AI inference infrastructure provider Modal Labs is nearing a $750 million funding round led by Accel at a valuation of $15.75 billion, including investment, according to people familiar with the funding. The size of the round was not previously reported, but Axios and Bloomberg reported other details of the deal.
The new funding more than triples Modal’s valuation from the $4.65 billion it reached when it announced its previous $355 million funding just four months ago.
Modal Labs declined to comment.
The deal comes amid a surge in demand for inference services, particularly the process of running already trained AI models to produce output from customers who rely on open-source models. Other inference startups are also in talks to raise new funding at even higher valuations. Bloomberg reports that BaseTen is close to injecting capital at a valuation of $26 billion, double its June valuation. Meanwhile, Fireworks and Fal, a startup that provides inference for video and image generation, are also in talks with investors about a new round that would significantly increase their valuations, according to The Information.
Although these companies’ revenues are growing rapidly, their profit margins are thin, largely because the cost of acquiring or leasing computing remains very high. Fireworks announced in July that its annual revenue reached $1 billion, a five-fold increase over the previous year. According to our sources, multiple inference-focused startups are expected to reach the same revenue milestone by the end of the year.
Modal was founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna. Bernhardsson, a Swede, has spent more than 15 years building data teams at companies including helping build recommendation systems for music streaming services at Spotify and as chief technology officer at online mortgage lender Better.com. Bubna studied mathematics and computer science at MIT and was an early staff engineer at data labeling startup Scale AI before co-founding Modal.
The New York-based company, which is estimated to have about 150 employees, allows developers to train AI models and run other compute-intensive workloads without managing their own servers. The company’s webpage lists customers such as coding startup Cognition, AI music generator Suno, fintech company Ramp, and publishing platform Substack.
As of May, Modal’s annual revenue was more than $300 million, it told Reuters at the time.
The funding talks come two months after Modal was involved in one of the AI industry’s highest-profile security incidents. In late July, Modal revealed that its customers’ data had been compromised as part of the same hacking campaign that a rogue OpenAI agent carried out against Hugging Face.
Akshat Bubna, Modal’s chief technology officer, said the breach was traced back to a flaw in the customer’s own code, not Modal’s systems. “We are aware that a Modal customer has exposed an unauthenticated endpoint that allows anyone on the internet to run code using the sandbox,” Bubna said in a statement to the press at the time. “This was used by a rogue agent. Modal’s platform was not compromised in any way,” he added.
If you buy through links in our articles, we may earn a small commission. This does not affect editorial independence.
