Modal Labs Nearing $750M Funding Round at $15.75B Valuation

Modal Labs, an artificial intelligence inference infrastructure company, is nearing the completion of a $750 million funding round at a post-money valuation of $15.75 billion, according to a source familiar with the matter. The new capital injection, which is expected to be led by Accel, marks a significant escalation in the company’s market worth.

The upcoming valuation represents more than a threefold increase from the $4.65 billion figure established just four months ago during a previous $355 million fundraise. While the specific size of this latest round has not been previously disclosed, other details of the deal have been reported by Axios and Bloomberg. Modal declined to comment on the proceedings.

The fundraising comes amid surging demand for inference services, a process that involves running pre-trained AI models to generate outputs. This trend is particularly evident among customers utilizing open-source models. Competitors in the inference space are also seeing their valuations climb; Bloomberg reports that Baseten is close to raising capital at a $26 billion valuation, effectively doubling its June worth. Similarly, Fireworks and Fal, a startup focused on inference for video and image generation, have engaged with investors regarding rounds that would substantially boost their valuations, according to The Information.

Despite rapid revenue growth across the sector, profit margins remain thin due to the high costs associated with acquiring or leasing compute power. Fireworks, for instance, announced in July that its annualized revenue reached $1 billion, a fivefold increase year over year. Industry sources indicate that several other inference-focused startups are projected to achieve the same revenue milestone before the year ends.

Founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna, Modal Labs operates out of New York with approximately 150 employees. The platform enables developers to train AI models and execute compute-intensive workloads without managing their own server infrastructure. Notable customers include coding startup Cognition, AI music generator Suno, fintech firm Ramp, and publishing platform Substack. As of May, the company reported to Reuters that it had surpassed $300 million in annualized revenue.

The funding discussions follow a security incident in late July involving the company. Modal disclosed that a customer’s data was compromised as part of a hacking campaign linked to a rogue OpenAI agent, which also targeted Hugging Face. However, CTO Akshat Bubna clarified that the breach originated from a flaw in the customer’s own code rather than 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 stated at the time. “This was used by the rogue agent. Modal’s platform was not compromised in any way.”