AI inference startup Modal Labs is in talks to raise a new funding round at a valuation of approximately $2.5 billion, according to four people familiar with the matter. If completed, the deal would more than double the company’s previously announced $1.1 billion valuation from less than five months ago. General Catalyst is reportedly in discussions to lead the round, though the talks are still early and terms could change, the sources said. Modal’s annualized revenue run rate (ARR) is estimated at around $50 million. The company and General Catalyst did not respond to requests for comment. Modal specializes in AI inference infrastructure—the process of deploying trained AI models to generate responses to user inputs. By optimizing inference, Modal helps reduce both computational costs and latency, enabling faster, more efficient AI interactions. The startup is among a growing number of inference-focused companies drawing significant investor interest. Just last week, competitor Baseten announced a $300 million funding round at a $5 billion valuation, a substantial increase from its $2.1 billion valuation just months earlier in September. In October, Fireworks AI, another inference cloud provider, raised $250 million at a $4 billion valuation. In January, the team behind the open-source inference tool vLLM transitioned into a new venture called Inferact, securing $150 million in seed funding led by Andreessen Horowitz at an $800 million valuation. Meanwhile, the creators of SGLang have launched RadixArk, which sources say raised seed funding at a $400 million valuation led by Accel. Modal was co-founded in 2021 by CEO Erik Bernhardsson, who spent over 15 years leading data and engineering teams at companies including Spotify and Better.com, where he served as CTO. The company has previously attracted backing from investors such as Lux Capital and Redpoint Ventures.