AI Inference Startup Fal Raises Capital at $16 Billion Valuation

Fal, an AI inference startup that hosts image, video and audio models for creators and developers, has doubled its valuation to $16 billion in a new round of funding.Bessemer Venture Partners, an existing investor, led a $1.3 billion financing round in the startup in October, Fal is set to announce Tuesday. Other investors include Nvidia Corp., Sound Ventures, HOF Capital and T. Rowe Price Group Inc. Fal previously raised $350 million in a Sequoia-led round in April at an $8 billion valuation.Talia Goldberg, a partner at Bessemer, is joining the startup’s board.Fal’s business has expanded in response to developers’ growing appetite for more inference, or the process of running AI systems after they’ve been trained. Other startups offering AI inferencing services, including Modal and Baseten, have also been in discussions to raise money at steep valuations, Bloomberg News previously reported.

Fal opted to raise such a large amount in part because a surge of demand meant it needed to get more computing power, said chief executive officer and co-founder Burkay Gur. “We hit a point in summer where we were not able to serve our customers and had to rate limit them,” Gur said.

Over the past year, Fal has put more effort into post-training video models in collaboration with both open-source and closed-source model makers. Some of those arrangements include licensing fees or revenue share agreements. Gur said that the startup doesn’t plan to pre-train its own models in the short-term, but didn’t rule it out in the future.

Fal hit $800 million in annualized revenue earlier this year, according to a person familiar with the matter. The Information earlier reported some details of Fal’s most recent round and revenue.

In addition to procuring compute, San Francisco-based Fal plans to use the new capital to help expand its 185-person team.

“Things are becoming a little more capital intensive in the whole AI market,” said Gur. “We know that compute and scale is a big bottleneck, and the more scale you have, the more likely you are to win at the end of the day.”