Modal Labs in Talks for Funding Round Valued at $2.5 Billion

Overview of the Funding Talks

Modal Labs, a startup that builds infrastructure for AI inference, is reportedly in early-stage talks with venture capital firms about a financing round that could value the company at approximately $2.5 billion. Sources close to the deal say the round would more than double the $1.1 billion valuation the company announced less than five months ago when it closed an $87 million Series B round. General Catalyst is said to be in discussions to lead the new round, though the firm has not commented publicly.

Company Performance and Revenue

According to the sources, Modal Labs currently has an annualized revenue run rate of roughly $50 million. The company focuses on optimizing inference—the process of running trained AI models to generate responses to user prompts. By improving inference efficiency, Modal aims to lower compute costs and reduce latency for AI applications.

Leadership Comments

Co‑founder and chief executive Erik Bernhardsson denied that Modal Labs is actively fundraising, describing recent interactions with investors as general conversations. The statement reflects the early nature of the discussions, which could still evolve as terms are negotiated.

Investor Landscape

Modal Labs counts Lux Capital and Redpoint Ventures among its earlier investors. General Catalyst’s potential involvement signals continued interest from prominent venture capital firms. The company’s previous funding history includes an $87 million Series B round that brought its valuation to $1.1 billion.

Competitive Context

The AI inference space has attracted significant capital recently. Competitor Baseten announced a $300 million raise at a $5 billion valuation, while Fireworks AI secured $250 million at a $4 billion valuation. In addition, the creators of the open‑source inference project vLLM formed a VC‑backed startup called Inferact, raising $150 million at an $800 million valuation. Another team, SGLang, commercialized as RadixArk and obtained seed funding at a $400 million valuation.

Founding Background

Erik Bernhardsson co‑founded Modal Labs in 2021 after more than 15 years leading data teams at companies such as Spotify and Better.com, where he served as chief technology officer. The company’s mission centers on delivering faster, more cost‑effective AI inference services for developers and enterprises.

Implications

If the financing round proceeds at the reported valuation, Modal Labs would join a growing list of AI inference providers that have attracted multibillion‑dollar valuations, underscoring investor confidence in the market’s potential. The company’s focus on efficiency and latency could position it well amid rising demand for scalable AI solutions.