Mercor, a company that supplies specialized data to improve artificial intelligence models, is engaged in preliminary fundraising conversations that value the business at roughly $20 billion, according to people familiar with the matter. The startup has informed investors that it received at least one term sheet at that valuation.
Those conversations are in an early phase, and the company could ultimately decide not to pursue a financing round or accept different terms than those currently discussed. The active talks have taken place over the past few weeks - coming less than a year after Mercor’s last financing round at a $10 billion valuation.
The discussions follow a turbulent span for the firm. In late March, Mercor experienced a security breach that exposed customers and contractors to potential risk. Meta Platforms Inc. - a customer at the time - responded by pausing its work with the startup indefinitely. Mercor says the impact on customer and contractor data was "very limited," based on an investigation's findings. A person familiar with the matter said OpenAI and Anthropic continue to be customers.
On the revenue front, Mercor’s chief executive, Brendan Foody, posted on X this week that the company reached a $2 billion annualized revenue run rate, up from $1 billion just four months earlier. That headline run-rate does not reflect the company’s retained revenue after payments to contractors - who, according to a person familiar with the matter, are paid between 60% and 70% of the total amount billed.
Those contractor payouts are a material component of Mercor’s unit economics and mean the company’s stated run rate overstates the portion it keeps after disbursing payments. The combination of accelerating top-line billing and substantial contractor share shapes how investors and potential acquirers will view the business’ underlying margins and long-term profitability.
Investors in the ongoing discussions have been shown the $20 billion figure via at least one term sheet, though participants cautioned that negotiations remain fluid. That uncertainty spans whether the company will complete a new financing, and if so, whether the valuation and other terms will be finalized as currently presented.
For now, Mercor’s growth narrative - a doubling of reported annualized revenue in roughly four months - is juxtaposed with the operational and reputational questions raised by the security incident and the pause from a major client. How those dynamics play into the final structure of any deal under discussion remains to be determined.