AI startup Modal Labs is in talks to raise its valuation to $2.5 billion, sources say

Modal Labs, a startup specializing in artificial intelligence inference infrastructure, is raising a new round worth about $2.5 billion, according to four people familiar with the deal. If the deal is completed on these terms, the financing round will double the company’s valuation of $1.1 billion, which was announced less than five months ago.

General Catalyst is in talks to lead the round, the people told TechCrunch. Modal’s annual revenue run rate (ARR) is around $50 million, our sources said. Discussions are still early, and terms could still change.

Modal and General Catalyst did not respond to our requests for comment.

The model focuses on improving heuristics, which is the process of running trained AI models to generate answers from user requests. Improving the efficiency of inference reduces computing costs and reduces the delay time between a user prompt and the AI ​​response.

Modal is one of the few heuristics-focused companies attracting intense interest from investors right now. Last week, rival Baseten announced a $300 million raise at a $5 billion valuation, more than double the $2.1 billion valuation it reached just months ago in September. Likewise, Fireworks AI, a provider of inference cloud services, earned $250 million at a $4 billion valuation in October.

In January, the creators of the open source inference project vLLM announced they had spun the tool into a venture capital-backed startup, Inferact, raising $150 million in seed funding led by Andreessen Horowitz at an $800 million valuation. Meanwhile, TechCrunch reported that the team behind SGLang has commercialized as RadixArk, which sources tell us has secured seed funding at a $400 million valuation led by Accel.

Modal was co-founded by CEO Erik Bernhardsson in 2021 after spending more than 15 years building and leading data teams at companies including Spotify and Better.com, where he served as CTO.

The startup counts Lux Capital and Redpoint Ventures among its previous backers.