# Modal CEO: Has Open-Source LLM Inference Peaked? | What Happens to the Cost of Compute Markdown copy of https://realalpha.app/v/1dwyL6Iz_PU/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy. Erik Bernhardsson argues that inference can become a vast market, but lasting AI infrastructure businesses need products beyond commodity token serving. - Show: 20VC - Hosts: [Harry Stebbings](https://realalpha.app/people/harry-stebbings/) - Guest: [Erik Bernhardsson](https://realalpha.app/builders/erik-bernhardsson/) is co-founder and CEO of Modal. - Published: Nov 2, 2026 - Length: 1 h 2 m ## The best minutes - [13:34](https://realalpha.app/v/1dwyL6Iz_PU/?t=814) [Inference providers need a broader platform to avoid commoditization](https://realalpha.app/s/inference-providers-need-a-broader-platform-to-avoid/) (5 min) - [17:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=1066) [Aggregating GPU demand helps Modal manage capacity](https://realalpha.app/s/aggregating-gpu-demand-helps-modal-manage-capacity/) (4 min) - [33:39](https://realalpha.app/v/1dwyL6Iz_PU/?t=2019) [Infrastructure products can take years to find their killer use](https://realalpha.app/s/infrastructure-products-can-take-years-to-find-their-killer/) (4 min) ## Also worth watching - [41:18](https://realalpha.app/v/1dwyL6Iz_PU/?t=2478) [Post-training favors tasks with short feedback loops](https://realalpha.app/s/post-training-favors-tasks-with-short-feedback-loops/) (3 min) - [52:00](https://realalpha.app/v/1dwyL6Iz_PU/?t=3120) [Employee liquidity can strengthen AI recruiting](https://realalpha.app/s/employee-liquidity-can-strengthen-ai-recruiting/) (3 min) - [46:57](https://realalpha.app/v/1dwyL6Iz_PU/?t=2817) [Model ownership matters for some workflows, not all](https://realalpha.app/s/model-ownership-matters-for-some-workflows-not-all/) (3 min) - [7:52](https://realalpha.app/v/1dwyL6Iz_PU/?t=472) [Founders should not maximize every round's valuation](https://realalpha.app/s/founders-should-not-maximize-every-rounds-valuation/) (3 min) Skip the sponsor reads (nearly six minutes total) and the opening founder-background discussion. ## Summary Bernhardsson co-founded and leads Modal, an AI infrastructure platform for training models, running inference and powering AI agents. Before Modal, he built Spotify's original music recommendation system. Bernhardsson sees inference becoming a very large market, but argues that providers need products beyond token serving to avoid commodity pricing. He expects specialized workloads and both open and frontier models to grow, while GPU supply and prices may remain tight before hardware prices eventually fall. He describes Modal's strategy of pooling compute across providers and expanding into adjacent products; its sandbox business reached a $300 million run rate after taking years to find strong demand. He is bullish on software engineering and coding agents, but expects a market pullback and warns against businesses that depend on continual equity funding. ### Minute by minute - [4:24](https://realalpha.app/v/1dwyL6Iz_PU/?t=264) **Coding became a lifelong craft.** Bernhardsson says he began coding at eight, made games and later competed in programming contests. He started Modal at 36 or 37 after spotting a market opportunity, and says he enjoys building enough to want to work on it for decades rather than sell. - [7:52](https://realalpha.app/v/1dwyL6Iz_PU/?t=472) **Early startups win on speed and brand.** Bernhardsson says he dislikes fundraising, has never made a pitch deck and builds investor relationships before raising. He advises founders not to simply maximize valuation, and says early startups rarely have durable moats: team quality, fast product decisions and brand matter more. Modal was capital-efficient, but GPU capacity now requires more spending. - [13:34](https://realalpha.app/v/1dwyL6Iz_PU/?t=814) **Inference needs a wider product suite.** Bernhardsson calls inference the new cloud, but says selling tokens alone risks becoming a commodity business. He sees room for products such as sandboxes, post-training, low-latency and batch inference, with the market fragmenting by workload. Because margins are split across the AI stack, he says Modal could reach 40%, 50% or 60% margins over time, but not traditional software margins. - [17:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=1066) **GPU aggregation smooths bursty demand.** Modal works with 25 neoclouds and uses its own infrastructure to treat their compute as a shared pool; Bernhardsson says combining customers' variable workloads makes overall demand easier to manage. GPU lead times are three to four months, and monthly customer demand grew 30% to 40% over the prior 12 months, so Modal projects demand forward and buys two to three times the expected capacity. He expects hardware prices to fall eventually, though supply may stay tight for years. - [23:26](https://realalpha.app/v/1dwyL6Iz_PU/?t=1406) **Bernhardsson says CUDA is not Nvidia's moat.** Bernhardsson expects Nvidia and specialized chipmakers to grow alongside each other. He says CUDA itself is less important than Nvidia's tooling and ecosystem, which he notes tends to support Nvidia first. He is skeptical that neoclouds can quickly reproduce Modal's infrastructure stack, while praising their financial engineering for securing and financing capacity. - [27:04](https://realalpha.app/v/1dwyL6Iz_PU/?t=1624) **Open models keep a role.** Bernhardsson says open models will remain useful for fine-tuning, control and customization, even as frontier models get cheaper. He says Europe has substantial human capital but struggles to concentrate it at one company and raise capital, and sees Nvidia's support of US open models as ecosystem-building. He sees specialized models such as Jev serving large markets and says there is a path to a $100 billion company in specialized inference. - [32:44](https://realalpha.app/v/1dwyL6Iz_PU/?t=1964) **Infrastructure products can find demand late.** Bernhardsson wants Modal to become a platform with more products and stronger customer support, while stressing the need to prioritize. Modal launched sandboxes in 2023, but demand surged in 2025 as models improved at generating code; the business reached a $300 million run rate, about a third of Modal's revenue. He says infrastructure products can take years to find a killer use case. - [37:00](https://realalpha.app/v/1dwyL6Iz_PU/?t=2220) **Open and frontier inference can both grow.** Bernhardsson says Modal should have invested more in open-model inference earlier; the team grew from one or two people to 30 in 12 months, and he says Modal became a top-three provider. He rejects a fixed-pie view, arguing that open and frontier inference could each grow 5x, 10x or 20x over the next 12 months. He says Modal grew 15x in the prior 12 months and its current monthly growth is 30% to 40%. - [41:18](https://realalpha.app/v/1dwyL6Iz_PU/?t=2478) **Clear feedback loops favor post-training.** Bernhardsson says post-training works well for tasks such as coding, cybersecurity and math, where results can be checked, but may be harder for work with longer feedback loops. He remains bullish on software engineers, whose work includes understanding requirements and workflows, not just translating instructions into code. Modal spends about half a million dollars per month on coding agents, and he expects greater efficiency to unlock more demand. - [45:36](https://realalpha.app/v/1dwyL6Iz_PU/?t=2736) **AI data sells well now.** Bernhardsson says companies selling training data and code environments can make strong money today, though he is unsure how durable some will be. He says owning a model can help with consistency and control in some use cases, but is only one of several considerations. He sees model routing as a viable business today, though he thinks it may need to become part of a broader platform; he says he would have advised OpenRouter to keep growing. - [51:41](https://realalpha.app/v/1dwyL6Iz_PU/?t=3101) **Employee liquidity helps hiring.** Bernhardsson expects a 20% or 30% market pullback and says he would accept it because he sees a much larger long-term opportunity. He supports employee secondaries as a way to make equity tangible for staff and future hires, with limits to preserve employees' stake. Modal aims to pay around the 95th percentile, while some labs offer exceptional new graduates more than $20 million. - [54:18](https://realalpha.app/v/1dwyL6Iz_PU/?t=3258) **Capital dependence is a warning sign.** Bernhardsson says TurboPuffer could expand from vector databases into adjacent data products, and that sandbox demand has exceeded his expectations. He would avoid companies that need continual equity infusions to survive. On parenting, he says he tries to push his children enough to expose them to opportunities without overdirecting them. - [58:07](https://realalpha.app/v/1dwyL6Iz_PU/?t=3487) **AI could expand drug discovery.** Bernhardsson says AI-aided drug design, especially for chronic conditions, is one of the applications he finds most exciting. He thinks AI-generated drugs are a realistic prospect, while noting that regulation will make the process take time. ## Transcript 20VC, hosted by Harry Stebbings, with Erik Bernhardsson. Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there. [0:00](https://realalpha.app/v/1dwyL6Iz_PU/?t=0) I think there is an opportunity to create a $100 billion company with a lot of specialized models in the inference. There's going to be a pullback. I'm okay with that because I think the long-term opportunity is so fucking big. There's just so much demand for it. It's like so large. I don't want to sell this company because I would just go and start modal too. We've lost new grads going to, you know, some of the labs for like, like talking, you know, 20 plus million. I mean, these are exceptional people, exceptional. This is 20VC with me, Harry Stebbings. And do you know what I wish I knew 12 months ago that I now know? [0:30](https://realalpha.app/v/1dwyL6Iz_PU/?t=30) The demand for inference, it's infinite. And we're seeing some of the biggest companies in the world be built in this space. Today, I'm thrilled to welcome one of those founders to the hot seat in the form of Eric, co-founder and CEO of Modal. Now, Modal just hit a billion in ARR. They just raised $750 million led by Excel. And they're priced at $15.75 billion today. I actually think it's a steal, by the way. But today, we dig into the inference market, what to come, what no one sees that everyone should see, and so much more. This was a phenomenal discussion with Eric. But before we dive into the show today, Blitzy, the autonomous software development platform that's built for enterprise scale, is proud to sponsor today's show. [1:12](https://realalpha.app/v/1dwyL6Iz_PU/?t=72) Enterprise codebases have grown beyond human comprehension. Tens of millions of lines, decades of tech debt, complexity existing tools cannot fathom. 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[3:59](https://realalpha.app/v/1dwyL6Iz_PU/?t=239) that's your destination eric listen dude it is so great to have you on the show you know i was sitting downstairs with you chatting before and i was just like you can feel when it's going to be a good show because people are themselves and that was an amazing conversation and we're gonna have a lot of fun so thank you for joining me it's so exciting to be here i mean i've listened to so many episodes it's it's kind of surreal to be inside of it right now that's really awesome as i said to you you you could have text me when you started the company and maybe i would have been a little bit richer yeah but you probably didn't know about me then no i didn't but i would have welcomed investing in another suite i wanted to start with i was talking to zach frankel last night and he said about your childhood and like early indicators of success and like exceptional ability how did you fall in love with technology and for me as an investor what would have made me excited in seeing your childhood i started coding 1992 or something like that i was eight i just loved it you know it's like one of those things like i realized you can control computers i had a mac plus you know one megabyte of ram or whatever um and yeah started making games and [5:04](https://realalpha.app/v/1dwyL6Iz_PU/?t=304) like i mean they were terrible but you know it's just i think back at like in a way i'm like so grateful i look back at like my childhood my friends they were like collecting hockey cards or whatever that was like their hobby my hobby was programming and now i make a lot of money from it isn't that kind of crazy like you know you know what you think about it like the fact that i can make a lot of money like doing what was my hobby since i was eight kind of nuts so So I'm just so grateful about, you know, the fact that I fell in love with technology and coding. And then, you know, I started doing programming competitions when I was 16, 17 and so much fun. [5:35](https://realalpha.app/v/1dwyL6Iz_PU/?t=335) Modal was your first company or is your first company. Why did it take so long? I think the consistent pattern in my life is like I never had quite enough confidence in myself. And a lot of it was that was missing was just the confidence, a little bit the money too. But so it wasn't until I was like 36, 37, I started Modal. And I don't think I've ever wanted to necessarily start a company. It was like one of those things where I just saw this big opportunity in the market. I almost thought to myself, why is no one else doing this? Such an obvious idea. And that led me to think, maybe I should start a company. [6:08](https://realalpha.app/v/1dwyL6Iz_PU/?t=368) And then five years later, here we are. It's gone pretty well. I think in hindsight, maybe I should have started much earlier. Do you wish you had? I look at some of these Stanford kids, and they're 21. And I kind of feel like they maybe have too much confidence. You know what I mean? like they're like, you know, think they're going to take over the world and they're 21. I think the ideal age is maybe like, I don't know, 32 or something like that. You have a little bit more experience. You know how to navigate people. You know how to hire people. You know how to fire people, like all these things. I don't know if I would have been a good founder at like in my 20s. Before we get into the market and everything beneath that, we were chatting downstairs. [6:41](https://realalpha.app/v/1dwyL6Iz_PU/?t=401) We often hear that founding companies is like eating glass. It's hard. It's painful. How do you feel about those? I hate that stuff. It's like, I don't get it. Like you're eating glass like every day. Like, why are you doing it then? Like, I don't know. You expect some like magic reward, like some big cookie in the end. Like, I never understood that mindset. I think it's like this mindset that a lot of people have. I'm going to suffer pain and then there's going to be this big reward in the end. I don't know. I don't think about it that way. I enjoy every day I go to work. Of course, there's like hard times. Like there's, you know, you have to have hard conversations, maybe fire people, maybe like do hard things. But like in the grand scheme of things, like, I mean, such is life and I enjoy life. I enjoy building a company. And I don't think of it as Like one day we're going to flip this company. [7:20](https://realalpha.app/v/1dwyL6Iz_PU/?t=440) I hope to work on this for 20, 30, 40, 50 years. I'm having so much fun. I don't want to sell this company because I would just go and start Modal 2. You really wouldn't. No, I don't. I don't think money necessarily makes you happy. I mean, a little bit. Like it's good to have some money, but, you know, be on a point. Like, you know. I like building stuff. I love technology. I love coding. So much fun. You're such a Swede. Is that Swedish mentality? Maybe it is. Yeah. Dude, never has an American come on before and said it's not about money. I mean, I do care about money a little bit, but maybe you're right. [7:49](https://realalpha.app/v/1dwyL6Iz_PU/?t=469) Because I do think in Swedish mentality, it's like self-actualization. Doing what you enjoy is kind of the highest form of prestige in a certain way. And it could be music, it could be poetry, whatever. It almost doesn't matter. What do you do that you don't enjoy? Yeah. I kind of hate fundraising, honestly. I mean, it's fine. I don't know. Like, I enjoy it when it's, like, good people. But it's, like, kind of challenging. You have to say no to a lot of people. I guess that's a good problem to have. But, you know, in general, it's... Oh, you have to say no to a lot of people? Oh, Eric, I'm sorry. [8:17](https://realalpha.app/v/1dwyL6Iz_PU/?t=497) I know, I know. That's a horrible thing. Oh, Harry, you can only have 10 million or 50 million. Oh, you've never done a deck, have you? I've never made a pitch deck, yeah. Every round we've done so far, I like to get to know people well in advance of raising money. So every round we've done, I mean, most recently we announced the D round yesterday with Excel. I've been speaking to Rich and Gonzalo at Excel for, I think, at least a year. And at some point, you know, we're like, actually, you know what? We could take some money. Like, what are the terms? Like, let's discuss terms. And then it happened very quickly because we already had that relationship. [8:50](https://realalpha.app/v/1dwyL6Iz_PU/?t=530) How do you think about price optimization? Is it a game of getting the highest price? No, I don't think so. I think maybe in later stages, it becomes a little bit more of a commodity, like the money itself. But I think in the early days, like, I mean, for several reasons, like one is that there's a misaligned incentive, like VCs always want to put in way more money than a company needs. And that, you know, you just take on a lot of dilution. It's not good as a shareholder. [9:11](https://realalpha.app/v/1dwyL6Iz_PU/?t=551) **Erik Bernhardsson:** But the other thing is like, you actually want to hold back, I think, and it's often better to raise a lot less money at a lower valuation, and then keep the VCs hungry for the next round. [9:21](https://realalpha.app/v/1dwyL6Iz_PU/?t=561) Is this not the generation, though, where actually capital is the moat, and you need so much more money than you think. You said that VCs want to give you more money than the company needs. I thought AI was finally the output exhaust for venture dollars that was needed. I think there are times in the market where you are capital constrained. We have not been capital constrained for most of the time of the company. We've been extremely capital efficient. We burn only a few million a month. I mean, only like, you know, it's a lot of money. I respect for the money. You burn a few million a month? No, I mean, up until like last year. Now we have to spend a lot of money on capacity. How much do you burn a month now? [9:53](https://realalpha.app/v/1dwyL6Iz_PU/?t=593) A lot. I mean, we actually are profitable on a P&L basis, but like cash flow is quite negative because we have to spend a lot of money on getting GPUs and building out capacity. And so that is a different period in the company and how we think about capital. Capital is, I don't want to call it a moat because, you know, I feel like people throw around that word like to mean like things that, you know, moat to me has like a very strict definition, but it certainly helps. Capital helps at this point. What's the moat definition for you? I mean, moat to me is like you go read like seven powers or like one of those things it's a good book but i think you know then people read that and they get delusional like and you know they're like yeah we're starting this company it has all these moats you never have moats in the early days like you know like google could do anything they wanted to google could do yeah but it's also like you know like what are the seven i don't even remember it's like cornering resources like market power like whatever it's like none of those things happen until you're like 10 years in you know there's an old blog post i always come back to it by ben thompson it talks about snap and the like the gingerbread man [10:51](https://realalpha.app/v/1dwyL6Iz_PU/?t=651) strategy do you know this thing and it's like the whole point is like snap doesn't have a moat they just run faster like they're the gingerbread man and i actually always come back to it i think that's so true like for almost every startup these days it's like you just have to like move faster than everyone else i actually think like the three things that matter to say when i invest is like one team are they top one percent team yeah two speed of product decision making very specifically you look at like instinct today the speed of feature shipping is really very impressive and they're very and then three is brand yeah and i think those are the three determinants to me of defensibility moat but it's a kind of package yeah i mean again i don't know if i would but i kind of agree your point like i think brand i don't want to call it a moat but it's it's actually i think the value of brand has gone up a lot can i be a dick yeah please do you think modal have done well with brand i think pretty well i think we have it's coupled with the developer experience and the product and the website and the visual identity and all these things. [11:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=706) We just did an event in San Francisco and I thought a lot about that, sort of how we package it, the event and the visual look and feel. But do you think you have a bigger brand than Bass 10 and Fireworks? I think we have that. I think we have like really, really good vibes. Like I'm terminally online. people tweet like way more about modal i think there's like a little bit more of a community i think there's like much better vibes around us like but like i am paranoid about those companies like i am paranoid about competition of course i track it like i of course like i i see everything that gets tweeted and about our competitors and this is important like everyone wants to be a part of the community everyone you know what i think is like people misunderstand is i love type safe with jev yeah because like everyone wants to clone jev no one wants to get up on stage and wear a fucking pink fur coat and just like talk about the jevolution in an unhinged way that is what brand to me is like it's like that guy is like he's playing the game on a whole different level and i think it's just like so like true about like companies today like you have to think about that what so can you tell me why because he's authentic and different i think [12:44](https://realalpha.app/v/1dwyL6Iz_PU/?t=764) so i think you just have to create a personality you kind of have to like figure out like what is the personality of your company and just be consistent and create like almost like a sense of movement a sense of like community like this is something cool and people want to use you because you're one of the cool products out there they're like have you tried modal it's pretty cool what what has modal done then the base 10 and fireworks haven't to build that i think we started with the developer experience so that was and we had a very clear sort of plg product market fit product-led growth in the sense that people came bottoms up they just sign up on a product like i think the consumer background of coming from spotify is very important in how i thought about building what's not a B2B company selling tech effectively. You know, it's like a very boring category. But I think, you know, like having personality and having, you know, a little bit of an edge is a big part of how you create that sort of movement and that sort of like sense of excitement and the feeling that you're different. And I wanted to start the moment you go to a website and the moment you try the product and you just feel that it's different, the magic moment. [13:42](https://realalpha.app/v/1dwyL6Iz_PU/?t=822) Can I ask you, we've spoken about the three different providers there. inference as a market has many different speculators commenting on it. When you look at the next five years, how does the inference market play out? First of all, I think inference is going to be an enormously large market. It's like the new cloud, basically. But I don't think inference in itself is maybe the only thing you need. One of the things that I feel very strongly about is it has to come with a lot of other products. It has to come with post-training, sandboxes, agentic stuff, all kinds of other types of inference, like low latency inference, batch inference. [14:16](https://realalpha.app/v/1dwyL6Iz_PU/?t=856) So building that platform, by the way, we've been working on this for the last five years. I think that to me is not a moat, but it's a very hard product to build, that infrastructure. Why do you need to have the breadth of that product set? Otherwise, you're just in a compression layer. Yeah, because otherwise you're just selling commodity product. [14:32](https://realalpha.app/v/1dwyL6Iz_PU/?t=872) **Erik Bernhardsson:** And if you're just selling tokens for dollars, there's no switching cost. People can just switch a different provider. It's just a race to the bottom. [14:39](https://realalpha.app/v/1dwyL6Iz_PU/?t=879) But if you couple it with all these other things around it, sandboxes and post-training and reinforcement learning and all these things, you can actually create a whole set of tools. No one wants to buy a single-jerk pony. People want to buy a portfolio of different things. They want to buy a whole suite of tools that basically lets them build amazing AI applications on top of it. And the infrastructure underneath is a lot of differentiation, a lot of staying power in the markets. It's very hard to copy the infrastructure required to build all of these products. What does no one see about the inference market, or you don't see commented on much, that is very obvious to you? [15:15](https://realalpha.app/v/1dwyL6Iz_PU/?t=915) One thing that people don't see about the inference market is, I actually think in the long term, there is so much gross margin opportunity in this space, because you can build all these things around it. All the sandboxes, all the agentic stuff, workflows, post-training reinforcement learning. If you do all those things, there's actually so much opportunity to make money. Is it a market that has software margins? Because we're looking at margins now in the 25% to 40% range. That's kind of traditional players. I don't know if that's yours, but that's kind of what inference providers are generally. [15:43](https://realalpha.app/v/1dwyL6Iz_PU/?t=943) Do they go to 70 as you own more and more of the stuff? I think basically almost no company today has software margins anymore. Like what you used to see in like Silicon Valley in the, you know, 10 years ago with this like 90% margins plus, I think that's basically gone. And the reason is actually almost like topological. Like you have this like stack of vendors, right? Like today you have applications, you have models, you have infrastructure, you have cloud, you have NVIDIA. And so when a customer pays a dollar at the top of the stack, it has to flow through a lot of different layers. And at every layer, there's gonna be, you know, 20%, 30% gross margins. [16:16](https://realalpha.app/v/1dwyL6Iz_PU/?t=976) So I think there's a lot of margin opportunity and there's a lot of opportunity to make a lot of money. I mean, the space is so big, but you're also splitting it across a lot of layers in the stack, so, I mean, you know, like the 90% software margin businesses are gone. I think modal has an opportunity long term to get to 40, 50, 60% margins, but we're never going to get to softer margins. What's a wild prediction you have on the future of the inference market that you think many people would disagree with? I think one prediction about the inference market is going to split into a lot of different things because the market got so big in the last. [16:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=1006) I don't think anyone expected, me included, I don't think anyone expected it to be so big. It's like 10x or 100x bigger than I ever thought. And that to me means there's going to be so much room for specialization, low latency, high latency, like various types of fine tuning and post training. I think there's going to be some wacky new technologies that let you do it with way less resources, new hardware, like all kinds of different things. I'm really sorry. Does that not go against what you just said about the need to own it all and have that breadth of product? If it's so much larger that you need real specialization. [17:15](https://realalpha.app/v/1dwyL6Iz_PU/?t=1035) Specialization by product. I think it's going to fragment into a lot of different products. Now, we can build a lot of those products and host it all under modal. And that to me is very exciting because there's going to be a lot of different products that companies are going to need. For one product, they're going to need low latency inference. For one product, they're going to need batch inference. For one product, they're going to need sandboxes, which we have. For one product, they're going to do pre-training their own models. Maybe it's certain specialized audio models or whatever. We do a lot of stuff besides LM inference. [17:43](https://realalpha.app/v/1dwyL6Iz_PU/?t=1063) And so that to me creates a lot of opportunity to basically kind of rethink what a cloud looks like in the era of AI and kind of deconstruct the cloud and rebuild it for this new era of software. Earlier, you said about building capacity with GPUs. Yeah. What's it like doing that today? Is it as crazy as reports suggest? So it is pretty crazy. I spent some time in March at GTC NVIDIA's big conference in San Jose. I would describe that as like an open air drug market, but GPUs instead of drugs. You're running around, you know, talking to 500 different cloud vendors. You're like, do you have GPUs? [18:18](https://realalpha.app/v/1dwyL6Iz_PU/?t=1098) Like, please get... And like, you know, in the end, you come out like you do a lot of deals and that's something we've had to develop the muscle. I think part of the value prop of modal is like our customers don't have to think about that. We do the dirty work of doing all the GPU deals under the hood. We work with 25 different NeoClouds or, you know, right now we control like, you know, 0.1% or whatever. I don't even know the number of like the world's compute. But like my like crazy, like, you know, how I think about the long term goal is like as we control more and more of the world's compute, you can aggregate that capacity and aggregate demand on the other side and manage that capacity and demand extremely efficiently. So that to me is like something where I actually think we can do, we can fill a big gap. What does that allow you to do being that aggregation layer? [18:58](https://realalpha.app/v/1dwyL6Iz_PU/?t=1138) Well, so we built a lot of our infrastructure ourselves. Like we don't use Kubernetes and Docker and things like that. We built our own file system, we built our own container runtime, we built our own scheduler, we built our own basically how we manage the capacity. And that enables us to basically treat like all of the world's compute as one big pool of capacity. And so if you think about the fact that there's, we already have many thousand paying customers and over time it just grows and grows. Each of those customers have like very sort of variable requirements or like their workloads kind of vary over the day and they have maybe bursts. [19:28](https://realalpha.app/v/1dwyL6Iz_PU/?t=1168) And each individually, they're like very sort of unpredictable. But if you pull all of those customers together, you end up with a very sort of smooth overall demand. And that is something we can manage extremely efficiently. And so one of the valid props of Modal, besides like we can scale up with you, is also you don't even have to do capacity planning. Just come to us, we'll give you 100 GPUs. I think it's so amazing going back to TypeSafe, for instance. Like they, we had talked to them, I think a long time ago before they launched, but they launched overnight on Modal and we weren't even aware of it. [19:57](https://realalpha.app/v/1dwyL6Iz_PU/?t=1197) They just like scale up and we gave them a ton of GPUs. It just happened automatically. So that magic, I think, is something that people really value with modal. It's like we can give them a lot of GPUs on very short notice. And we can handle that sort of variable. Like if you go to us, you don't have to lock up, you know, like a rectangular block of GPUs over three years. And you have to know the exact number. It's pay as you go. You scale up and down. You pay per GPU second. How do you do GPU buying in terms of forecasting then? Because you don't want to have an insane excess of supply just sitting on your books. [20:27](https://realalpha.app/v/1dwyL6Iz_PU/?t=1227) Totally. The GPU lead times right now is about three to four months. So we basically do a straight line or exponential line extrapolation, and we look at an aggregate across all our customers. We have a very diversified set of customers. [20:38](https://realalpha.app/v/1dwyL6Iz_PU/?t=1238) **Erik Bernhardsson:** You can actually look at the demand in aggregate pretty well and predict based on monthly growth rates, which have been about 30%, 40% month-to-month for the last 12 months. [20:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=1246) And you just project that three to four months into the future, you end up with like two to three X. You go out and buy that capacity and make sure to ramp up. And can you just buy that capacity? You can, yeah. I think there's a little bit of a misconception that we're out of capacity. NVIDIA is shipping an insane amount of GPUs every month. I don't know how many hundred thousand Blackwalls are getting installed. Prices are up, for sure. You have to pay more to get the same amount of GPUs. And I don't want to say it's an efficient market, but if you're willing to pay more than other people, you can get a lot of GPUs. [21:15](https://realalpha.app/v/1dwyL6Iz_PU/?t=1275) Is there a price at which it doesn't make sense for you? Of course there is, but at what point? I don't think so. I think, in fact, we're actually more long than we're short GPUs because we can charge a higher price to our customers. There's effectively a market price, and it's like different dynamics because we lock up longer-term reservations and rent them out on a slightly shorter duration. But if the underlying price goes up, people are also willing to pay more. What happens to the price over time? H-100s were meant to depreciate and go down. I have no idea. Yeah. I mean, actually, it's funny. [21:44](https://realalpha.app/v/1dwyL6Iz_PU/?t=1304) Well, dude, if you have no idea, what am I meant to do? Did you see Jensen yesterday? He was in London, actually. Someone asked him this question. He's like, well, obviously, supply is going to catch up with demand eventually, And then we'll see what happens with pricing. It might happen in a year. It might happen within five years. He said exactly the same thing I always tell people. Like hardware prices, it's like gravity. Hardware prices always go down in the very long run. Right now we're in a very, you know, there's a supply shortage. And, you know, that means that the prices have gone up. [22:10](https://realalpha.app/v/1dwyL6Iz_PU/?t=1330) They may continue to go up for another year, two years, five years. I don't know. But eventually it will come down. How early are we? Because, you know, I run Instinct for everything. I have over 100 automations on Instinct doing things that are just absolutely wild from buying concert tickets to planning shows to helping with like medication for my mother the amount of compute i am using is jevin's paradox times 100 yeah if that is equivalent for actually many people in society yeah because it's accessible within whatsapp and what how early are we there i think we're very early i think you're saying the same thing i mean yeah jevin's power whatever like i think there's just so much latent demand for these things and you know i think you know eventually we're going to start to run up against these capital constraints, right? There's interest rates that are going up. We just can't build data centers fast enough. Maybe that's good. I don't know. I think in a way, it's a guarantee against overbuild. But I also don't know if we can overbuild these things. There's just so much demand for it. I don't think you can overbuild in the next five years. Probably not, no. I think what could happen is people realize Instinct is a good example. [23:13](https://realalpha.app/v/1dwyL6Iz_PU/?t=1393) Allegedly, they don't charge or they don't make revenue yet. So I think it's a good example. But Like, clearly, Instinct can make a ton of money in the future. But so, you know, that's a dynamic in the market. There's a lot of companies that are not yet making money yet, and they're using a lot of GPUs. They just have to eventually start to make money. But, like, that lack could take a while, right? And we might run up against that. You mentioned the specialization that comes within the inference market, and we spoke about NVIDIA there. We're seeing more and more specialization within the chip market. [23:41](https://realalpha.app/v/1dwyL6Iz_PU/?t=1421) Is NVIDIA's business today stronger than ever, or actually weaker than ever, is you see the fragmentation of the market into very specialized players from Cerebrus to Etch to Olex to Fractile that weren't there before. I think you're trying to phrase it as like one versus the other. My view... It was like, I think Eric Vischer was actually talking, it's funny, like the same thing, like all of these things are going to grow. Like I think NVIDIA is going to keep growing. They're going to keep shipping amazing chips. I think there's also going to be like Cerebrus and all these etched and all these other ones like shipping specialized chips and they're also going to grow. [24:14](https://realalpha.app/v/1dwyL6Iz_PU/?t=1454) So I think there's going to be markets for all of it. So why is Cerebrus down 30%? I don't know. I don't follow really the stock market. You don't follow the stock market? No. I'm in like a very passive, you know, buy the index. Mostly because of my own time. Like I don't feel like I have the energy to follow the stock market. To what extent is CUDA the moat that everyone says it is for NVIDIA? I actually, I think it's a little overstated. I don't think CUDA itself is the moat. CUDA is actually kind of annoying to work with. It's like a pretty low programming model. But I do think all the NVIDIA, the ecosystem is. [24:42](https://realalpha.app/v/1dwyL6Iz_PU/?t=1482) Like I think, you know, all the kernel optimizations and all the stuff that, you know, like Torch always supports NVIDIA much better than anything else. And the open source engines like VLM and SGLAN, because of that, they always support it much better. So like everything is NVIDIA first today. And that's probably going to continue. It's like funny for the last like 15 years, I've been saying, you know, like next year is, you know, it's the year of non-NVIDIA accelerators. It never keeps happening. I'm always wrong. NVIDIA has just, you know, shown to be incredibly good at having that staying power and just dominating the market. [25:13](https://realalpha.app/v/1dwyL6Iz_PU/?t=1513) We'll see. I mean, there's like Tranium, there's TPUs, there's AMD. There's a lot of other stuff that does look quite good and they're catching up. But, you know, I still think they're quite behind. To what extent are the neoclouds a friend, because they're partnered with you in a lot of cases, I'm sure, as you mentioned, I think 25, you said, or a foe? You know, I had the founder of Nebius on, and he was like, we're coming for the inference market. Like, we need to own full stack. And I don't mean that against him. I totally understand it. But are they friends or are they foes? I feel like everyone in startup land is like a friend and a foe at the same time. [25:45](https://realalpha.app/v/1dwyL6Iz_PU/?t=1545) They have this like weird sort of, you know, relationship with everyone. I think some of the top neoclouds, Nabuus included, they are trying to move up the stack. I'm personally somewhat skeptical. I think it's very hard to be good at your core business and also trying to move into a different market at the same time. Why would it be hard for them? What's the bare case on them being able to move into the inference layer efficiently? I mean, I'm biased, but we spent the last five years building an incredibly complex infrastructure stack. I think it's very, very hard to replicate what we built. What's the hardest thing? [26:13](https://realalpha.app/v/1dwyL6Iz_PU/?t=1573) All the code and everything around the file system, the container runtime, the scheduler, building the system that can place millions of sandboxes every minute, scale up and down many, many thousands of GPUs, power hundreds of thousands of tasks running concurrently. These are very hard engineering problems. I mean, I'm an infra geek. I love that shit. It's so much fun to work on it. But these are hard problems. Is Nebius a better business than CoolWeave? I actually don't know. I don't know. I think they're both. They've executed extremely well, both of them. I have a tremendous respect for what we've done. [26:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=1606) I think at the end of the day, the thing that I have the most respect for is actually more on the financial engineering side. They're very good at that kind of stuff. Why do you say that? Because I think a lot of the constraint for building a neocloud very quickly is on the financial side. You need to be very good at, you go lock in a long-term customer contract, then you go raise a bunch of money against it, then you go buy the chips, then you deliver the chips, and then you pay off the debt over the next few years. Doing that sort of dance with the financial It's kind of an interesting game, and CoreViva has done it exceptionally well. [27:16](https://realalpha.app/v/1dwyL6Iz_PU/?t=1636) It's a capital game. It's a financial game. When you move a layer beneath them, we spoke about Jev, who obviously worked with Modal. We've seen incredible movement from the open source community, which has been exciting. Yeah. But then you also see Haiku and Anthropics' newest models being incredibly performant and incredibly cheap. What's the benefit of open models if frontier models are almost as cheap and as efficient? I think open source is always going to be, there's always going to be great models coming out. Let's also remember like the open source, the open source models, they're all moving into licensing models. So like they're getting better at capturing the value of those models. And I think that means they're going to have more funding to train better models. And I really hope there's going to be European and US models because I don't think it's a good situation that we have so many Chinese. [28:00](https://realalpha.app/v/1dwyL6Iz_PU/?t=1680) models i mean they're obviously i have tremendous respect for all the chinese labs are extremely good at what they're doing but i think it's good for the world if there's you know more power spread out but anyway going back to the question i do think that open source there's always going to be people who want to fine-tune want to have more control over their models and and sort of tweak the parameters like go low latency high throughput like whatever it is and and open sources kind of play a big role in that it's like windows versus linux with the i am sorry with the greatest of respects, do you think Europe will produce a competitive open source model? [28:30](https://realalpha.app/v/1dwyL6Iz_PU/?t=1710) Yeah. I mean, I love Europe. I grew up in Europe. I grew up in Sweden. But I do think that Europe does struggle with accumulating large amounts of capital. I think both of those things are things that Europe struggles with. And that is something that China has done really well. They've accumulated massive amounts of human capital. And the US obviously is very good at raising enormous amounts of money and training very large models. I don't know if Europe has the either of those. Does it matter if NVIDIA owns the open source model layer in the US with first poolside and now reflection? I think NVIDIA is very smart to focus on the ecosystem, building up an ecosystem. And I think that includes like propping up a lot of open source models. And I think they probably saw an opportunity to pick up open source models. These companies are very resource intensive, right? Very CapEx intensive. And I think it's smart of NVIDIA to like buy some of those and sponsor them effectively in order to create like American built models by the way I want to take back like one thing I said Europe does have an insane amount of human capital I do think what Europe is very bad at is like aggregating them and putting all of them at the [29:21](https://realalpha.app/v/1dwyL6Iz_PU/?t=1761) same company that is something I think U.S. is very good at and I think inspiring a mindset of ambition yes and huge huge scale I think to the point that you said earlier which is like oh I didn't have the belief in myself I respectfully think if you're in the U.S. you might have been surrounded by influencers that told you to start a company earlier yeah yeah i mean it's almost like too much on the other side to that point but oh when you're four you're encouraged to start yeah exactly i totally agree with you i do want to talk about you and we said about models and jev in particular are we seeing like the unbundling of models on a like per function basis where jev is obviously very good for its certain tasks i think so and i think that's a function of what i talked about earlier where like the market for inference is so large and and that you know, when a market is like, you know, a billion dollars, like you're not going to have too many sub markets. But when a market is starting to get 10 billion, 100 billion, whatever, like you're going to have a lot of different sub markets. And, and Jev does classification and things like that regression type things very, very well. And there's a large enough market for that. [30:27](https://realalpha.app/v/1dwyL6Iz_PU/?t=1827) Okay, welcome. It's your first day as a partner at 20VC fund. And we're in the investment committee. And very kindly, we have the opportunity to invest. Jev, we're all in on Jev's new round. What's, what's the bull case for Jev being worth 100 billion? I told you before, but I think the brand and the community and the movement around just the sort of everything they're doing is so incredible. And that to me is like a massive, massive asset in this new age. That's a $100 billion company. I think there is an opportunity to create a $100 billion company with a lot of specialized models in France. [30:56](https://realalpha.app/v/1dwyL6Iz_PU/?t=1856) You would have done it though at $8.5 billion. I would have done it at $8.5 billion. I think there's a pretty big outcome here. Could be an exit, could be a public company, who knows. But I do think there's a lot of upside here. Dude, I'd love to see him ringing the bell on the New York Stock Exchange. Do you know what I mean? Yeah, fantastic guy. Love that guy. Is he great? I mean, you know, his charisma, his like, you have to create like a personality like around your brand. You have to create this like visual identity. It's obviously not the visual identity I would have picked. I hear you, but I think then you should be more loud, if I'm just honest, Eric. [31:28](https://realalpha.app/v/1dwyL6Iz_PU/?t=1888) Moodle? No, well, yeah, but you. Yeah, I mean, that's possible, right? Like, I don't think there's like a personality-led cult from Moodle from your perspective. I think that's a fair point of criticism. i think i could be out there even more i try to tweet i try to blogging i've been kind of bad at that recently no one gives a about blogging yeah maybe right maybe i just need to like go more unhinged on twitter it's like fun related marketing basically like in the early days of modal like that was a big part of our growth right like me just like tweeting all the time about what we're building and i think that's really important i mean every company has to find its own sort of you know go to market strategy but in the early days like we spent a lot of time just talking to people on twitter just like hitting people up try the product what do you think half of them ended up angel investing you know they're now supporters of modal and and you know you have to lean into what you're good at and in the early days i did a lot of posting do you know for every follower that followed me before 50,000, I would send them a personal thank you message. [32:18](https://realalpha.app/v/1dwyL6Iz_PU/?t=1938) That's amazing. You typed it out yourself? Every night from 1 till 2.30 a.m. I used to send them a person. And I'd say like, I see that you're from Sweden. I love the Grand Hotel. Let me know when you're in London. And I would send like 50 to 100 a night. That's dedication. That's amazing. No, but it was the customer acquisition flywheel. Yeah. They would go into the office next day and be like, wow, you know, this guy, he'd send me a message and like, you should listen to a show. Yeah, it's smart. I love what you've been doing in terms of building up this media brand. It's fantastic. Neil Mater has a great thing, which is like, how can I 10x the customer experience? [33:01](https://realalpha.app/v/1dwyL6Iz_PU/?t=1981) And actually, like, let's do it. Fuck it. Let's play a game. How do I 10x the current modal customer experience? I think the biggest thing we need is we need way more products in modal. Like, we want to create a busy, comprehensive experience of anything you need to do in order to build an AI application should be a product inside modal. The other thing we can do is hire way more FDs and way more sales reps. I will say we've been behind on that, but we should hire like way more people that reach out to you personally and say, hey, I saw you get started in modal. I saw you're working in the bio space. [33:31](https://realalpha.app/v/1dwyL6Iz_PU/?t=2011) How can we help you? Here's some bio examples, you know, protein folding, whatever. Like we work with a bunch of other similar companies. You seem skeptical. But no, I don't at all. I'm actually just thinking about like, I like the product ambition, but I go, as a European who goes, wow. We're in a B2B space. So I think it's like, you know. But do you worry about being stretched too thin? Yeah. To your point on like, you know, why can't nebius do what you do so efficiently because you're so good and you spent so much time as you expand into all the specialities there are players in each of them who've been doing that for years where i'm like i think that's true i don't think they're very good a lot of them but i mean i sort of agree with your higher level premise like if there's anything that's like super critical and never goes away it's prioritization or resource allocation right like you can't boil the water and try to do everything at the same time you need to be extremely ruthless and having a multi-product strategy, I think it's a very hard balance. Like when do you branch out into second product or third product, right? Like it took us four years to see success with a second [34:27](https://realalpha.app/v/1dwyL6Iz_PU/?t=2067) product, which was sandboxes. Four years to see success with your second product, but you're five years to a billion in revenue. Yeah. So we launched sandboxes in 2023. Didn't see a lot of success in the early days. I mean, there was like some success, you know, it wasn't horrible, but you know, it was a relatively insignificant part of our revenue up until summer of 2025 when models, I think like Sonic 4.5, one of those, they just got really good at generating code and building whole apps. And then it just exploded. I mean, Sandbox today is a 300 million run rate business, about a third of our revenue. And so that's been a kind of a crazy journey. And now we're thinking about, what's the third and the fourth? We just launched a training product. I'm super excited about that. Working on batch products, working on reinforcement learning. We're working on all kinds of other stuff. And so that evolution into becoming a platform it's actually there like if you go back to the very early decks of modal you know i put together some just for my own thinking it was all there it's like we had this like market map and all these you know it ended up being very different products than we thought but it's so important for [35:38](https://realalpha.app/v/1dwyL6Iz_PU/?t=2138) me to create like you know to focus on a category and focus on a set of solutions not just like be a single single widget vendor what do you know about the sandboxes market today that you wish you'd known when you started and released the first product it actually is like one of those products. I think one of the benefits of being in infrastructure, but also one of the drawbacks in a weird way is you kind of just have to trust your gut on what are important primitives and just build amazing building blocks. I think we're in the space of providing building blocks. We try to look at what do engineers need and not listen too carefully because they'll ask for all kinds of random stuff, but kind of distill it down into what are some of the... [36:17](https://realalpha.app/v/1dwyL6Iz_PU/?t=2177) the building blocks. And we put out a serverless function product in 2021. It saw success in 2023 with Gen AI inference. We put out a sandbox product in 2023 because we saw a lot of people using LLAMs to generate code. And then it saw success in 2025, like I said. So a lot of how we think about building products has always been kind of like, let's just put out good building blocks. And then it exploded. But to answer your question, it was reinforcement learning, it was Vibe coding, background agents, and maybe some other stuff too in the future. those were things we actually didn't anticipate. [36:47](https://realalpha.app/v/1dwyL6Iz_PU/?t=2207) So I think infrastructure is often like that. Like, we didn't anticipate Stable Diffusion when we started building our serverless function product. It just happened to be the killer app. What's your takeaway from that? The only thing that matters is you've got to stay in the game long enough for your timing to be right. Sometimes I think that's right. I mean, we've definitely been extremely lucky in certain ways with timing. We put out products right before we started the company in 2021, and then Stable Diffusion and ChatGPT came out in 2022. We had really good timing with that. It just created so much demand and we're very well positioned. [37:17](https://realalpha.app/v/1dwyL6Iz_PU/?t=2237) But some of it is also like with infrastructure, like again, I think it's about building products that you anticipate will be useful in the future. And from your own experience are things that you always wanted to see. I think you have to kind of trust your gut in that. You said there about resource allocation and that being very, very important as you think about this breadth of products. Where did you allocate resources where with the benefit of hindsight you wish you hadn't and how do you reflect on that? I think we should have allocated more resources towards LLM inference like earlier. I think we're a little bit on the sidelines for a while. [37:31](https://realalpha.app/v/1dwyL6Iz_PU/?t=2251) We didn't realize how big open source inference would be. And we thought it would be kind of a race to the bottom, just a commodity space. And then Deep Sea came out and we're like, fuck, we got to move very fast. And so we stepped up a team immediately, went from one or two people working on this to like 30 people 12 months later. And now we're one of the top three providers. Jason Lampkin, a dear friend of mine who I do a show with every Thursday, he always says that now we've reached peak open source LLM inference usage. We're going to see Frontier providers bluntly provide incredibly cheap products that they are now. US enterprises don't want to use Chinese models. That will continue. And so actually, with those two core prevailing wins, Frontier will actually resurge and we will see a reduction slash plateauing of the OS LLM inference model. I think that's a little bit of a fixed pie size mentality like i i think you know with with all due respect i do think both spaces will grow 5x 10x 20x over the next 12 months and and beyond like and so like it's hard to argue like you know which one's going to be bigger than the other but i think both will grow like in you know orders of magnitude over the next few years 5x 10x 20x over the next 12 months yeah for sure you just hit a [38:38](https://realalpha.app/v/1dwyL6Iz_PU/?t=2318) billion in revenue yeah well done yeah does that feel pretty cool it feels pretty cool it's you know like i i don't know like i'm just like you know swedish guy that you know grew up in a random know for me it's like these numbers are absurd but like yeah like it feels great it's so much money you're so do you know i wasn't expecting you to be so like likable and cool i don't know like it's like a lot of zeros like how many zeros are in a billion it's it's a lot your wealth manager will tell you when you look at that where will you be in 12 months i don't know what i can say is we've been growing we grew 15x in the last 12 months so you can extrapolate that i mean i know like at some point we start you know like markets just get very big and they start to slow down a little bit but um with the growth rate right now like the growth rates are not slowing down like we're growing 30 40 every month four billion i hope to be way beyond that with the greatest of respects 15 billion then feels like quite a cheap price like if i'm an investor so this is now my ballpark if you think you're going to be at four billion say dropping i don't know a billion two to the bottom line then they actually only paid what 14x end of year next year bottom [39:45](https://realalpha.app/v/1dwyL6Iz_PU/?t=2385) line 3x top line yeah it's kind of cheap that feels pretty cheap i think it's cheap i mean like i wouldn't do this if i didn't think we could grow and become like a generational company i think there's so much upside i think this is one of the largest markets opportunities that's ever existed i think that the demand for compute The demand for AI applications, it's just going to be enormous. And they're all going to need a place to run. And I hope a lot of them are going to run a modal. What revenue line do you not have today, or is tiny, that you think will be very significant in three years' time, five years' time? [40:15](https://realalpha.app/v/1dwyL6Iz_PU/?t=2415) That is a good question. I think training is something we just launched. I think that could be very large. I hope that could get to 100 million run rate in the next six to 12 months. Post-training, similarly, working on batch jobs. I'm very excited also about a lot of like sort of traditional like data warehousing stuff, databases, workflow orchestration, feature stores, like vector database. And there's just so many parts of this. And they all kind of fit together very nicely. And that to me is like what I'm so excited about. It's like once you start building in this space, there's so many natural adjacencies. [40:43](https://realalpha.app/v/1dwyL6Iz_PU/?t=2443) Like this is like a problem with me. It's like I get excited about so I have like no lack of ideas. Like at Modal, like we have so many ideas of things we want to go. I would love to get into continuous integration. That's like a very interesting space. Agent harnesses. Maybe we should train models. There's just 5,000 directions. And that's like my ADD brain wants to run in all of those directions. You have to be, obviously, ruthless with prioritization and only take on one or two things at the right time. But there's so many different directions we can go on. It's amazing that your wife calls you for decisions. [41:13](https://realalpha.app/v/1dwyL6Iz_PU/?t=2473) She must get a very incoherent answer. I know, I know. What is this? Is this? Is this? I just wanted some curtains. Yeah, with the curtains, I just could pick one of them. I've seen Simpsons and Rainer Wolfcastle becomes the president. And they're like, which one do you want to pick? You know, one to seven. He's like, I was born to lead, not to read. And number four. Yeah. Can I ask, we've seen this real shift, I think, in emphasis, but also in resource allocation from pre-training to post-training. How do you feel about that? And do you think that is the new normal? I don't know. [41:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=2506) **Erik Bernhardsson:** I think post-training works because there is a lot of tasks that people do in real life that have fairly finite sort of feedback mechanisms. [41:54](https://realalpha.app/v/1dwyL6Iz_PU/?t=2514) So coding is like a great example, right? Like you can do coding with reinforcement learning pretty well because, you know, you can run code in sandboxes. And a lot of labs are running modal sandboxes for that exact purpose. Start to look at cyber security is another area. Math, obviously, with Lean, I mean, we've seen some fantastic product. I think it's kind of incredible, all these like OpenAI proofs the other day. So law, maybe to some extent, you can, you know, do like eval. So I think post-training right now, like there's like such an incredible focus on it because you have all these tasks that traditionally only humans can do but are actually well within reach for agents and for LMs. [42:28](https://realalpha.app/v/1dwyL6Iz_PU/?t=2548) But I don't know if it extends beyond that. I don't know. There's a lot of tasks out there that have way longer feedback loops that I don't know if post-training quite yet is within reach. A lot of people ask me, what's going to happen with software engineers in the long term? And I think we're probably going to automate everything that an agent can do within 24 hours or a week or something like that. But I kind of feel like engineers, they work on a longer timescale and they have feedback loops that are longer. So I have a feeling like reinforcement learning, we're going to start to run into some limitations around that. [42:56](https://realalpha.app/v/1dwyL6Iz_PU/?t=2576) But I've been wrong for so long, so maybe I'll be wrong. It just keeps going and eventually we can do reinforcement learning on things that take six months for a human. I don't know. What does the day look like in three years for an engineer? I mean, I'm extremely bullish on software engineering. I've been coding for 30 years and I've seen so many different changes with like programming languages and the cloud and so many different frameworks. And every single time we make programmers more efficient, it just increases demand for software. There's so many parts of the world that desperately need software. And so I'm very, very bullish on software and the need for software engineering. [43:28](https://realalpha.app/v/1dwyL6Iz_PU/?t=2608) And I think one of the biggest misconceptions from the outside is that developer is about translating from English to code. That has never been the job of software engineers. It's to understand the requirements in the first place and be kind of an interface between the humans. You're building for humans at the end of the day and trying to figure out what does that even mean in terms of processes and workflows. And that continuously moves up in the stack. you know back in the 60s we used to write assembly and punch cards and then you move to kobold and then to c plus plus and then to python and and now we're using agents and that's just like one like it's definitely The biggest thing that I've seen in the last 30 years, but I do think we have many, many analogs and many parallels throughout the history of software and computers. To me, that makes me feel like, you know, software engineers are going to be fine for the next 10, 20 years. [44:11](https://realalpha.app/v/1dwyL6Iz_PU/?t=2651) How much money do you spend on coding agents a month at Modal? I think a half a million or something like that. How many engineers do you have? 150. Dude, that's so worrying, you know. You want to, should be token maxing more? There should be 10x that. Yeah, maybe. I don't know. Brandon McCaw, that they spend 3x their human salaries on inference. Yeah, we're not quite there yet. But I will say, like, our software engineers are extremely agent-pulls, including myself. I mean, I write code with agents, like, all the time. But I think, like, the big question, if you're looking at, like, an Anthropic IPO, and don't mind, I'm not doing a Bloomberg and, like, pulling you in to be like, what do you think of the Anthropic IPO? [44:45](https://realalpha.app/v/1dwyL6Iz_PU/?t=2685) I hate those ones. Yeah, you know where it's like, yeah. I think it's great. Yeah, it's great. No one in AI is like, oh, not a fan. Yeah, yeah, yeah. Everyone is against it. Go, go. But I do think a big, the motherlode, so to speak, is Claude Code. It's $60 billion of revenue. It largely kind of dictates the $2 trillion price. And you look at Mark Benioff, who says that they spend 5% of engineers' salaries, $300 million, on Claude Code today. Now, if that comes way down as efficiencies improve, you name it, that's a challenge. Or will that go up as it just eats more and more of engineers' workflows? [45:22](https://realalpha.app/v/1dwyL6Iz_PU/?t=2722) Yeah, it's just going to eat more. I mean, like, again, like we've seen this so many times, like you make something more efficient, it makes something more powerful. It just unlocks like five new use cases and the demand just goes up in the end. Like that's that's just the history of like the last 50 years of computers and software. But like I wouldn't be here if I wasn't such an optimist. That's why I started a company. And I'm just like the biggest like optimist that there is in the world about software and computers. And like, I just love this shit. I think it's just going to keep growing. The data market is an interesting one. [45:48](https://realalpha.app/v/1dwyL6Iz_PU/?t=2748) We have so many players that have scaled so fast. Yeah, it's incredible. If I was 20 and I just wanted to make a lot of money, I would go out and start an environment company and just sell data to the Frontier Labs. There is so much money to be made in that space. It's kind of incredible. Let's go a layer deeper. What would you do next? You specialize on a specific market? I mean, the coding space is where you see the most demand right now. If you can sell code environments to the labs, you can make a lot of money. There's a big space in that. Still? Still, yeah. Yeah. I meet startups all the time. I angel invested in a bunch of that. I mean, they're incredible businesses. What I will say, like my one piece of advice is like, you make a lot of money today, but like, is this a venture fund? Do you want to get on the venture treadmill? I'm not sure. Like, I think these are companies that are going to make a lot of money today. I don't know if they're going to make a lot of money in the very long run, but like, who cares? Like, you know, take the money. It's like great money. Like it's a fantastic business today and that's all that matters. I think there's data marketplaces and then there's data and services. And when you look at the leading providers, they started as the data [46:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=2806) or acquirers, and then just sell you the data. And that's kind of it. And I think they've really gone full lifecycle now to deployment, implementation, evaluation, monitoring, with a real enterprise hand-holding ability, similar to the FDs, where they will really be that partner to ensure full implementation. That's how you expand margin and have some form of business in the long term. For sure. Yeah, and I think it's going to be a tough business in the very long run. But today, you can have extremely good cash flow selling these data sets. Can I ask, when we think about that kind of implementation, working with partners so closely. [47:18](https://realalpha.app/v/1dwyL6Iz_PU/?t=2838) You've said, and Lynn has said too from Fireworks, about the importance of owning your own intelligence. Can you unpack how this looks? Because specialized models for companies in this way, the kind of jury's still out. We have Harvey who says that it's fantastic and it's been amazing. And then you have Legora who say, ridiculous, the underlying models move so fast, it's the wrong strategy. Yeah, for some stuff, it's good to own your own intelligence. For other stuff, I don't think it matters. We have a lot of customers that run proprietary models on Model 2, and their customers, they use a proprietary model. [47:51](https://realalpha.app/v/1dwyL6Iz_PU/?t=2871) I don't think it makes sense for everyone to own their own intelligence. Why does it make sense for you two versus not? I think for certain use cases, you can take an open source model and you can fine-tune. [48:00](https://realalpha.app/v/1dwyL6Iz_PU/?t=2880) **Erik Bernhardsson:** and you can get really good performance. And the nice thing is you know what the fine tuned model is based on. It's not going to change. They're not going to take away the model from you. [48:07](https://realalpha.app/v/1dwyL6Iz_PU/?t=2887) It's nice to have that consistency and the ability to continue to tweak it without the underlying model changing, which has happened in some cases with the Frontier Labs. That's nice. I support that, but I think there's many other things that matter to people. Owning your intelligence is just one thing out of many. I think latency matters. I think cost matters, performance. I think hackability. I think, you know, having a platform of a lot of adjacent services. Like, these things matter too. So owning your own intelligence, like, yeah, I'm supportive. But, you know, there's many other things. Isn't that kind of going against your business? [48:40](https://realalpha.app/v/1dwyL6Iz_PU/?t=2920) No, I don't think so. I mean, I love the honesty. But, like, dude, it would be in your favor to say, yes, every company is going to need it. And we're the partner to help you. I kind of fucking teed you up there. Well, I mean, not really. I mean, if you think about TypeSafe with Jeff, right, like, you know, it's a highly proprietary model. I want people to use Jav. I mean, it runs on Modal. So we have many customers that themselves are proprietary model that are hosting on Modal that are serving their customers. And I'm very, very in favor of that too. I think the beauty of Modal is always that it's like a general purpose platform and we support so many different things. [49:15](https://realalpha.app/v/1dwyL6Iz_PU/?t=2955) That to me is like the beauty. It's like, if you want to use open source models, that's great. We'll help you. And there's many customers that build incredible AI applications on top of open source models, fine tuning them, reinforcement learning, have a bunch of adjacent sandbox use cases or training or whatever. But there's a lot of companies that have built highly successful businesses, you know, Suno, Runway, TypeSafe, and many others like running their own proprietary model on modal and their customers don't care. And that I think is like, you know, puts us in a really good spot. I want to ask two more questions before I do a quick fire. [49:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=2986) Okay. Model routing, as the dear Americans say, is that a defensible business? What do you say in the UK, routing? Routing. I love that. Well, I mean, we are actually, The original language, America, just took us and bastardized it. But yes, my question to you, is that a defensible segment of this value chain, or is that a commoditized product that everyone just builds themselves? I think it's possible to build a successful business in model routing. I think you can do that today as a standalone product. I wonder if long-term, it has to be part of a more comprehensive platform. At the end of the day, I think what these companies want, they want evals they want you know ways to fine-tune they want you know more control over performance like latency throughput like all these things and i think it's like one of those things that kind of makes sense today like these are very good businesses i invested in open router personally and they had a great outcome i actually think they could have done even better on a standalone basis but i think in the very long term it feels like one of those categories like you know and but that's my view on everything in ai it should really be a part of you know larger more [50:48](https://realalpha.app/v/1dwyL6Iz_PU/?t=3048) comprehensive set of tools congratulations you're on the open router board and the acquisition offer comes in please make the case for why they would reject yeah yeah please make the case i think i think open router like the growth rate and the revenue like this is and and the brand frankly like they have a really strong brand i mean there's a lot of like there's 500 other competitors but but the space is growing so fast and there's so much revenue i would have told them to keep going final one i think a really telling question is what do you believe that does not go in the favor of your business. And so for example, I think that seed investing today is kind of dead and bullshit. This idea of like two on 10 or slowly build for 18 months. Well, it's kind of bad. Like it's kind of bad if you want to make money, right? But it's great if you want to develop a relationship with engineers or I mean with founders. Sure. But that goes against what I do. You're against the relationship with founders? No, no, no. I'm saying like I think the death of seed investing, the two on 10 and build for 18 months is dead. [51:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=3106) Yeah, I understand what you're saying. So what would yours be? I don't know. I mean, I think one thought I have is like, obviously at some point, this AI stuff is growing so fast and we're here and we're going to go to here and then there's going to be a pullback, you know, 20%. 30% in the stock market, everyone's going to freak out and people are going to say it's the end of the world. I'm almost certain it's going to happen, but I'm so bullish because then we're going to keep going. So that would be one thing that I'm like, there's going to be a pullback. I'm okay with that because I think the long-term opportunity is so fucking big. [52:17](https://realalpha.app/v/1dwyL6Iz_PU/?t=3137) It's so large. Do you take secondaries? Very little. Why? I mean, I personally don't need a lot of money. I'm pretty happy with life and I have enough. So personally, I actually support it for my employees though. It's quite important, actually, as a founder, that you make the equity worth as much as possible. And one of the ways to do that and to tell future candidates that, no, this isn't just paper money. This is real money, is to have a precedent of doing employee secondaries. And you can point to last round, we let employees sell this much or whatever, and up to 10%. I think you have to have guardrails. [52:51](https://realalpha.app/v/1dwyL6Iz_PU/?t=3171) You don't want employees to sell too much. You want them to still have a lot of skin in the game and be very incentivized to make the company successful. [52:58](https://realalpha.app/v/1dwyL6Iz_PU/?t=3178) **Erik Bernhardsson:** But I think it's a way to create a very liquid, hard currency out of the equity. [53:04](https://realalpha.app/v/1dwyL6Iz_PU/?t=3184) I totally agree. And as you think about a talent marketplace that's ever more competitive, it's very- It's extremely competitive out there. Is it nuts? It's nuts. It's nuts. I mean, the offers we see for, we've lost new grads going to some of the labs for talking 20 plus million. I mean, these are exceptional people. Exceptional. What makes an exceptional, exceptional new grad? You know, like just fucking sharp people. You know, these are like, I know it when I see it. Like they're just, you know, they're just extremely hungry, hardworking. And where do they go? They know everything about technology. [53:40](https://realalpha.app/v/1dwyL6Iz_PU/?t=3220) I mean, they go to some of the big labs. Is that it? They go to Open Air and Anthropoc? Yeah, the big labs. They pay a lot. But is that it? Is that where the talent comes? There's like a few other ones. But I mean, mainly those people are known for paying very, a lot of money. And you won't pay that much? We pay a lot. We can go very aggressive. We want to be out there paying 95th percentile in the market. And there's a few companies that I know, they're probably going to pay a little bit more. I think we have way more upside in the equity. And going back to what I said about secondaries, I think it's important that for that reason also to create a real tangible value in the currency, in the equity that makes us, our offers seem very, very strong. [54:14](https://realalpha.app/v/1dwyL6Iz_PU/?t=3254) Plus the fact that we have a lot of upside. I mean, you said it, right? Like our stock seems cheap. Like I kind of agree, there's a lot of upside in our stock. so that enables us to not necessarily have to match with the labs but i think you know create a compelling sales pitch for why our comp package is like basically better than the labs and we're willing to go very far to get the best talent okay we're gonna do a quick fire round because otherwise i could talk to you all day you have a great angel portfolio open router you mentioned lovable before you can put all of your money into only one i love turbo puffer i know simon really well, a Danish guy. So you have the Scandinavian connection. Just a fantastic entrepreneur. I just love the business. How big can that business be? That's a good question. I mean, it is like somewhat specialized. They're doing vector databases. I think it could be a very large category. If I ran that company, I would have 500 different ideas of how to expand into many adjacent things around databases, data warehouses, other types of querying system. It could be a large category. What have you changed your mind on most in the last 12 months? Probably the [55:13](https://realalpha.app/v/1dwyL6Iz_PU/?t=3313) magnitude of the sandbox space. I think it's kind of insane. Like I look at the revenue and it just keeps going up and I'm like, well, clearly it has to stop right now. And I think I'm like doing some sort of reverse psychology on the revenue because it just keeps going up. I'm like, what is going on? It just keeps growing and growing. And like, I've been wrong so many times. I was like, you know, in a good way, like, you know, and so it's incredible how large that space has gotten. What do you think is the most overheated category within AI today? Oh boy. I don't know. I don't think anything is overheated. I will say like one of the things that I'm a little nervous about is companies that are dependent on continual infusion of equity capital. I would not invest in them. And there's a lot of them that I would be nervous about anything where like if there's a venture capital pullback, they will struggle to raise more. [56:00](https://realalpha.app/v/1dwyL6Iz_PU/?t=3360) money, I think it's important that you race every round as if it's your last round. And there's like a real path towards commercialization and revenue. You got two kids. Two kids. Biggest lesson on being a good dad and being a good CEO? I mean, sometimes I feel like it's kind of similar. Like, you mean like in terms of like how to balance it? Or do you mean in terms of just like being a good dad? What does it take to be a good dad? Setting them up for success in life. And I always like think about like the right amount to push the kids. I'm not a tiger dad, but like I think a little bit you need to push the kids a little bit to get them exposure. I don't want to create in the future a situation where my kids come back to me and say, hey, dad, I wish you'd made me do X or I wish you'd made me do Y. But I also don't want to create a situation where my kids come back to me when they're 20 and they say, hey, dad, why did you make us do X or why did you make us do Y? [56:46](https://realalpha.app/v/1dwyL6Iz_PU/?t=3406) So a little bit of pushing. I make them play piano. I don't know why. But I think it's a good way to learn something that I hope when they're 20, 30, they will actually appreciate. They don't like it that much. But I think stuff like that, you got to push them a little bit, but not too much. My parents were very lax, and I discovered math and programming, and they were like, Eric, why are you doing so much math? You should go out and play like the other kids. So in a way, I actually wish they would have pushed me even harder, but I pushed myself so hard anyways, it doesn't matter. So that right amount of pushing. [57:15](https://realalpha.app/v/1dwyL6Iz_PU/?t=3435) Why did you push yourself so hard? You're actually from a nation where you are told that it's bad to stand out. I'm forgetting that word, but I had a Swedish girlfriend. Yeah, where it's like, it's bad to stand out. Yeah, don't think you're special. Yeah, why? But I don't know if that's true. Like, I think there's a lot of misconceptions to Scandinavian culture. I do think there's a lot of, like, respect for people who follow their dream and, like, do things. And, like, whether, like I said, you know, it's music or writing books or, you know, making furniture or art, like, or being an entrepreneur. [57:47](https://realalpha.app/v/1dwyL6Iz_PU/?t=3467) Like, I actually think there's a lot of respect for, I think this, like, you know, self-actualization and following your dreams is, like, kind of highly regarded. And I think, you know, like that's the flip side of having a very lax culture is like you kind of pursue people to follow their dreams. And I don't know. My dream was like doing math and programming. I love that shit. So I did that. Unless you're from Norway where a tax structure exists that basically makes it impossible to start a company. Yeah. I mean, Norway has some issues. They also barely work. Yeah, this is very true. But we do have a sovereign wealth fund. [58:15](https://realalpha.app/v/1dwyL6Iz_PU/?t=3495) Yeah, they are rich. Thank God for that. Maybe it's like the first post-economic society. I don't know. Literally. In certain, in multiple meanings of the word. Final one for you. What are you most excited for? It can be anything. I look at drug discovery for kind of chronic conditions. My mom's got that. Actually, drug discovery is like one of the applications I think is so incredibly cool. Like I can't wait to take AI-generated drugs. You know, I'm like old and my skin is getting bad. And like, I don't know, like, you know, every time I drink a beer, I feel like horrible the day after. Like, I don't know. [58:43](https://realalpha.app/v/1dwyL6Iz_PU/?t=3523) Give me all the AI-generated drugs I can take. Like I want to live long. I want to live a healthy life. You know, and I think- Do you think that is actually a realistic future? I think so. But I think with the FDA and other things, it's going to take a while. But I think there's just so much incredible progress today in AI-aided drug design. I think there's so many cool stuff, so many things. Dude, I've so enjoyed this show in a way that I honestly wasn't expecting you to be this fun, open, charismatic. You've been amazing. So thank you so much. 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