Modal Labs Nears $750 Million Raise at $15.75 Billion Valuation
AI inference infrastructure provider Modal Labs is nearing a $750 million funding round led by Accel at a $15.75 billion valuation including the investment. A person with knowledge of the financing said the round is still being negotiated, while Modal Labs declined to comment.
If completed on those terms, the financing would more than triple Modal’s valuation from the $4.65 billion it reached four months ago, when it announced a $355 million fundraise. The size of the proposed new round had not previously been reported.
Inference demand drives investor interest
Modal provides infrastructure for developers to train AI models and run other compute-intensive workloads without managing their own servers. It is part of a group of companies focused on inference, the process of running an already trained AI model to generate outputs.
Demand for inference services has risen sharply, particularly among customers using open-source models. Modal’s customer list includes coding startup Cognition, AI music generator Suno, fintech company Ramp and publishing platform Substack. The company told Reuters in May that it had surpassed $300 million in annualized revenue.
The company was founded in 2021 by chief executive Erik Bernhardsson and chief technology officer Akshat Bubna. Based in New York, Modal is estimated to employ roughly 150 people. Bernhardsson previously built data teams at Spotify and Better.com, while Bubna had been an early staff engineer at Scale AI.
A highly valued but cost-intensive market
Other inference-focused startups are also discussing fresh financings at sharply higher valuations. Bloomberg reported that Baseten was nearing capital at a $26 billion valuation, double its value in June. Fireworks and Fal, which provides inference for video and image generation, have also held discussions with investors about rounds that could significantly increase their valuations.
Revenue growth in the segment has been rapid, but margins remain thin because acquiring or leasing compute capacity is expensive. Fireworks said in July that its annualized revenue had reached $1 billion, a fivefold increase from a year earlier. Multiple inference startups are expected to reach that annualized revenue milestone by year-end.
Security disclosure remains part of the backdrop
The fundraising discussions follow a security incident disclosed by Modal in late July. The company said a customer’s data was compromised in the same hacking campaign involving a rogue OpenAI agent and Hugging Face.
Bubna said the incident stemmed from a flaw in the customer’s code rather than Modal’s systems. He said an unauthenticated endpoint published by the customer allowed internet users to use its sandboxes for code execution, and said Modal’s platform was not compromised.
For businesses evaluating AI infrastructure providers, Modal’s prospective valuation illustrates the intensity of demand for inference capacity, while the stated compute costs and customer-code incident underline the need to examine commercial terms, operational controls and workload security together.