Scale at $760M ARR
Jan-Erik Asplund
TL;DR: Sacra estimates that Scale grew annual recurring revenue (ARR) 158% to $760M in 2023 riding the LLM wave just as their previous bread-and-butter of data labeling for autonomous driving went into a decline. For more, check out our report and dataset on Scale.
Key points from our research:
- Mid 2022, Scale’s bread-and-butter of autonomous vehicle (AV) data labeling workloads went into a decline alongside falling R&D investment and VC funding, with GM’s Cruise (2021 valuation: $30B) suspending operations and Argo AI (2021 valuation: $7.B), Lyft (NASDAQ: LYFT), and Uber (NYSE: UBER) shutting down their AV programs. General Motors CEO Mary Barra told investors in January that GM would slow down its investment in Cruise in 2024 to reflect a “more cadenced go-to-market strategy” after it lost $2.7B in 2023.
- In 2023, Scale’s revenue exploded to $760M ARR, up 162% YoY, with $18B in capital inflows to foundational model companies like OpenAI ($1.3B ARR in 2023), Anthropic ($200M ARR in 2023) and Cohere and generative AI apps like Runway ($237M raised) and Harvey ($106M raised) alongside the integration of gen AI-features into every app. LLMs and the apps built on them use human data labeling to power reinforcement learning from human feedback (RLHF), which is used to train and fine-tune AI models.
- The very source of Scale’s near-term revenue re-acceleration poses the gravest long-term existential threat to its business, with LLMs getting closer to parity with humans on data-labeling tasks while being cheap and 20x as fast. At a $7.3B valuation at the last primary financing, Scale is valued at 9.7x forward revenue with ~50% gross margins—compare to TELUS (NYSE: TU) at $15B forward revenue growing 2.7% YoY on a $25.7B market cap for a 1.7x multiple with ~35% gross margins.
For more, check out this other research from our platform:
- Scale (dataset)
- OpenAI (dataset)
- Anthropic (dataset)
- Cohere
- Geoff Charles, VP of Product at Ramp, on Ramp's AI flywheel
- Mike Knoop, co-founder of Zapier, on Zapier's LLM-powered future
- Oscar Beijbom, co-founder and CTO of Nyckel, on the opportunites in the AI/ML tooling market
- Cristóbal Valenzuela, CEO of Runway, on the state of generative AI in video
- Thilo Huellmann, CTO of Levity, on using no-code AI for workflow automation
- Dave Rogenmoser, CEO and co-founder of Jasper, on the generative AI opportunity
- Chris Lu, co-founder of Copy.ai, on the future of generative AI
- Copy.ai (dataset)
- Jasper (dataset)
- DataRobot
