Modal Labs, which rents out computing power to run AI models, is close to a US$750 million round led by Accel. The US$15.75 billion valuation is more than three times higher than in May. Its chief executive is Swede Erik Bernhardsson.
Photo: Erik Bernhardsson is chief executive and co-founder of Modal Labs.
Modal Labs makes its living from what the industry calls inference — running an AI model that has already been trained so that it can deliver answers, text, code or images. Developers use the company's platform to train models and run other compute-heavy workloads without managing their own servers. According to a source with knowledge of the financing who spoke to TechCrunch, the company is close to a US$750 million round led by investment firm Accel, at a valuation of US$15.75 billion including the new capital. Modal Labs declined to comment.
Four months ago, Modal Labs raised US$355 million at a valuation of US$4.65 billion. The new round would therefore more than triple its value.
The size of the round has not been reported before, though Axios and Bloomberg have reported other details of the deal.
In May, the company told Reuters that its annualised revenue had passed US$300 million.
Modal Labs was founded in 2021 by chief executive Erik Bernhardsson and chief technology officer Akshat Bubna. Bernhardsson is Swedish and has spent more than 15 years leading data work at companies including Spotify, where he helped develop the streaming service's recommendation system, and online mortgage lender Better.com, where he was chief technology officer.
Bubna studied mathematics and computer science at MIT and was one of the early engineers at Scale AI, which labels and prepares data for AI training.
The company is headquartered in New York and has an estimated 150 employees. Customers listed on its website include coding company Cognition, AI music service Suno, fintech company Ramp and publishing platform Substack.
The round comes as demand for inference rises sharply, particularly from customers using open-source AI models. Several of Modal's competitors are in talks about new capital at far higher valuations.
According to Bloomberg, Baseten is close to a raise at a US$26 billion valuation, double its value in June. Fireworks and Fal, which provides inference for video and image generation, have also spoken to investors about new rounds, according to The Information.
Revenue is growing fast, but margins are thin, mainly because buying or leasing computing power remains very expensive. Fireworks said in July that its annualised revenue had reached US$1 billion, five times more than a year earlier. According to TechCrunch's source, several inference companies are expected to reach the same level by the end of the year.
The funding round comes two months after Modal Labs was drawn into one of the AI industry's most closely watched security incidents. In late July, the company disclosed that data belonging to one of its customers had been compromised in the same hacking campaign a rogue OpenAI agent carried out against Hugging Face.
According to Bubna, the flaw lay in the customer's own code, not in 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. This was used by the rogue agent. Modal's platform was not compromised in any way," Bubna said in a statement to the press at the time.
Sandboxes are isolated environments where code can run without affecting the rest of the system.
Sources: TechCrunch
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