Three college dropouts built a company that is now worth around $10 Billion. But the scary truth is that they are currently facing a lawsuit which might change everything.
Let’s dive into the the company what it does, who are the founders and everything else. Mercor is founded by three 21-year-olds: Brendan Foody (CEO, co-founder), Adarsh Hiremath (CTO, co-founder), and Surya Midha (COO, co-founder). This startup helps companies find AI experts. What’s mind- blowing is that the startup now makes over $540 million per year and is no short of investors. As investors are lining up to give them money.
Just seven months ago the startup was valued at $2 billion. And now, seven months later multiple investors pay $10 billion for the company.
What does Mercor Actually Do?
In really simple terms think of Mercor as a job site, but specifically only for AI work. What it does is it connects companies like OpenAI and Meta with experts- who train their AI systems and check data quality. So basically, Mercor earns revenue by providing companies with specialized domain experts to perform AI model training, such as scientists, doctors and lawyers, as reported by TechCrunch. So what they do is they charge an finder’s fee hourly and a matching rate for their work by these experts.
The Big Problem: A Lawsuit
Here’s where the conflict arises and things have started getting messy. Scale AI has filed a lawsuit which alleges Mercor of misappropriation of trade secrets. The allegation stems from the story that it’s former employee Eugene Ling, who has joined Mercor, took over 100 confidential documents before leaving. The documents contained crucial info like:
- Customer strategies
- Business secrets
- Pricing information
And all of this gives Mercor an unfair advantage and calls it as corporate espionage.
Why Investors Still Want In
It’s shocking how even with lawsuit from a big company like Scale AI, is not stopping investors from investing, here’s why:
- Massive Revenue Growth– As reported by Forbes, Mercor generated $6 million in profit in the first half of the year, which is nothing short of impressive. Additionally, a revenue of $450 million annually is quite impressive for such a young company.
- Perfect Timing– The AI sector is booming, and every company now wants AI to do the heavy lifting. Which is thus creating a huge demand for Mercor’s services.
What This Means
Mercor’s story shows us both the sides of the AI boom.
- The Good Side– Billion dollar companies can be made really fast, if they help in solving real problems.
- The Bad Side– With growth comes challenges, intense competition leads to ethical and legal questions which revolve around how companies operate.
- The Reality– AI valuations might be too high, or just right, but the thing for sure is that investors do not want to miss out on the next big thing.
What is Going to Happen Next?
Mercor is facing two big challenges:
- The legal battle: Legal battles are lengthy and cost a lot of resources like time and money. The lawsuit coming from such a big company might hurt their reputation and cost millions to fight.
- Keeping Up: Growing up this fast while maintaining quality service is going to be extremely hard and difficult.
Eugene Ling has responded to all of this, he said he feels bad for leaving scale and understands how this could be frustrating for his old team. As reported by TechCrunch, this was his response to the company suing him” When Scale reached out about some files I had in my personal drive, I asked if I could just delete them. But Scale asked that I not do anything with them, so I’m still waiting for guidance on how to resolve this. I’ve never used any of them in this role. It sounds like Scale wants to sue me and that’s up to them. But I just wanted to say that there truly was no nefarious intent here. I’m really sorry to my new team at Mercor for having to deal with this.”
The company’s future depends on how it resolves and handles this law suit, and at the same time it has to prove that the $10 billion valuation makes sense. Because as of the now investors believe that the potential rewards (timing and revenue) are greater than the risks (ethical and legal battles).
