Perplexity, an AI search engine startup, is currently in the process of raising $250 million or more at a valuation between $2.5 billion and $3 billion. This comes after two previous large fundraises that saw the company’s valuation increase significantly. In January, Perplexity raised nearly $74 million at a valuation of $540 million, and in March, the company closed a $56 million round at a valuation of $1 billion.
The company is not just relying on these previous rounds, however. Sources close to Perplexity have revealed that the company is also raising additional funds to take advantage of the attention it is receiving in the market. Previous backers, such as NEA and IVP, are among those interested in investing in this new round. The decision of whether or not existing investors will participate may depend on Perplexity’s willingness to work with them and expand its cap table to include new investors.
Perplexity’s core product is a generative AI-based search engine that uses a chatbot-style interface to provide results. While there are other companies in the generative AI space, Perplexity sets itself apart by incorporating a variety of language models (LLMs) into its algorithms. This approach aims to produce more accurate and comprehensive responses.
CEO and co-founder Aravind Srinivas highlighted the unique features of Perplexity’s offering, stating that their enterprise AI product, Perplexity Enterprise Pro, is the only one on the market that incorporates all the cutting-edge foundation models, including OpenAI GPT-4 and Anthropic Claude Opus. Srinivas also hinted at potential partnerships with Hugging Face and Meta in the future.
Despite being founded in 2022, Perplexity has already attracted a long list of investors, including prominent venture capital firms like Sequoia, Bessemer, and Kindred, as well as strategic backers like Nvidia and Databricks. Notable individuals, including Jeff Bezos and Yann LeCun, chief AI scientist at Meta, have also invested in the company.
The rapid succession of fundraises is reminiscent of other successful startups, such as Snap, that continuously raised funds before going public. The AI sector, in particular, has seen a surge in fundraising activities, with companies like OpenAI, Anthropic, and Mistral experiencing exponential growth in valuation.
Perplexity stands out in the market for its focused approach to building generative AI services. While many companies are racing to develop multi-purpose language models, Perplexity has chosen to concentrate on search. This strategy aligns with the success of large technology companies that have excelled by focusing on specific products.
Another startup, Synthesia, based in the UK, is taking a similar approach by targeting the business market with AI video tools for training and customer support content.
In terms of revenue, Perplexity offers both free and paid tiers for its tools. According to Bloomberg, the company has processed 75 million queries this year and currently has an annual recurring revenue (ARR) of $20 million.
The decision to raise funds again so soon may be driven by the opportunity to capitalize on customer and investor interest during what some describe as a “zeitgeist moment” for Perplexity. Additionally, the high cost of computing power required for AI services may necessitate further fundraising.
As more information becomes available, we will update this post with comments from Aravind Srinivas, CEO and co-founder of Perplexity.