Modal Labs Nears $750M Round at $15.75 Billion Valuation

AI inference infrastructure provider Modal Labs 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 round's size has not been previously reported, though Axios and Bloomberg have reported other details of the deal.

Modal Labs declined to comment.

The number deserves attention. If completed, the round would more than triple Modal's valuation from the $4.65 billion it reached when the company announced its $355 million previous fundraise just four months ago. That kind of step change in valuation, compressed into a single quarter, signals how aggressively investors are repricing the infrastructure layer of the AI stack.

The stakes are straightforward. Inference — the process of running an already-trained AI model to generate outputs — has become one of the fastest-growing segments of the AI market, particularly among customers relying on open-source models. Modal sits directly in that path, and the deal comes amid soaring demand for inference services. It is not the only company commanding new prices: Baseten is nearing an infusion of capital at a $26 billion valuation, doubling what it was worth in June, Bloomberg reported. Fireworks and Fal, a startup providing inference for video and image generation, have also talked to investors about new rounds that would significantly increase their valuations, according to The Information.

The financial picture behind the hype is more complicated. Revenue at these companies has been growing rapidly, but their margins are thin, largely because the cost of acquiring or leasing compute remains very high. Fireworks announced in July that its annualized revenue had hit $1 billion, 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 the source familiar with Modal's funding.

Modal has its own revenue story. As of May, the company had surpassed $300 million in annualized revenue, it told Reuters at the time.

The company was founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna. Bernhardsson, who is Swedish, spent more than 15 years building data teams at companies including Spotify, where he helped build the music-streaming service's recommendation system, and Better.com, the online mortgage lender, where he served as chief technology officer. Bubna studied math and computer science at MIT and was an early staff engineer at Scale AI, the data-labeling startup, before co-founding Modal.

Modal is based in New York and is estimated to have roughly 150 employees. Its platform lets developers train AI models and run other 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.

The fundraising talks arrive 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 as part of the same 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, not to 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.

The episode does not appear to have dented investor appetite. If the round closes at the reported terms, Modal will join the ranks of inference providers whose valuations are rising faster than their margins — a gap investors appear willing to finance as long as demand for running open-source models keeps climbing.