Fal, a San Francisco startup that runs image, video and audio AI models for developers, raised $1.3 billion at a $16 billion valuation, double the $8 billion it was valued at in April, according to Bloomberg. Bessemer Venture Partners led the round, which closed in October.
What is Fal's new valuation after its latest funding round?
Fal, a San Francisco startup that runs image, video and audio AI models for developers, has raised $1.3 billion at a $16 billion valuation. That is double the $8 billion it was valued at in April, Bloomberg reported.
Bessemer Venture Partners, an existing investor, led the round, which closed in October. Nvidia, T. Rowe Price, Sound Ventures and HOF Capital also took part.
Why is demand for AI inference driving startup funding?
Fal makes its money on inference, the process of running AI models after they have been trained. Demand for that work is booming. The company hit $800 million in annualized revenue earlier this year, according to a person familiar with the matter.
The growth has stretched Fal's capacity. “We hit a point in summer where we were not able to serve our customers and had to rate limit them,” said chief executive Burkay Gur.
The company plans to spend the new money on more computing power and on growing its 185-person team. It has also started fine-tuning video models with the companies that build them, sometimes in exchange for licensing fees or a share of revenue.
Gur said scale will decide the winners. “The more scale you have, the more likely you are to win at the end of the day,” he said.
Fal is not alone in drawing big checks. Rival Modal raised $750 million at a $15.75 billion valuation in October. Fireworks raised $1.5 billion at a $17.5 billion valuation in July, and Baseten is reportedly set to more than double its value to $30 billion.
Why do AI inference companies have thin gross margins?
Several people familiar with the inference companies’ financials said their gross margins remain thin. The high cost of buying or leasing computing power is the main reason.
Fal announced its Series E and F rounds at the same time and said the two together raised $1.65 billion. Sequoia led the earlier round. The latest round, Series F, comes as customers increasingly rely on open source models.
Gur co-founded Fal in 2021 with Gorkem Yurtseven, who previously worked as a developer at Amazon. Gur was formerly a machine learning leader at Coinbase and an engineer at Oracle.
This article was written with the assistance of AI.
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