Video Hosting Startup Fal in Funding Talks at $8 Billion Valuation
The Takeaway
- Fal.AI discusses $300M-$350M funding at an $8 billion valuation.
- Annualized revenue for Fal.AI has doubled to $400 million.
- Company valuation would nearly double to $8 billion in new round.
Fal, a fast-growing cloud service for accessing and storing AI models that generate images, video, and audio, is in talks to raise $300 million to $350 million, according to a person with direct knowledge of the fundraise.
The deal, which would nearly double the company’s paper valuation to around $8 billion from a financing three months ago, shows intense demand from investors for startups that can run AI models quickly for customers, a process known as inference.
Fal competes with other inference providers such as Replicate as well as traditional cloud providers. The new fundraise reflects Fal’s annualized revenue growth, which recently hit $400 million, up from $200 million in October. Its other financial details couldn’t be learned. It charges for usage, such as for per second of video output.
The San Francisco startup is raising the round in two installments, with the highest priced one at an $8 billion valuation, up from a $4.5 billion valuation in a Sequoia Capital-led round in December, according to the person and two more familiar with the discussions. It isn’t clear which firm is leading the new round. It raised $314 million in three funding rounds last year. Investors in the startup include Andreessen Horowitz, Notable Capital, Meritech Capital and Kindred Ventures.
Fal, started in 2021 by former Amazon and Coinbase engineers, serves 3 million developers including Adobe Systems, Canva and Shopify. Developers can use Fal to run Google’s Nano Banana, Black Forest Labs’ Flux and hundreds of other models.
Hot AI startups have been raising rounds in quick succession since OpenAI’s launch of ChatGPT set off the AI craze three years ago. More recently, as investors compete for the fastest growing startups, they are sometimes agreeing to invest in an installment, or tranche, priced higher than a tranche raised at roughly the same time. The dual tranches mean investors in the lower-priced round receive a quick markup on their investment. But the structure has added to worries about a bubble in startup valuations.