Perplexity, the innovative AI search engine startup, is currently generating significant buzz in the tech industry. According to insights from tech media, the company is aiming to secure at least $250 million in its latest funding round, with its valuation estimated between $2.5 billion and $3 billion.
This exciting news follows two substantial fundraising efforts over the past four months that have dramatically increased Perplexity's valuation. In January, the startup raised nearly $74 million, catapulting its worth from $121 million in April 2023 to $540 million. Then in early March, Perplexity closed additional funding that pushed its valuation to $1 billion, with CEO Aravind Srinivas confirming the round raised approximately $63 million via a recent tweet.
However, those two funding rounds only tell part of the story. Multiple sources indicate that Perplexity is seeking an additional $250 million to leverage its growing visibility in the market. Previous investors NEA and IVP are reportedly among those poised to participate in this larger fundraising round. Whether existing backers will invest again may hinge on Perplexity's willingness to diversify by welcoming new investors into its cap table.
“They are experiencing rapid growth,” remarked a partner from one of the existing firms, indicating a supportive position. “We will look to participate.”
At the heart of Perplexity’s offering is a generative AI-driven search engine that delivers results via an engaging chatbot-style interface. While not alone in the generative AI search landscape—competing against leading products such as ChatGPT and Microsoft’s Bing, which is powered by OpenAI—Perplexity sets itself apart by employing a combination of various large language models (LLMs) to achieve more precise and comprehensive responses. Recently, the company has also introduced a more advanced enterprise product known as Perplexity Enterprise Pro.
“Unlike other enterprise tools like Microsoft Copilot, Perplexity Enterprise Pro uniquely integrates multiple cutting-edge foundation models into one platform: OpenAI GPT-4, Anthropic Claude Opus, Mistral, and more,” CEO Aravind Srinivas mentioned in a promotional tweet. “This approach allows customers to tailor their experiences according to specific use cases.” The potential for future expansions could involve additional offerings from Hugging Face and Meta, based on Srinivas’s public endorsements and the company’s investor roster.
Since its inception in 2022, Perplexity has attracted an impressive array of investors, with PitchBook data indicating 46 unique names supporting the venture. Key participants include IVP, NEA, and well-known firms such as Sequoia, Bessemer, and Kindred. Strategic partners range from Nvidia to Databricks, while notable individuals like Jeff Bezos, Meta’s chief AI scientist Yann LeCun, Naval Ravikant, and many others are also on board. Recent investments have come from Daniel Gross, who spearheaded a $56 million round in March, with participation from Y Combinator’s Garry Tan, Stanley Druckenmiller, and Figma’s Dylan Field, among others.
The rapid succession of fundraising rounds echoes a trend seen with other high-growth startups. For example, leading up to its IPO, Snap consistently announced fundraising efforts as it garnered significant attention. Today, this trend appears to be concentrated in the AI sector, with companies like OpenAI, Anthropic, and Mistral all raising funds at a brisk pace and experiencing soaring valuations.
Perplexity stands out in the AI landscape for a couple of key reasons. Firstly, it is among the ambitious yet smaller players aiming to develop generative AI services. Unlike others racing to create multipurpose LLMs, Perplexity is honing in on a singular product: search.
Moreover, similar to how other niche startups are targeting specific markets, like Synthesia in the UK, which focuses on AI video tools for corporate training and customer support, Perplexity is strategically positioning itself within the enterprise sector. The startup operates on free and paid enterprise tiers, having processed 75 million queries this year, with an annual recurring revenue (ARR) of $20 million, as reported by Bloomberg.
The motivation behind this rapid fundraising? Beyond seizing the current wave of customer and investor interest, which one investor called a "zeitgeist moment" for Perplexity, the company faces the inherent costs associated with building and scaling AI services today. “Compute costs are high, so they may need to raise funds for that reason alone,” observed a source.
We have reached out to Srinivas for further insights and will provide updates as more information becomes available.
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