AI inference startup Modal Labs in talks to raise at $2.5B valuation, sources say

Modal laboratoriesa startup specializing in AI inference infrastructure is talking to venture capital firms about a new round at a valuation of about $2.5 billion, according to four people with knowledge of the deal. Should the deal close on these terms, the financing round would more than double the company’s valuation $1.1 billion announced less than five months ago, when it was a $87 million Series B round.

General Catalyst is in talks to lead the round, the people told TechCrunch. Modal’s annualized revenue run rate (ARR) is around $50 million, our sources said. Discussions are early and terms are subject to change.

Erik Bernhardsson, co-founder and CEO of Modal Labs, denied that his company was actively fundraising and characterized his recent interactions with venture capital firms as general conversations. General Catalyst did not respond to our requests for comment.

Modal focuses on optimizing inference, the process of running trained AI models to generate responses based on user requests. Improving inference efficiency reduces computational costs and reduces the delay between a user’s prompt and the AI’s response.

Modal is one of the few inference-focused companies currently capturing investor attention. Last week, competitor Baseten made one An increase of $300 million at a valuation of $5 billion, more than doubling the $2.1 billion valuation it reached just months earlier in September. Similarly, Fireworks AI, an inference cloud provider, raised $250 million in October at a $4 billion valuation.

In January, the creators of the open source inference project vLLM announced that they had spun the tool into a venture-backed startup, Inferact, which had raised $150 million in seed funding led by Andreessen Horowitz at an $800 million valuation. Meanwhile, TechCrunch reported that the team behind SGLang has commercialized as RadixArk, which sources told us had secured seed funding at a $400 million valuation led by Accel.

Modal was co-founded in 2021 by CEO Erik Bernhardsson after spending more than 15 years building and leading data teams at companies such as Spotify and Better.com, where he was CTO.

The startup counts Lux Capital and Redpoint Ventures among its previous backers.

Editor’s note: This story has been updated with comment from Modal.