Investor interest in AI infrastructure continues to grow as Modal Labs discusses a potential new funding round that could value the company at about $2.5 billion. According to 4 people familiar with the matter, the AI inference startup is in talks with venture capital firms and General Catalyst is in discussions to lead the round. If completed at these terms, the deal would more than double Modal Labs’ previous valuation of $1.1 billion, which was announced less than 5 months ago alongside an $87 million Series B round. Sources say the company’s annualized revenue run rate stands at approximately $50 million, though talks remain at an early stage and terms could still change.
Modal Labs Co-Founder and CEO, Erik Bernhardsson denied that the company is actively raising funds, describing his recent conversations with venture capital firms as general discussions. General Catalyst did not respond to requests for comment from a media publication. Founded in 2021, Modal Labs focuses on AI inference infrastructure, which involves running trained AI models to generate responses to user prompts. By improving inference efficiency, the company aims to reduce compute costs and shorten response times between prompts and outputs.
Modal Labs is part of a small but fast growing group of AI inference focused startups drawing strong investor attention. Recently, competitor Baseten announced a $300 million funding round at a $5 billion valuation, more than doubling its $2.1 billion valuation from September. Fireworks AI, another inference cloud provider, secured $250 million at a $4 billion valuation in October. In January, the creators of the open source inference project vLLM launched a startup called Inferact, raising $150 million in seed funding led by Andreessen Horowitz at an $800 million valuation. The team behind SGLang also commercialized its project as RadixArk, reportedly securing seed funding at a $400 million valuation led by Accel, according to a media report.
Erik Bernhardsson founded Modal Labs after spending more than 15 years building and leading data teams at companies such as Spotify and Better.com, where he served as CTO. The startup’s earlier investors include Lux Capital and Redpoint Ventures. As demand for AI inference infrastructure rises, Modal Labs appears positioned at the center of a rapidly expanding market.
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