Modal Labs valuation could double amid AI infrastructure boom

Modal Labs, a startup specializing in AI inference infrastructure, is in talks to raise a new funding round at a valuation of about $2.5 billion, according to four people with knowledge of the deal. AI inference is defined as the process of running trained AI models to generate answers from user requests. General Catalyst is in talks to lead the funding round, people told TechCrunch. Sources reported that Modal Labs has an annualized revenue run rate (ARR) of approximately $50 million. However, co-founder and CEO Erik Bernhardsson denied that the company is actively fundraising, characterizing recent interactions with venture capital firms as general conversations.

Should the deal close at these terms, the funding round would more than double the company’s previous valuation of $1.1 billion, which was announced less than five months ago. At that time, the startup secured an $87 million Series B round, which is a specific stage of venture capital funding. Modal Labs was co-founded in 2021 by Bernhardsson, who has more than 15 years of experience building and leading data teams at companies including Spotify and Better.com. Earlier backers of the startup include Lux Capital and Redpoint Ventures.

The discussions come amid intense investor interest in infrastructure that optimizes AI model efficiency, driving capital into a crowded field of inference-focused competitors. Several of these companies have recently secured funding at high valuations:

• Baseten: Announced a $300 million raise last week at a $5 billion valuation, more than doubling the $2.1 billion valuation it reached in September.
• Fireworks AI: An inference cloud provider, Fireworks AI secured $250 million at a $4 billion valuation in October.
• Inferact: A VC-backed startup created from the open-source vLLM project, Inferact announced its transition in January, securing $150 million in seed funding led by Andreessen Horowitz at an $800 million valuation.
• RadixArk: A commercialized entity from the SGLang team, RadixArk secured seed funding led by Accel at a $400 million valuation.

Why it matters

Should the deal close at these terms, the funding round would more than double the company’s valuation of $1.1 billion announced less than five months ago, signaling continued investor appetite for AI inference infrastructure.