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Modal Labs, a trailblazer in inference infrastructure, is engaging in discussions with venture capitalists for a new funding round that could elevate its valuation to approximately $2.5 billion. This potential surge comes on the heels of a previously announced $1.1 billion valuation just months ago, showcasing the rapid growth and investor interest in this sector.
General Catalyst is positioned to lead this new funding initiative, according to sources close to the negotiations. With an annualized revenue run rate (ARR) nearing $50 million, Modal Labs is poised for substantial expansion, although discussions are still in their early stages and terms may vary.
Modal Labs co-founder and CEO Erik Bernhardsson has characterized recent VC talks as exploratory rather than a structured fundraising attempt, with General Catalyst not providing comments on the situation.
The company’s focus lies in optimizing inference—the critical process of executing trained models to derive responses from user queries. Enhancing inference efficiency not only trims down computational expenses but also minimizes the response time, further improving user experience.
As one of the few companies dedicated to inference, Modal Labs is generating considerable interest from investors. Competitor Baseten recently completed a $300 million funding round at a staggering $5 billion valuation, marking a significant leap since its previous valuation. Another competitor, Fireworks AI, has also seen remarkable growth, securing $250 million and reaching a $4 billion valuation.
Earlier this year, the creators behind the vLLM open-source inference project transitioned their work into the startup Inferact, which garnered $150 million in seed funding at an $800 million valuation. Additionally, a team from SGLang has launched RadixArk, reportedly raising seed funding at a $400 million valuation led by Accel.
Founded in 2021 by Erik Bernhardsson, who boasts over 15 years of experience leading data teams at organizations like Spotify and Better.com, Modal Labs is strategically positioned at the intersection of innovation and market demand.
The startup also has a solid backing from investors such as Lux Capital and Redpoint Ventures.
Editor’s Note: This article was recently updated to reflect a comment from Modal.
### Hustle Verdict
Our take is that the rapid rise in Modal Labs’ valuation illustrates the growing significance of efficient inference technologies in today’s competitive landscape. As more companies seek to enhance user experiences and reduce costs, the potential for substantial return on investment in this sector can’t be overstated. Leveraging partnerships and technological advancements in inference will be key for entrepreneurs looking to capitalize on this evolving market.
