AI inference startup Modal Labs in talks to raise at $2.5B valuation, sources say

Modal Labs, a rising player in the AI inference infrastructure sector, is reportedly in discussions to secure a new funding round that could value the company at around $2.5 billion. This development comes less than five months after the startup's valuation stood at $1.1 billion. According to insiders familiar with the negotiations, General Catalyst is expected to spearhead this funding round. Modal Labs is currently generating an annualized revenue run rate (ARR) of roughly $50 million. However, these discussions are still in the early stages, meaning that the terms may evolve as talks progress. Neither Modal Labs nor General Catalyst has provided comments on the matter. The startup is dedicated to enhancing the efficiency of inference, which is crucial for executing trained AI models to respond to user queries. By optimizing this process, Modal Labs aims to lower computing costs and minimize the time it takes for users to receive responses from AI systems. The interest in Modal Labs is reflective of a broader trend, as several inference-focused companies are garnering significant investor attention. Recently, competitor Baseten announced it had raised $300 million at a staggering $5 billion valuation, more than doubling its previous $2.1 billion valuation just months earlier. Similarly, Fireworks AI secured $250 million at a $4 billion valuation in October. In January, vLLM transitioned into a VC-backed startup named Inferact, raising $150 million in seed funding led by Andreessen Horowitz, with an initial valuation of $800 million. Furthermore, the team behind SGLang has commercialized their efforts into RadixArk, which is reported to have secured seed funding at a $400 million valuation led by Accel. Founded in 2021 by CEO Erik Bernhardsson, who has over 15 years of experience in leading data teams at companies like Spotify and Better.com, Modal Labs has garnered support from notable investors including Lux Capital and Redpoint Ventures.