpenAI. Applied Compute, a new startup focused on AI reinforcement learning that was founded by ex-OpenAI staffers, uses Mercor to provide datasets on specific topics, like finance. \u201cThey attract the caliber of talent that a lot of these other platforms aren\u2019t able to,\u201d said Yash Patil, CEO of Applied Compute, who met the Mercor founders when they were all Thiel Fellows together.<\/p>\n The company has its detractors. One rival data labeling CEO praised Surge for its execution and high volume, while saying Mercor wasn\u2019t on their radar as much when it came to big deals with customers. \u201cI see them a lot less,\u201d the CEO said. However, they agreed that Mercor\u2019s bread and butter is in staffing highly-skilled experts.<\/p>\n The focus on expert-quality data has gotten the attention of investors. Mercor raised $100 million in February from backers including Felicis, Benchmark and General Catalyst, vaulting its valuation to $2 billion, eightfold from $250 million just a few months before. Now, Peter Fenton, a Benchmark partner who was an early investor in Twitter and Yelp, is joining the board, after Victor Lazarte, the previous board member representing Benchmark, announced in July that he\u2019s leaving to start his own fund. \u201cI think Mercor has proven itself as the highest quality data provider,\u201d Lazarte told Forbes. \u201cThe people building models understand that the quality of your data is more important than the amount of data that you need.\u201d<\/p>\n There are pitfalls to letting AI weigh in on hiring decisions. In general, language models can generate biased responses based on training data. Foody argues Mercor protects against bias even more than traditional recruiting, because its AI isn\u2019t allowed to see certain identifiers about candidates, including name, gender and race. Foody said the company also isn\u2019t using interview data to train its AI recruiter, a concern of some detractors. \u201cOne of the main reasons not to train on interviews is that, on a standalone basis, they’re not super useful,\u201d said Foody, adding the company would need an amount of data closer to the size of the whole web for it to be valuable.<\/p>\n When Scale\u2019s sale to Meta sent shockwaves through the industry, it also cast doubt on the future viability of data labeling as a business. Observers wondered why Wang, the CEO of the sector\u2019s most dominant player, would suddenly jump ship if he didn\u2019t see something foreboding on the horizon. Foody takes the opposite view: The Meta deal validated the industry, he argues, since the social giant found it valuable enough to pony up billions for a 49% stake. Human AI trainers will be necessary as long as there are complicated concepts to teach models, and he\u2019s betting it will be a long time before that business dries up.<\/p>\n Now Mercor is trying to get to the next level. When the company hired Jain as president last month, he became the proverbial \u201cadult in room\u201d \u2014 like when Google brought in Eric Schmidt to coach young founders Larry Page and Sergey Brin. Jain said his main goal is to scale all of Mercor\u2019s systems. That includes onboarding and management processes, as well as creating better systems for tracking and reporting data for customers. As he settles in, he\u2019ll also have to get used to the youthful environment. \u201cI\u2019m significantly increasing the average age,\u201d said Jain, 54, laughing.<\/p>\n That\u2019s certainly evident in Mercor\u2019s headquarters. On a recent Friday afternoon in July, the office is bustling. Framed inspirational quotes hang on the wall, from both tech icons and Mercor engineers alike. \u201cNo significant innovation has ever come out of a large company,\u201d says a poster quoting Vinod Khosla. It hangs a few feet away from another quoting a rank-and-file Mercor engineer: \u201cWelcome aboard the rocket ship.\u201d Copies of Peter Thiel\u2019s Zero to One are scattered throughout the office. On an office bar cart beside bottles of Dom Perignon and Don Julio 1942 are rows and rows of Monster energy drinks and a lone canister of Loaded Hot Dog Pringles.<\/p>\n Foody, who grew up in Menlo Park, always had Silicon Valley in his blood: his mom worked for Meta\u2019s real estate team and his dad founded a graphics interface company in the 90s before turning to startup advising. One of his first ventures, started as a high schooler at age 16, was a company to get his friends promotions on Amazon Web Services, the ecommerce giant\u2019s cloud platform, charging them $500 each. Foody reaped the benefits of his parents\u2019 entrepreneurial wisdom during dinner table conversations. His dad\u2019s advice: create jobs and sell to \u201crich customers in pain,\u201d instead of hawking products to your friends, Foody recalled. \u201cWe joke that Mercor epitomizes both of those. We create jobs and we sell to the wealthiest customers.\u201d<\/p>\n The trio originally started the company to match engineers in India with U.S. companies in need of freelance coders. Intrigued investors began wining and dining them. \u201cThey\u2019re not just prodigies,\u201d Benchmark\u2019s Fenton told Forbes. \u201cThey\u2019re forces beyond categorization.\u201d To court the founders, he whisked them away on a helicopter tour of San Francisco. Felicis Ventures, another backer, flew the founders to Las Vegas in a private jet to race Ferraris around the F1 track. Foody finished the race first, said Felicis partner Sundeep Peechu, who recalled him taking turns aggressively. \u201cThe appropriate risk-taker at the company should be the CEO.\u201d<\/p>\n Thiel, who invested in the company\u2019s series A, has also opened up his network. Foody recalled attending his politics-themed Christmas party, where guests could choose to either take a red pill or a blue pill \u2014 a play on The Matrix that has come to symbolize the chasm between left and right wing politics. (Foody said he took neither pill.)<\/p>\n Mercor\u2019s longer term goal is to be able to match every person with an appropriate job for them. In the future, the company wants to be able to place lawyers at law firms and doctors at hospitals. For now, though, the money is in training AI, and it looks like it will be that way for the foreseeable future as Scale becomes a presumably less looming threat. \u201cThey’ve left a very meaningful void in the space,\u201d said Foody.<\/p>\n \nMore From ForbesForbesAI Startup Flock Thinks It Can Eliminate All Crime In AmericaBy Thomas Brewster<\/a>ForbesCloud 100 Rising Stars 2025: The Next Generation Of Superstar Cloud CompaniesBy Victoria Feng<\/a>ForbesThe Cloud 100 Methodology: Making The Definitive List Of The World\u2019s Top Private Cloud CompaniesBy Bessemer Venture Partners<\/a>ForbesHow Software Leaders Need To Adapt To AI \u2014 Or Risk Going Extinct.By Bessemer Venture Partners<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Mercor, debuting on the Forbes Cloud 100 list, built an AI recruiter to interview job candidates. 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