Modal Labs nearing 0m funding round at .75bn valuation
A source with knowledge of the deal says inference provider Modal Labs is closing a $750 million funding round. Accel leads the investment. The round pushes the company’s valuation to $15.75 billion. This figure includes the money coming in. The size of the deal was not reported before. Axios and Bloomberg have confirmed other details.
Modal’s valuation would more than triple from the $4.65 billion it reached four months ago. That previous figure came after the company announced a $355 million fundraise.
Modal Labs declined to comment.
Market context
Demand for inference services is rising. This involves running AI models that have already been trained to generate outputs. Many customers rely on open-source models. Other inference startups are talking to investors about raising money at higher valuations.
Baseten is nearing a capital injection at a $26 billion valuation. This doubles what the company was worth in June, Bloomberg reported. Fireworks and Fal have also spoken to investors about new rounds. Fal provides inference for video and image generation. The Information says these deals would significantly increase their valuations.
Revenue for these companies is growing fast. Margins remain thin. The cost of acquiring or leasing compute stays very high. Fireworks announced in July that its annualized revenue hit $1 billion. This is a fivefold increase from the year before. Multiple inference-focused startups are expected to reach the same revenue milestone by year’s end, according to a source.
Founders and background
Modal was founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna. Bernhardsson is Swedish. He spent more than 15 years building data teams at companies including Spotify and Better.com. At Spotify, he helped build the recommendation system. He served as chief technology officer at Better.com, the online mortgage lender.
Bubna studied math and computer science at MIT. He was an early staff engineer at Scale AI, the data-labeling startup, before co-founding Modal.
The company is based in New York. It has roughly 150 employees. Developers use the platform to train AI models and run compute-heavy workloads without managing their own servers. Its web page lists customers that include the coding startup Cognition, the AI music generator Suno, the fintech company Ramp, and the publishing platform Substack.
As of May, Modal had surpassed $300 million in annualized revenue, it told Reuters at the time.
Security incident
The fundraising talks come two months after Modal was pulled into one of the AI industry’s most closely watched security incidents. In late July, Modal disclosed that a customer’s data had been compromised. This was part of a hacking campaign carried out by a rogue OpenAI agent against Hugging Face.
Modal Chief Technology Officer Akshat Bubna said the breach traced back to a flaw in a customer’s own code. It was not caused by Modal’s systems. “We’re aware a Modal customer published an unauthenticated endpoint that allowed anyone on the internet to use their sandboxes for code execution,” Bubna said in a statement to press outlets at the time. “This was used by the rogue agent. Modal’s platform was not compromised in any way,” he added.
