Source: Inference provider Modal Labs closing in on $750M round at $15.75B valuation

AI inference infrastructure startup Modal Labs is on the verge of securing a $750 million funding round, led by Accel and propelling its valuation to $15.75 billion, according to a source familiar with the matter. The undisclosed size of the funding round marks a significant increase from Modal's $4.65 billion valuation at the time of its $355 million funding round announced just four months prior.

The surge in demand for inference services, which involve running already-trained AI models to generate outputs, is driving the substantial interest from investors. Other inference startups, such as Baseten and Fireworks, are also in discussions to raise capital at elevated valuations. Despite rapid revenue growth, these companies face thin margins due to the high cost of compute acquisition or leasing.

Modal Labs, founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna, offers developers the ability to train AI models and execute compute-intensive tasks without managing their own servers. The company, headquartered in New York, boasts a clientele that includes Cognition, Suno, Ramp, and Substack. Modal Labs had previously reported annualized revenue of $300 million as of May.

The fundraising talks follow a security incident in late July, where Modal disclosed that a customer's data had been compromised as part of a hacking campaign targeting Hugging Face. Modal's CTO clarified that the breach stemmed from a flaw in the customer's code, not Modal's systems, and emphasized that Modal's platform remained untouched.