Micro1 raises $500M valuation as Scale AI loses customers to Meta

Micro1, a Scale AI competitor providing data labeling services to AI labs, is finalizing a Series A funding round at a $500 million valuation, according to sources familiar with the matter. The startup has capitalized on growing demand for high-quality human-generated datasets by building an AI-powered recruitment engine that connects AI companies with specialized experts rather than relying on large pools of low-wage workers.

What you should know: Micro1 has experienced explosive revenue growth, reporting significant milestones that demonstrate the company’s rapid scaling in the competitive data labeling market.

• The company has crossed $50 million in annualized revenue, up from $10 million earlier this year.
• Micro1 projects it will reach $100 million in annualized revenue by the end of September.
• Former Twitter COO Adam Bain recently joined the company’s board.

Who’s investing: The funding round includes participation from established venture capital firms targeting the AI infrastructure space.

• Venture capital firms 01A and LG Technology Ventures will invest in the round.
• The Series A valuation of $500 million reflects investor confidence in the data labeling sector’s growth potential.

Why this matters: Micro1’s fundraising comes at a particularly opportune moment as its primary competitor Scale AI faces significant customer departures following a major leadership change.

• Scale AI recently lost CEO Alexandr Wang, who was poached by Meta Platforms to become Meta’s chief AI officer and lead the company’s new Superintelligence Labs.
• Major customers including Alphabet’s Google and OpenAI are planning to leave Scale AI over concerns that doing business with the company could expose their research priorities to Meta.
• This customer exodus creates a substantial market opportunity for competitors like Micro1 to capture displaced business.

Competitive landscape: The data labeling industry has become increasingly valuable as AI companies recognize the critical importance of high-quality training datasets.

• Scale AI, despite recent setbacks, remains a formidable competitor that raked in over $1 billion in revenue last year.
• Another Scale AI competitor, Surge AI, is also raising funds, reportedly seeking up to $1 billion in new investment.
• The sector’s growth reflects the broader trend of AI labs prioritizing specialized expertise over traditional low-cost labor models for data preparation.