AI infrastructure startups are seeing rising valuations, particularly in inference.
With the rapid growth of generative AI, the challenge has shifted from just training models to running them efficiently. Companies that can deliver faster and cheaper AI responses are now highly sought after.
San Francisco-based Modal Labs is now reportedly in discussions with venture capital firms about a new funding round at a valuation of around $2.5 billion, according to people familiar with the matter.
If the deal closes at those terms, it would more than double the company’s $1.1 billion valuation, announced less than five months ago following its $87 million Series B.
General Catalyst is reportedly in discussions to lead the round, according to industry reports.
Modal’s annualised revenue run rate (ARR) is reportedly around $50 million.
What does Modal actually do?
Modal was co-founded in 2021 by Erik Bernhardsson, who previously led data teams at Spotify and served as CTO at Better.com.
The company counts Lux Capital and Redpoint Ventures among its earlier backers.
Modal centres on AI inference, which involves using trained AI models to respond to user prompts. While training models often gets attention, inference is crucial for ongoing cost and performance efficiency.
Improving inference helps lower computing costs and speeds up responses. For businesses widely deploying AI, making inference more efficient directly affects profits.
Modal is one of the few companies focused on inference, attracting significant investor interest.
Recently, its competitor Baseten raised $300 million, increasing its valuation from $2.1 billion in September to $5 billion. Another competitor, Fireworks AI, also raised $250 million at a $4 billion valuation in October.
