Modal Labs, a startup that specializes in AI inference infrastructure, is currently holding discussions with venture capital firms about a potential new funding round at an estimated valuation of $2.5 billion, according to four people familiar with the matter. If the deal closes at these levels, the round would more than double the company’s previous valuation of $1.1 billion, which Modal announced less than five months ago alongside its $87 million Series B funding.
Meanwhile, sources said that General Catalyst is holding talks to lead the new funding round. At the same time, insiders revealed that Modal’s annualized revenue run rate (ARR) stands at approximately $50 million. However, the discussions remain at an early stage, and the final terms could still evolve.
In response, Modal Labs co-founder and CEO Erik Bernhardsson denied that the company is actively raising capital and described his recent conversations with venture capitalists as general discussions rather than formal fundraising efforts. Meanwhile, General Catalyst declined to comment on the matter.
Notably, Modal focuses on optimizing AI inference, which refers to the process of running trained artificial intelligence models to produce outputs in response to user prompts. By improving inference efficiency, companies can significantly lower compute costs while also reducing latency between a user’s request and the model’s response.
Against this backdrop, Modal stands among a small but rapidly growing group of inference-focused startups drawing intense investor interest. Just last week, competitor Baseten announced a $300 million funding round at a $5 billion valuation, more than doubling its $2.1 billion valuation from September. Similarly, Fireworks AI, an inference cloud provider, raised $250 million at a $4 billion valuation in October.
Additionally, in January, the creators of the open-source inference project vLLM transitioned the tool into a VC-backed company called Inferact. The new startup raised $150 million in seed funding, led by Andreessen Horowitz, at an $800 million valuation. At the same time, reports said that the team behind SGLang commercialized its technology as RadixArk and secured seed funding at a $400 million valuation led by Accel, according to sources.
Modal Labs traces its origins to 2021, when Erik Bernhardsson founded the company after spending more than 15 years building and leading data teams. Previously, he held senior roles at companies such as Spotify and Better.com, where he served as CTO.
Earlier in its journey, Modal attracted backing from prominent investors, including Lux Capital and Redpoint Ventures, further cementing its position in the rapidly expanding AI inference infrastructure ecosystem.
