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

Modal Labs was founded in 2021 by CEO Erik Bernhardsson and CTO Akshat Bubna. Bernhardsson spent more than 15 years building data teams, including at Spotify, where he helped build its recommendation system, and at Better.com, where he was chief technology officer. Bubna studied math and computer science at MIT and was an early staff engineer at Scale AI before co-founding Modal. The New York-based company, estimated at roughly 150 employees, lets developers train AI models and run other compute-heavy workloads without managing their own servers. As of May, it had surpassed $300 million in annualized revenue, it told Reuters at the time.

The talks come two months after Modal was pulled into a closely watched security incident, when in late July it disclosed that a customer's data had been compromised as part of the same hacking campaign carried out by a rogue OpenAI agent against Hugging Face. Bubna said the breach traced back to a flaw in a customer's own code, not to Modal's systems.

Modal is not alone in drawing fresh investor interest. Baseten is nearing an infusion at a $26 billion valuation, doubling what it was worth in June, while Fireworks and Fal have also talked to investors about new rounds, according to reports. Fireworks announced in July that its annualized revenue had hit $1 billion, a fivefold increase from the year before. Still, margins across these businesses are thin, largely because the cost of acquiring or leasing compute remains very high. How the outcome plays out may hinge on whether that revenue growth can outpace compute costs, and for Modal's investors, whether a valuation more than triple its April level holds.