Modal Labs valuation jumps to $4.65bn as AI coding demand surges
CEO Erik Bernhardsson reports annualised revenue has hit $300 million, driven by institutional clients seeking AI code testing and computational resources amid tighter chip markets.
AI coding startup Modal Labs has raised $355 million in a Series C funding round, achieving a post-money valuation of $4.65 billion, according to Chief Executive Officer Erik Bernhardsson. The transaction, led by Redpoint Ventures and General Catalyst, represents a substantial increase from the company’s $1.1 billion valuation recorded in September.
The valuation reflects a sharp acceleration in the company’s financial performance, with annualised revenue surging to approximately $300 million, up from an annualised rate of $60 million in the previous quarter. Bernhardsson attributed the growth primarily to increased demand for AI-generated code testing and infrastructure, noting that coding-related activity has been the primary driver of business momentum over the last six months.
To meet this growing demand, Modal Labs has expanded its operational footprint significantly. The company now partners with 13 cloud providers, a notable increase from five partners last year. This expansion was necessary as computational resources became more expensive and difficult to secure in the broader market. Bernhardsson stated that the company had to cast a wider net to identify compute providers that were previously unknown to the firm.
The funding round was executed in two tranches. The initial tranche of investors participated at a $2.5 billion valuation. However, increased interest from additional investors prompted a second tranche, which closed at the current $4.65 billion valuation. Participants in this second tranche include Accel and Menlo Ventures, while Redpoint Ventures and General Catalyst secured board seats as part of the deal.
Modal Labs serves a diverse range of institutional clients, including biotech companies, hedge funds, and two weather-forecasting firms. The startup provides infrastructure to help AI companies access chips for inference and offers a sandbox environment for testing AI-generated code before deployment. This growth occurs against a backdrop of rising institutional interest in AI infrastructure, including heavy buying of NVIDIA shares following recent approvals for chip sales to Chinese firms.
