Young Startup Micro1 Secures $35M Funding to Bridge Data Gap Left by Scale AI Exit, Expanding Services for AI Labs
A three-year-old startup named Micro1, which specializes in connecting AI companies with human contractors for data labeling and training, has secured a $35 million Series A funding round. This investment values the company at an impressive $500 million. The financing round was spearheaded by O1 Advisors, a venture capital firm co-founded by Dick Costolo, former CEO of Twitter, and Adam Bain, his predecessor as COO.
With Scale AI’s recent changes garnering attention, many data market gaps have emerged. Following Meta’s $14 billion investment in Scale AI and the subsequent hiring of its CEO, several AI labs, including OpenAI and Google, announced plans to sever ties with Scale AI, reportedly due to concerns about potential disclosure of confidential research information. However, it is worth noting that Scale AI denies sharing such confidential information as part of their partnership.
Despite this, the demand for data services remains high among AI labs, and startups like Micro1 are eager to step in to fill the void.
In an interview with a leading news outlet, Micro1’s CEO, Ali Ansari—who is just 24 years old—revealed that his company has been collaborating with major AI labs, including Microsoft, as well as numerous Fortune 100 companies. Ansari shared that Micro1’s annual recurring revenue (ARR) has surged to $50 million, up from $7 million at the beginning of the year.
Although this figure is significantly lower compared to competitors like Mercor and Surge, Micro1’s growth and adoption among AI labs seem to be on an upward trajectory.
As part of the new funding, Bain has joined Micro1’s board of directors, alongside Joshua Browder, founder, and CEO of DoNotPay, the AI legal assistant.
“The only way models are now learning is through net new human data. Micro1 stands at the heart of providing that data to all leading-edge labs, moving faster than ever before,” Bain stated in a press release.
Previously reported by Reuters, details of Micro1’s fundraising efforts have come to light.
Micro1, Surge, Mercor, and Scale AI are among the key players offering access to large pools of human contractors who can label and generate data for AI training. This service has become indispensable for companies like OpenAI, Anthropic, Meta, and Google, enabling them to build advanced AI models.
Initially, Scale AI dominated this sector by leveraging a strategy that paid relatively low wages to contractors worldwide for data labeling tasks. However, Ansari explains that the requirements of AI labs have evolved in recent years, necessitating high-quality data labeling from domain experts like senior software engineers, doctors, and professional writers, to enhance AI models’ performance. The challenge was finding such individuals.
To address this issue, Micro1 developed its AI recruiter, Zara, which screens candidates who apply to work as contractors or, as Ansari refers to them, domain experts. Micro1 claims that Zara has successfully recruited thousands of professionals from prestigious universities like Stanford and Harvard, with plans to add hundreds more every week.
The market for AI training data appears to be experiencing another transformation. Now, many AI labs are interested in collaborating with startups to create “environments” — virtual workspaces that can train AI agents on simulated tasks. Ansari shares that Micro1 is working on new offerings in this area to meet these evolving demands.
Fortunately for startups like Micro1, AI labs seem to be working with multiple training data providers. Given the nature of the business, it’s challenging for any one company to handle all of an AI lab’s data needs, leaving ample opportunities for collaboration in the market.
