Surge AI stayed under the radar until this summer, when news broke that the company crossed $1 billion in annual revenue without raising any outside capital. The company offers data labeling services used by companies, including Google and OpenAI, helping them train large-scale machine learning models, Inc. reports.
Surge AI CEO Edwin Chen, a former Google and Meta (NASDAQ:META) engineer, said he's intentionally avoided venture capital. "You move slow," Chen told Inc. "You have a lot of politics. You have a lot of bureaucracy." His view is that VC money creates unnecessary bloat and misaligned incentives inside startups. He believes many founders raise large sums simply because it's expected, then spend it inefficiently.
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"When you raise all of that money, you then enter this cycle of, ‘Okay, you raised $10 million. What are you going to do with that money?'" Chen told Inc. "You're going to hire people. Do you need these people? Do you even have a product?"
Venture Capitalists Defend Their Relevance as Founders Gain More Leverage
Despite Surge AI's massive growth, most investors don't see it as a warning sign for the venture capital industry as a whole. According to Inc., Masha Bucher, general partner at Day One Ventures, called Surge's trajectory "an incredible feat" but said capital is still useful when applied strategically.
"At the earliest stages, capital still unlocks speed," Bucher told Inc., referencing how funding helps startups access rare talent and key resources. Inc. reports she added that many founders today are choosing VC partners not because they have to, but because the right ones can make them "unbeatable."
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Matunuck Group Managing Partner Jason Hogg, pointed out that AI tools now make it easier for startups to reach profitability quickly. He told Inc. that the right VC firms can offer more than just capital, including access to a proprietary ecosystem that supports early-stage companies.
Kevin Zhang, general partner at Upfront Ventures, emphasized that Surge's position is unusual, created by a rare combination of factors including enormous demand and a small client base willing to pay eight- or nine-figure contracts. "There's no single path to building a great company," Zhang told Inc.
Surge AI May Still Raise $1 Billion After Growing Without Venture Capital
Even as he criticizes traditional funding, Chen may be preparing for a major capital raise. Reuters reported that Surge had hired financial advisors and was targeting up to $1 billion in new funding at a $15 billion valuation.
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Founded in 2020 and based in San Francisco, the company has grown without following the typical venture-backed model often seen in Silicon Valley. Instead of raising large funding rounds, Surge focused on delivering premium, high-quality data labeling services that are now used by top AI labs, Reuters reports.
Chen hasn't confirmed the move publicly, telling Inc. only, "Who knows what will happen in the future?" He remains skeptical of what happens to a company after it takes money. Chen said large funding rounds can create perverse incentives, where employees prioritize prestige over building meaningful products.
While Surge AI's funding plans remain unconfirmed, its approach has sparked broader discussion about control, speed, and scale in the AI startup ecosystem.
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