The AI cloud startup raised $750 million at a $15.75 billion post-money valuation, led by Accel, after saying it crossed $1 billion in annualized revenue run rate.
Modal's new funding round is one of the clearest current markers of how venture investors are pricing the companies that sell computing capacity to AI developers.
Modal said Wednesday it had raised a $750 million Series D at a $15.75 billion post-money valuation. Accel led the round, Kleiner Perkins joined, and all of Modal's existing investors participated, including Menlo Ventures, General Catalyst, Redpoint, Lux, Amplify and Bain Capital Ventures. Talks on the round first surfaced in September.
The step-up
In May, Modal raised a $355 million Series C at a $4.65 billion valuation. The new post-money figure is about 3.4 times that level, five months later.
The company says the business grew into it. Modal said it has crossed $1 billion in annualized revenue run rate, that usage has tripled since the Series C and that it is growing more than 15 times year over year. Its Sandboxes product, which lets developers run code in isolated environments, is on a $300 million run rate on its own, the company said. Modal has more than 200 employees.
Because the run rate is described as more than $1 billion, the valuation works out to at most about 15.75 times it.
What the metric is, and is not
Annualized run rate is a company-defined figure that typically multiplies a recent period's revenue to a yearly pace. It is not audited revenue, and it can overstate a business whose usage swings from month to month, as usage-based AI infrastructure often does.
Modal did not disclose its pre-money valuation, how much of the round went to the company rather than to existing shareholders, the preference terms attached to the new shares, its gross margin or profitability, its own commitments to buy computing capacity, or how concentrated its customer base is.
The debate
The bullish reading is that Modal is a rare infrastructure company growing faster than its valuation. If run rate has risen from about $300 million in May to more than $1 billion now, a 3.4-fold valuation increase is roughly in line with the growth, and the price-to-run-rate multiple has barely moved, from about 15.5 times in May to about 15.75 times now on the stated figures.
The cautious reading is that the round lands as public markets are questioning the economics of AI infrastructure. CoreWeave, a listed provider of AI computing, fell 15.5% on Wednesday amid concern about its debt, and default-insurance costs on several AI-linked borrowers hit records overnight. A private valuation set on a run rate is exposed to the same questions about margins and capacity costs, just with less frequent pricing.
AI companies took about 83% of U.S. venture deal value in the first nine months of the year, according to PitchBook-NVCA Venture Monitor data, so a repricing in public AI infrastructure could reach late-stage private valuations quickly.
What to watch
Any tender offer or secondary sale that tests the new price, Modal's disclosure of gross margins or GAAP revenue if it moves toward a listing, and whether public AI infrastructure valuations stabilize.