Perplexity Raising Over $250M for its AI Search Platform, Valuation Soaring to $2.5B-$3B – Insider Sources Reveal

Perplexity, the AI search engine startup, is a hot property at the moment. TechCrunch has learned that the company is currently raising at least $250 million more at a valuation of between $2.5 billion and $3 billion.

The news follows two other major fundraises that have resulted in a significant surge in the company’s valuation over the past four months: In January, the company raised nearly $74 million at a valuation of $540 million (up from $121 million in April 2023). Then, at the start of March, the company closed funding at a valuation of $1 billion, with CEO Aravind Srinivas providing details on Twitter today that the amount raised was approximately $63 million.

But, there’s more to it than the aforementioned funding rounds. According to multiple sources close to the company, Perplexity is working on an additional round of at least $250 million to capitalize on the growing interest it’s gaining in the market. NEA and IVP, both former backers of the company, are said to be considering investing in this larger round.

A source mentioned that Perplexity’s decision to involve past investors in the new round or to diversify and extend its cap table to include new investors, will likely dictate the participation of previous backers.

“They are growing very rapidly,” a partner from an existing investor stated. “Indeed, we plan to participate.”

The foundation of Perplexity’s product lies in a generative AI-based search engine that provides outcomes using a chatbot-like interface. Unquestionably, it’s not the sole firm in generative AI chasing the search opportunity: a large number of people use products like ChatGPT and Microsoft’s Bing (enabled by OpenAI), and Google is firmly focusing on enhancing search results with its Gemini LLM.

Yet, Perplexity is constructing its algorithms with a range of LLMs, the objective being that this generates a more precise and detailed response.

Currently, it’s utilizing these to develop what it portrays as a more advanced enterprise “pro” product.

“Unlike other enterprise tools for knowledge work like Microsoft Copilot, Perplexity Enterprise Pro is also the only enterprise AI offering that offers all the cutting-edge foundation models in the market in one single product: OpenAI GPT-4, Anthropic Claude Opus, Mistral, and more to come,” CEO and co-founder Aravind Srinivas noted earlier today in a tweet promoting the new offering. “This gives customers and users choices to explore and customize their experience depending on their use cases.” That “more to come” may well be including more from Hugging Face and Meta, if Srinivas’s public endorsements and investor lists are anything to go by.

Though the company has only been operational since 2022, Perplexity’s current list of investors is already lengthy, standing at 46 names according to PitchBook data.

Notable VCs such as IVP, NEA, Sequoia, Bessemer, and Kindred, as well as strategic backers like Nvidia, Databricks, Bezos Expeditions, and several recognizable individuals including Jeff Bezos, Meta’s chief AI scientist Yann LeCun, Naval Ravikant, Susan Wojcicki, Elad Gil, Nat Friedman, and Clément Delangue from Hugging Face all feature in this list. Daniel Gross, a recent backer, led the $56 million funding round in March, with fellow newcomers Stanley Druckenmiller, Y Combinator head Garry Tan, and Figma’s CEO Dylan Field also participating, among others.

Swift and successive fundraising rounds remind one of “rolling fundraising” trends witnessed in many large startups over the years. Prior to its IPO during a period of significant growth and attention, Snap seemed to be constantly raising funds. Today, it appears that the AI sector is in focus, with companies like OpenAI, Anthropic and Mistral raising funds at a frenetic pace, leading to their sky-high valuations.

Perplexity, a burgeoning startup, stands out in the market due to a few unique characteristics. It has made its mark in the pursuit to create advanced AI services. Unlike most, it’s not concentrating on generating multipurpose broad language models. Instead, it’s drawing inspiration from one of the most influential technological corporations of present times to tackle a particular product, which at present is search.

This strategy of focusing on narrow arenas by targeting enterprise is not unique to Perplexity in the AI startup landscape. Synthesia, out of the U.K., is following a similar path, developing AI video tools aimed exclusively at the commercial sector to facilitate the creation of training and customer support video content.

Perplexity provides its tools for free and on enterprise, paid tiers. To date, it has processed 75 million queries for the year and is now boasting an ARR of $20 million, as reported by Bloomberg.

Why the need for fund-raising again so soon? The company may be seeking to seize the moment given the current interest from customers and investors, a situation one investor dubbed as a “zeitgeist moment” for the startup. But the subsequent reason may be related to the current complexities involved in building any AI service.

“Compute is very expensive, so they may need to raise” for that reason alone, one said.

We have reached out to Srinivas for comment and will update this post as we learn more.

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