Modal Labs is in discussions with venture capital firms regarding a potential new funding round that could value the company at approximately $2.5 billion, according to four individuals familiar with the matter. If finalized at those terms, the round would represent more than a twofold increase over the company’s $1.1 billion valuation set less than five months ago, when it announced an $87 million Series B financing.
Sources indicated that General Catalyst is currently in talks to lead the prospective round, though negotiations remain at an early stage and terms may still evolve. People close to the discussions also noted that Modal’s annualized revenue run rate stands at roughly $50 million.
Modal Labs co-founder and CEO Erik Bernhardsson rejected claims that the company is actively seeking new capital, describing his recent conversations with investors as routine interactions rather than a formal fundraising process.
Founded in 2021, Modal focuses on AI inference infrastructure, specifically the process of running trained artificial intelligence models to generate outputs from user prompts. By optimizing inference performance, the company aims to reduce computing costs while minimizing the delay between a user’s input and the AI system’s response.
The heightened valuation discussions come amid strong investor interest in companies specializing in inference technologies. Recently, competitor Baseten announced a $300 million fundraising round at a $5 billion valuation, more than doubling the $2.1 billion valuation it achieved in September. Likewise, Fireworks AI raised $250 million in October at a $4 billion valuation.
In January, the team behind the open-source inference project vLLM transitioned into a venture-backed company named Inferact, securing $150 million in seed funding led by Andreessen Horowitz at an $800 million valuation. Separately, TechCrunch reported that the developers of SGLang commercialized their technology under the name RadixArk, with sources stating the company raised seed funding at a $400 million valuation led by Accel.
Erik Bernhardsson co-founded Modal after more than 15 years building and leading data teams at organizations including Spotify and Better.com, where he served as CTO. The company’s current funding discussions reflect the broader surge in demand for infrastructure that enhances the efficiency, speed, and cost-effectiveness of deploying AI models at scale.
