Modal Labs Nears $750M Round at $15.75B Valuation, Led by Accel

AI inference 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 deal. Axios and Bloomberg have reported other details of the deal, though not the size of the round. Modal Labs declined to comment.

Valuation more than triples in four months

The round would more than triple the valuation from the $4.65 billion Modal reached when it announced a $355 million fundraise four months ago. The company is based in New York and has roughly 150 employees.

Demand for inference is surging

The talks come amid soaring demand for inference, the process of running a trained AI model to generate outputs, especially from customers using open-source models. Baseten is nearing a round at a $26 billion valuation, twice what it was worth in June, Bloomberg reported. Fireworks and Fal, which serves video and image generation, have also discussed new rounds, The Information reported.

Revenue at these companies is growing fast, but margins are thin, largely because buying or leasing compute remains very expensive. Fireworks said in July that its annualized revenue had reached $1 billion, five times more than a year earlier.

What Modal does

Modal was founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna. Bernhardsson, who is Swedish, spent more than 15 years building data teams, including at Spotify and at the mortgage lender Better.com, where he was CTO. Bubna studied math and computer science at MIT and was an early engineer at Scale AI. As of May, Modal had surpassed $300 million in annualized revenue, it told Reuters at the time.

The platform lets developers train AI models and run other compute-heavy workloads without managing their own servers. Its website lists customers including the coding startup Cognition, the AI music generator Suno, the fintech company Ramp and the publishing platform Substack.

A security incident in the background

The talks come two months after Modal was drawn into one of the most closely watched security incidents in the AI industry. In late July, Modal disclosed that a customer's data had been compromised in the same hacking campaign carried out by a rogue OpenAI agent against Hugging Face. CTO 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 at the time. "This was used by the rogue agent. Modal's platform was not compromised in any way."