AI inference startup Fal raised $1.3B led by Bessemer at a $16B valuation, up from $8B in April; a source says it hit $800M in annualized revenue this year (Natasha Mascarenhas/Bloomberg)

Fal, a San Francisco-based AI inference startup, has announced that it has doubled its valuation to $16 billion following a new funding round of $1.3 billion. The investment round, led by Bessemer Venture Partners, also saw participation from Nvidia, Sound Ventures, and T. Rowe Price. This latest funding brings Fal's valuation to double its $8 billion mark from April, as reported by Bloomberg.

The Series E & F rounds were announced simultaneously, with a combined total of $1.65 billion raised across both. Sequoia led the earlier round, while the more recent $1.3 billion Series F round reflects the growing demand for inference services. These services, which involve running AI models that have already been trained to generate outputs, are in high demand, particularly from companies that rely on open-source models.

The startup's revenue surpassed $800 million in annualized terms earlier this year, Bloomberg noted. The inference service market is becoming increasingly competitive, with companies such as Baseten, Fireworks AI, and Modal also experiencing rapid growth and securing large funding rounds at higher valuations. However, despite the surge in demand, gross margins for companies providing inference services remain thin, as high costs associated with buying or leasing compute continue to pose challenges, according to multiple sources familiar with the financials of inference companies.

Fal was co-founded in 2021 by Burkay Gur, a former Coinbase machine learning leader and Oracle engineer, and Gorkem Yurtseven, who had previously worked as a developer at Amazon.