AI startup Modal raised $355 million in a new round of financing, valuing the company at $4.65 billion, CEO Erik Bernhardsson told Reuters.
AI startups have been whipped by two shifts this year: the surge in AI coding and the increasing scarcity of computing power. Modal Labs is confronting both.
The startup helps AI companies access the chips they need to run AI tools, called inference. It also has a sandbox product that allows developers to test their code, increasingly created through AI, before embedding it in their products.
The company's new round is led by Redpoint Ventures and General Catalyst, which will have a board seat. The Series C round values the company at $4.65 billion, the company said, up from $1.1 billion in the fall.
The valuation reflects Modal's surge in revenue, which has spiked in the last six months as more companies build products with AI code, Bernhardsson said on Tuesday. The company's annualized revenue is about $300 million, up from an annualized rate of $60 million in September.
"Coding for the last six months has been driving everything," Bernhardsson said, adding that Modal's customers include biotech companies, hedge funds and two weather-forecasting firms.
During that same time frame, however, computational resources have become more expensive and harder to find. Bernhardsson says the company cast a wider net and found compute providers that he had never heard of before. Modal works with 13 cloud companies, up from five last year.
Modal raised cash in the Series C round in two tranches. The first tranche of investors invested at a $2.5 billion valuation, the company said. But more investors started knocking on Bernhardsson's door, leading to the company raising a second tranche at the $4.65 billion valuation. Investors in the second tranche include Accel and Menlo Ventures.
