What Is the Best Use of New Cash at Modal?

Erik Bernhardsson says the best use of new cash at Modal today is capacity prepayments. Modal is ramping up capacity very aggressively. Salaries and office space are a rounding error in the financials.

A lot of the cash flow in the current capacity situation is capacity prepayments. Other deployment models in the future, including ownership, would still need a down payment or prepayment. The operating leverage in the business is insane. Modal has 200 employees who cost a lot of money, but the GPUs cost a lot more money, and he does not expect the balance to change.

The biggest focus is capacity and the financial complexity around it: pricing and packaging, the tension between ownership and renting, and whether Modal should move in a more neocloud direction or the opposite direction.