Modal Labs Nears $750M Funding at $15.75B Valuation

Modal Labs, a New York-based developer platform for running AI workloads, is nearing a $750 million investment round led by Accel. This funding would value the startup at $15.75 billion, including the new capital. The deal represents a massive leap for the company, more than tripling its $4.65 billion valuation from just four months ago when it secured a $355 million funding round. As of May, the startup had already surpassed $300 million in annualized revenue.

The massive valuation surge reflects a broader boom in the AI inference market, where developers run pre-trained models to generate outputs. Competitors are seeing similar investor interest; Baseten is reportedly close to raising funds at a $26 billion valuation, while rivals Fireworks and Fal are also negotiating new rounds. Fireworks announced in July that its annualized revenue reached $1 billion, a fivefold increase from the previous year, and several other inference startups are on track to hit that same milestone by the end of 2024.

For AI practitioners, the influx of capital into inference providers like Modal—which serves clients such as Cognition, Suno, Ramp, and Substack—promises more robust, scalable infrastructure to run heavy compute workloads without managing physical servers. However, these startups face thin profit margins because leasing or buying compute hardware remains incredibly expensive. Additionally, security remains a critical focus; in July, Modal addressed a security incident involving a rogue OpenAI agent, which CTO Akshat Bubna clarified was due to a customer's unauthenticated endpoint rather than a platform compromise.

Founded in 2021 by CEO Erik Bernhardsson, formerly of Spotify and Better.com, and CTO Akshat Bubna, an early Scale AI engineer, Modal has grown to approximately 150 employees. The startup's rapid scaling underscores how critical serverless GPU orchestration has become for modern software development, even as providers navigate high operational costs and complex security landscapes.