Modal Labs nears $750M round at $15.75B valuation

Modal Labs, an AI inference infrastructure provider, is closing in on a $750 million funding round led by Accel at a $15.75 billion valuation that includes the investment, according to a source with knowledge of the funding. The size of the round has not been previously reported, though Axios and Bloomberg have reported other details of the deal. Modal Labs declined to comment. The new round would more than triple Modal’s valuation from the $4.65 billion it reached when it announced its $355 million previous fundraise just four months ago.

The deal comes amid soaring demand for inference services — the process of running an already-trained AI model to generate outputs — particularly from customers relying on open-source models. Other inference startups are also in talks to raise fresh capital at much higher valuations: Baseten is nearing an infusion at a $26 billion valuation, doubling what it was worth in June, Bloomberg has reported, while Fireworks and Fal, a startup providing inference for video and image generation, have talked to investors about new rounds that would significantly increase their valuations, according to The Information. Revenue at these companies has been growing rapidly, but margins remain thin because the cost of compute stays high: Fireworks said in July its annualized revenue had hit $1 billion, a fivefold increase from the year before, and multiple inference-focused startups are expected to reach the same milestone by year’s end, according to Modal’s source.

Modal was founded in 2021 by CEO Erik Bernhardsson, who is Swedish and spent more than 15 years building data teams at companies including Spotify and Better.com, where he served as chief technology officer, and CTO Akshat Bubna, who studied math and computer science at MIT and was an early staff engineer at Scale AI before co-founding Modal. The company, based in New York and estimated to have roughly 150 employees, lets developers train AI models and run other compute-heavy workloads without managing their own servers; its customers 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.

Why it matters

The round underscores investors’ bet that inference, not just model training, is becoming the durable revenue layer of the AI stack — even as thin compute margins raise questions about how sustainable these fast-rising valuations really are.