Mercor's recent fundraising made its CEO Brendan Foody (pictured) and his two co-founders the world's youngest self-made billionaires. Now contractors say his startup has shut down one of its AI training projects and cut salaries.
Cody Pickens for Forbes
Mercor's co-founders became billionaires last month after raising $350 million for a $10 billion venture for the AI training startup. Just over a week later, they reportedly failed an AI project involving thousands of contractors. According to several people affected, hours later an offer was made to rehire the workers at a lower hourly rate.
Contractors who worked with startup Mercor said they were banned from Slack on Tuesday after the AI training project they had been working on was suddenly shut down.
The San Francisco startup, which was valued at $10 billion last month, reportedly sent an email to contractors on Wednesday to inform them that the project, codenamed Musen, had been canceled.
Forbes spoke with five Mercor contractors who worked on the project, which involved reviewing video and audio data from Meta's Facebook and Instagram short video platform Reels. The contractors were part of a Slack group that shared updates on the project, which at one point included over 5,000 people, according to those contractors.
Contractors told Forbes that they had been working on the project for several months and Mercor managers had told them in October that the project was expected to run until at least December. Mercor didn't officially identify the client behind the project, but employees were told it was Meta and described working exclusively with content from Meta's social media apps to train AIs to identify people and products in short videos.
“It all happened very suddenly. I've never seen anything like this and have worked on a few AI projects,” said a Mercor contractor Forbes. All contractors interviewed requested not to be named or identified.
Mercor had been paying workers on the project $21 an hour, but contractors complained that the project had been paused intermittently in recent weeks and that promised hours had been cut. “It felt like a slap in the face. It's very disrespectful to ask us to do more work for less money,” said another contractor.
After the Slack group was closed and former contractors took to Reddit to regroup and figure out what happened, Mercor emailed them around 1 p.m. ET: “We've carefully reviewed contributor feedback regarding task availability, hour limits, and workload consistency. We've listened to you—and we're committed to creating a more stable and predictable environment for everyone in the future.”
The email also included an offer for some employees to take on new roles on a project called Nova. Mercor promised a “more consistent volume of tasks” and more work hours per week, but also set a new hourly rate of $16 per hour, 24% lower than the previous $21. That's lower than the state minimum wage that applies in locations like California, Washington and Connecticut.
“While this reflects a change from the current structure, our goal is to provide greater income stability and consistent access to work, rather than fluctuating opportunities,” Mercor said in the email to its contractors, which was viewed by Mercor Forbes.
“It's contract work, but we are real people who deserve attention, warning or consideration,” said another former Mercor contractor Forbes. “I know we work with AI, but we don't work for AI. You don't just drop thousands of people, that's not entirely true.”
Heidi Hagberg, head of communications at Mercor, said: “It is inaccurate and we decline to comment further.”
Mercor's move to cut pay for some of its contractors comes just weeks after a new $350 million funding round boosted the company's value to $10 billion from $2 billion just months earlier and crowned its three 22-year-old co-founders as the world's youngest self-made billionaires.
Bay Area high school friends Adarsh Hiremath, Brendan Foody and Surya Midha dropped out of college to start Mercor, originally intended as an AI recruiting platform for software developers.
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The trio came across the booming field of data labeling for AI laboratories. Mercor announced that it had reached $500 million in annual revenue in September, shortly after being named to the Forbes Cloud 100 list of top private cloud computing companies. (Tracing revenue was not disclosed.) This is largely thanks to a massive shakeup in the data labeling industry, which had already made several three-point fortunes for the founders of competing data labeling labs like Scale and Surge.
Meta announced in June that it was buying 49% of one of the industry's biggest players, Scale, for $14 billion to hire its co-founder and CEO Alexandr Wang, who is now Meta's chief AI officer. The move sparked widespread excitement from companies like Mercor, Surge and Turing, who were betting that rival AI labs wouldn't work with a company now partially owned by a major competitor.
Mercor CEO Brendan Foody said in September that sales had increased fivefold since March, but the boom had also created tensions. That same month, Scale sued Mercor, saying the startup had stolen trade secrets. “We don’t spend a lot of time thinking about it,” Foody said Forbes when asked about the complaint.
Big tech companies' massive investments in generative artificial intelligence have fueled demand for thousands of people, often taking short-term and flexible jobs, to label training data, coach emerging chatbots and review results for safety. In the early days, these were often low-paid “click workers” in Africa and Southeast Asia, but as models evolved, so did labor demands, and many labs hired specialists and masters graduates to work on niche topics.
While Mercor is offering data annotation workers on Project Nova just $16 an hour, it is also running job ads for lawyers, journalists and doctors who are reportedly willing to pay up to $200 an hour to answer questions about their work developing new AI models.
Several of the Mercor contractors with whom Forbes Spokesman said they had already signed up for the new project at a lower price. “I work part-time, but for many of my colleagues it was the be-all and end-all, and they have children.”
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