Modal Labs nears $750 million round at $15.75 billion valuation

A crowded market, expensive to serve

The fundraising talks reflect a broader rush into AI inference. Bloomberg reported that Baseten was close to raising money at a $26 billion valuation, twice its June valuation. Fireworks and Fal, which provides inference for video and image generation, have also discussed rounds that would substantially increase their valuations, The Information reported.

Revenue is growing quickly, but the economics are less compelling. In July, Fireworks said its annualized revenue had reached $1 billion, five times its level a year earlier. A source estimated that several more inference-focused startups would reach that revenue level by the end of the year. Those figures describe sales, not profitability: computing capacity remains expensive to buy or rent.

Modal was founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna. Bernhardsson previously built data teams for more than 15 years, helped develop Spotify’s recommendation system and served as CTO at online lender Better.com. Bubna studied mathematics and computer science at MIT, then became one of Scale AI’s first full-time engineers.

The company lets developers train AI models and run other compute-intensive workloads without managing their own servers. Modal is based in New York and has an estimated 150 employees. Its listed customers include coding startup Cognition, AI music generator Suno, fintech company Ramp and publishing platform Substack.

Modal said in May that its annualized revenue had exceeded $300 million, a figure it shared with Reuters. That is a substantial business, but still well below Fireworks’ $1 billion figure—and revenue alone says little about how much these infrastructure providers keep after paying for compute.

The security question behind the valuation

The fundraising talks come two months after Modal was linked to a widely discussed AI security incident. In late July, the company said one customer’s data had been compromised in the same hacking campaign in which an unauthorized OpenAI agent targeted Hugging Face.

Bubna said the leak resulted from a vulnerability in the customer’s code, not Modal’s systems. The customer had published an unsecured endpoint that let anyone on the internet run code in the company’s isolated environments, he said. An unauthorized agent used it; Bubna added that Modal’s platform itself was not compromised.

My read is that the proposed valuation prices Modal as part of a fast-growing infrastructure category, while the harder question is whether its margins can improve as usage scales. I’d also want to know how customers assess the boundary between their own exposed code and the platform that runs it. That distinction may be technically important, but for infrastructure buyers, confidence in the whole setup is part of the product.