Surge AI Seeks $1 Billion in First Capital Raise, Challenging Scale AI's Dominance

Exclusive: Scale AI's bigger rival Surge AI seeks up to $1 billion capital raise, sources say

July 1 (Reuters) - Surge AI, a data-labeling firm that competes with Scale AI, has hired advisors to raise as much as $1 billion in the first capital raising in the firm's history, sources told Reuters, as it seeks to capitalize on growing user demand amid Scale AI's recent customer exodus. The company, founded by former Google and Meta engineer Edwin Chen, is targeting a valuation of over $15 billion, sources said, cautioning that the talks are still in early stages and the final number could be higher. The funding would be a mix of primary and secondary capital that provides liquidity for the employees. Surge AI, which has been profitable and bootstrapped by Chen, has raked in over $1 billion in revenue last year, bigger than its better-known competitor Scale AI, which reported $870 million in revenue over the same period of time. In comparison, Scale AI was valued at $14 billion in a funding round last year, and was mostly recently valued at nearly $29 billion when Meta invested for a 49% stake in the company and poached its CEO Alexandr Wang to be its chief AI officer to lead its new Superintelligence Labs. Surge AI declined to comment. Like other Scale AI competitors, Surge AI is benefiting from Scale AI's customer losses following Meta's investment. This includes OpenAI and Scale's largest customer, Google, who are now planning to move away from the platform over concerns that doing business with Scale could expose their research priorities to Meta. Scale has said its business remains strong, and it is committed to protecting customer data. Surge AI's quiet yet meteoric rise has positioned it as one of the largest players in the crowded data labeling industry, defying the typical Silicon Valley playbook of raising massive rounds of venture capital to fuel growth. Founded in 2020, the San Francisco-based company has largely operated under the radar, known for its premium, high-end data labeling services used by top AI labs, including Google, OpenAI and Anthropic. As reinforcement learning from human feedback (RLHF) has become more important in training advanced AI systems, the demand for meticulously labeled, nuanced datasets has grown. Surge AI has capitalized on this trend by appealing to a network of highly skilled contractors instead of large pools of low-wage labor. The outsized funding of Surge would be a test of investor interest in the data labeling sector. Some investors view data labeling as an ongoing necessity for AI development, predicting a continued demand from leading AI labs. Others express concern that the industry's low margins and reliance on human labor could make it vulnerable to automation, as AI technology advances and the need for manual annotation diminishes. Reporting by Milana Vinn and Krystal Hu in New York; Editing by Chizu Nomiyama Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Business Milana Vinn Thomson Reuters Milana Vinn reports on technology, media, and telecom (TMT) mergers and acquisitions. Her content usually appears in the markets and deals sections of the website. Milana previously worked at GLG and PE Hub, where she spent several years covering TMT deals in private equity. She graduated from CUNY Graduate School of Journalism with Masters in Business Journalism. Krystal Hu Thomson Reuters Krystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and characters, with a focus on growth-stage startups, tech investments and AI. She has previously covered M&A for Reuters, breaking stories on Trump's SPAC and Elon Musk's Twitter financing. Previously, she reported on Amazon for Yahoo Finance, and her investigation of the company's retail practice was cited by lawmakers in Congress. Krystal started a career in journalism by writing about tech and politics in China. She has a master's degree from New York University, and enjoys a scoop of Matcha ice cream as much as getting a scoop at work.

Data labeling startup Surge AI seeking $1B in first capital raise, reports say - SiliconANGLE

Data labeling startup Surge AI seeking $1B in first capital raise, reports say Data-labeling startup Surge Labs Inc. is hoping to capitalize on the recent customer exodus at its main rival Scale AI Inc., and to do that it's reportedly seeking up to $1 billion in venture capital funding. That's according to an exclusive report by Reuters, which cites anonymous sources as saying Surge AI has hired advisors to help out with the first capital raise in its history, targeting a $15 billion valuation. The sources added that the funding would be a mix of primary and secondary capital that provides liquidity for employees. The talks are still in their early phases, and the final amount raised could yet be much higher, the report added. San Francisco-based Surge AI was founded and bootstrapped by the former Google LLC and Meta Platforms Inc. artificial intelligence engineer Edwin Chen back in 2020, and despite not attracting any funding itself, it has already grown its annual revenue to more than $1 billion and is also said to be profitable. That suggests the company may have a market lead over the better-known data labeling firm Scale AI, which generated $870 million in sales last year and was recently acquired by Meta Platforms in a $14.3 billion deal. Upon conclusion of that deal, Scale AI was valued at almost $29 billion, even though its founder and Chief Executive Alexandr Wong left the company to head up Meta's new AI Superintelligence Labs. Surge AI has reportedly benefited from Scale AI's decision to partner with Meta, grabbing a number of the latter's former customers, including OpenAI and Google. Those companies are worried that if they continue using Scale AI's datasets, they could ultimately end up exposing their AI research and priorities to Meta, hence the need for an alternative provider. For its part, Scale AI says its customer base remains strong despite the Meta deal, and insists it's fully committed to protecting their data, but the bigger players seemingly aren't convinced. In any case, Surge AI's offering seems to be every bit as good as the services provided by Scale AI. Since being founded just over five years ago, it has largely operated under the radar, with its founder Chen shying away from the limelight, in stark contrast to the publicity-seeking Wong, who has made a concerted effort to cosy up to the White House. The company itself has barely made any headlines either, and even its website remains noticeable threadbare, with little detail provided on the services it offers. Yet Reuters says it has still managed to establish a reputation among major AI players for its premium, high-end data labeling services, which are also used by Anthropic PBC. Surge AI is betting on the need for even more nuanced and meticulously-labeled data in future due to the rise of reinforcement learning techniques in AI development. It creates these datasets by drawing on a network of highly-trained contractors, as opposed to the low-wage labor that makes up Scale AI's primary workforce. The startup is trying to entice investors with claims that it offers more concrete assurances in terms of data protection and a broader roster of customers, who prefer its pay-as-you-grow business model. However, Surge AI will also need to show it's able to absorb the $1 billion capital it's seeking and utilize this to accelerate its growth, which won't be easy amid the rising competition it faces from new entrants and incumbent data labelers. At the same time, it will need to explain how it intends to remain relevant, given that its reliance on human labor puts it at risk of automation as AI advances.

Bootstrapped to $1 Billion: Surge AI CEO Edwin Chen on How He Did It

Even by Silicon Valley's hyper-competitive standards, the past few weeks have provided a generational example of one-upmanship in the AI space. First, in June, the data-labeling startup Scale AI announced that Meta had invested $14 billion in the company, at a near $29 billion valuation. As part of the deal, many Scale AI staffers, including CEO Alexandr Wang, would go to work for Mark Zuckerberg's tech giant. But then, days later, a wholly unknown competitor, Surge AI, disclosed that it had more than $1 billion in revenue, making it larger than Scale AI and other players. What's more, the company was entirely self-funded, meaning that Surge's founder and CEO, Edwin Chen, was among the most successful startup CEOs in Silicon Valley -- and still largely in charge of his own destiny. Like Wang, Surge's Chen, 37, has seen his company benefit from the stampede of big tech giants and startups racing to train their AI models over the last few years. Surge made "well north of $1 billion in full-year revenue" in 2024, a spokesperson tells Inc., likely making it the highest-grossing data-labeler in the world. The Information first reported Surge's revenue. Chen's company is only now emerging from the fringes of Silicon Valley to talk about its titanic growth. The CEO, who used to work as a machine learning engineer at Facebook, Google, and Twitter, wants to be a leader amid all the clamor that's now enveloping the previously niche trade of data-labeling.

Scale AI's bigger rival Surge AI seeks up to $1 billion capital raise, sources say - The Economic Times

The company, founded by former Google and Meta engineer Edwin Chen, is targeting a valuation of over $15 billion, sources said, cautioning that the talks are still in early stages and the final number could be higher. The funding would be a mix of primary and secondary capital that provides liquidity for the employees.Surge AI, a data-labeling firm that competes with Scale AI, has hired advisors to raise as much as $1 billion in the first capital raising in the firm's history, sources told Reuters, as it seeks to capitalize on growing user demand amid Scale AI's recent customer exodus. The company, founded by former Google and Meta engineer Edwin Chen, is targeting a valuation of over $15 billion, sources said, cautioning that the talks are still in early stages and the final number could be higher. The funding would be a mix of primary and secondary capital that provides liquidity for the employees. Surge AI, which has been profitable and bootstrapped by Chen, has raked in over $1 billion in revenue last year, bigger than its better-known competitor Scale AI, which reported $870 million in revenue over the same period of time. In comparison, Scale AI was valued at $14 billion in a funding round last year, and was mostly recently valued at nearly $29 billion when Meta invested for a 49% stake in the company and poached its CEO Alexandr Wang to be its chief AI officer to lead its new Superintelligence Labs. Surge AI declined to comment. Like other Scale AI competitors, Surge AI is benefiting from Scale AI's customer losses following Meta's investment. This includes OpenAI and Scale's largest customer, Google, who are now planning to move away from the platform over concerns that doing business with Scale could expose their research priorities to Meta. Scale has said its business remains strong, and it is committed to protecting customer data. Surge AI's quiet yet meteoric rise has positioned it as one of the largest players in the crowded data labeling industry, defying the typical Silicon Valley playbook of raising massive rounds of venture capital to fuel growth. Founded in 2020, the San Francisco-based company has largely operated under the radar, known for its premium, high-end data labeling services used by top AI labs, including Google, OpenAI and Anthropic. As reinforcement learning from human feedback (RLHF) has become more important in training advanced AI systems, the demand for meticulously labeled, nuanced datasets has grown. Surge AI has capitalized on this trend by appealing to a network of highly skilled contractors instead of large pools of low-wage labor. The outsized funding of Surge would be a test of investor interest in the data labeling sector. Some investors view data labeling as an ongoing necessity for AI development, predicting a continued demand from leading AI labs. Others express concern that the industry's low margins and reliance on human labor could make it vulnerable to automation, as AI technology advances and the need for manual annotation diminishes.

Surge AI Reportedly Targeting $1 Billion in First-Ever Fundraise | PYMNTS.com

By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions. The firm has hired advisors for the capital raise, which would be the company's first, Reuters reported Tuesday (July 1), citing sources familiar with the matter. Those sources said Surge, founded by former Google and Meta engineer Edwin Chen, is aiming for a valuation of more than $15 billion. According to the report, the company took in more than $1 billion in revenue last year, while its better-known rival, Scale AI, reported $870 million in revenue in the same period. Scale was valued at nearly $29 billion when Meta took a 49% stake in the company and hired away CEO Alexandr Wang as chief AI officer for its new Superintelligence Labs. The Reuters report notes that Surge is benefitting from Scale AI's customer losses in the wake Meta's investment, as are competitors like OpenAI and Google. Google had been Scale's largest customer, and is now among the companies planning to move away from the platform due to concerns that being tied to Scale could expose their research priorities to Meta. Scale has said its business is strong, and it is committed to guarding customer data, the Reuters report added. In other artificial intelligence (AI) news, PYMNTS wrote earlier this week about the increasing number of chief financial officers (CFOs) who see generative artificial intelligence (GenAI) as "very" or "extremely" important to their companies. The ranks of these executives have about doubled across use cases, according to the forthcoming CAIO report from PYMNTS Intelligence. "These high-impact companies are also pulling away from the pack when it comes to deploying GenAI effectively in their businesses," PYMNTS wrote. "While most companies use GenAI to generate content, high-impact firms tend to use it for more strategic and advanced functions while lower-impact firms mainly are using the technology for entry-level tasks." Among high-impact companies, the three main use cases for GenAI product and service innovation; generating real-time, automated responses to customer queries; and developing contextualized emails or recommendations. Each was mentioned by 87.5% of CFOs. The importance of these use cases have nearly or more than doubled compared to a year ago, according to the CFOs interviewed for the report. "Among medium- and low-impact companies -- those in which GenAI still remains in early to mid-stage deployment or relegated to entry-level tasks -- CFOs generally see smaller gains or even declines in the impact of GenAI on their businesses, year over year," PYMNTS added.

Exclusive-Scale AI's bigger rival Surge AI seeks up to $1 billion capital raise, sources say

(Reuters) -Surge AI, a data-labeling firm that competes with Scale AI, has hired advisors to raise as much as $1 billion in the first capital raising in the firm's history, sources told Reuters, as it seeks to capitalize on growing user demand amid Scale AI's recent customer exodus. The company, founded by former Google and Meta engineer Edwin Chen, is targeting a valuation of over $15 billion, sources said, cautioning that the talks are still in early stages and the final number could be higher. The funding would be a mix of primary and secondary capital that provides liquidity for the employees. Surge AI, which has been profitable and bootstrapped by Chen, has raked in over $1 billion in revenue last year, bigger than its better-known competitor Scale AI, which reported $870 million in revenue over the same period of time. In comparison, Scale AI was valued at $14 billion in a funding round last year, and was mostly recently valued at nearly $29 billion when Meta invested for a 49% stake in the company and poached its CEO Alexandr Wang to be its chief AI officer to lead its new Superintelligence Labs. Surge AI declined to comment. Like other Scale AI competitors, Surge AI is benefiting from Scale AI's customer losses following Meta's investment. This includes OpenAI and Scale's largest customer, Google, who are now planning to move away from the platform over concerns that doing business with Scale could expose their research priorities to Meta. Scale has said its business remains strong, and it is committed to protecting customer data. Surge AI's quiet yet meteoric rise has positioned it as one of the largest players in the crowded data labeling industry, defying the typical Silicon Valley playbook of raising massive rounds of venture capital to fuel growth. Founded in 2020, the San Francisco-based company has largely operated under the radar, known for its premium, high-end data labeling services used by top AI labs, including Google, OpenAI and Anthropic. As reinforcement learning from human feedback (RLHF) has become more important in training advanced AI systems, the demand for meticulously labeled, nuanced datasets has grown. Surge AI has capitalized on this trend by appealing to a network of highly skilled contractors instead of large pools of low-wage labor. The outsized funding of Surge would be a test of investor interest in the data labeling sector. Some investors view data labeling as an ongoing necessity for AI development, predicting a continued demand from leading AI labs. Others express concern that the industry's low margins and reliance on human labor could make it vulnerable to automation, as AI technology advances and the need for manual annotation diminishes. (Reporting by Milana Vinn and Krystal Hu in New York; Editing by Chizu Nomiyama )