Modal Labs, a startup specializing in AI inference infrastructure, is in the process of raising a new funding round at a valuation of approximately $2.5 billion. This information comes from four people familiar with the deal. Should the deal close under these terms, it would more than double the company’s valuation from the $1.1 billion announced less than five months ago.
General Catalyst is in talks to lead this new investment round. According to sources, Modal’s annualized revenue run rate is currently around $50 million. The discussions are still in early stages, and the terms could change. Both Modal and General Catalyst did not respond to requests for comment.
The company focuses on optimizing inference, which is the process of running trained AI models to generate answers from user requests. Improving inference efficiency is critical as it reduces computing costs and decreases the lag time between a user’s prompt and the AI’s response.
Modal is among a select group of inference-focused companies currently attracting intense investor interest. Just last week, its competitor Baseten announced a $300 million raise at a $5 billion valuation, more than doubling its valuation from just months prior in September. Similarly, Fireworks AI, another inference cloud provider, secured $250 million at a $4 billion valuation in October.
Earlier this year, the creators of the open-source inference project vLLM transitioned the tool into a venture-backed startup called Inferact. It raised $150 million in seed funding led by Andreessen Horowitz at an $800 million valuation. Meanwhile, the team behind SGLang has commercialized as RadixArk, which secured seed funding at a $400 million valuation led by Accel.
Modal was co-founded by CEO Erik Bernhardsson in 2021. Bernhardsson brought over 15 years of experience building and leading data teams from companies including Spotify and Better.com, where he served as Chief Technology Officer.
The startup counts Lux Capital and Redpoint Ventures among its earlier investors.