Perplexity AI Raises $74M to Take Valuation to $520M
Google and a few others have been dominant in the search engine space for years, but with the recent advancement of GenAI technology, the competitive landscape is set to be disrupted.
Perplexity AI, a search engine startup, is taking on search engine heavyweights, such as Google and Microsoft Bing, by trying to deliver a better, AI-native search experience. The startup has seen rapid growth with over 10 million monthly active users and over a billion queries in 2023.
The San Francisco-based startup that is only over a year old has raised its valuation to an impressive $520M with new funding from NVIDIA and Jeff Bezos. It recently secured $74M in its Series B funding led by venture capital firm Institutional Venture Partners (IVP). The funding participants included NEA, NVIDIA, Databricks, and Bessemer Venture Partners.
The meteoric growth of Perplexity AI is partly a result of its AI-driven approach to search, which involves delivering direct answers to queries using natural language processing rather than just presenting a list of links. The chat box-like interface offers simplicity and ease of use
“In an era where misinformation and AI hallucinations are causing increasing concern, we’re built on the idea that accuracy and transparency are prerequisites to making AI-powered search ubiquitous. The times of sifting through SEO spam, sponsored links, and multiple web pages will be replaced by a much more efficient way to consume and share information, propelling our society into a new era of accelerated learning and research,” Aravind Srinivas, co-founder, and CEO of Perplexity, wrote in a blog post.
Perplexity AI integrates its search engine with popular AI models such as GPT-4 and Claude. This enables it to summarize responses for a more conversational flow and provides source citations in the form of articles and websites. Users can even ask follow-up questions if they want to dive deeper into any subject.
Despite its rapid growth, Perplexity AI is not yet profitable. It is only generating single-digit million revenue annually. The major revenue stream is from its Pro offering, which offers advanced features such as image generation capabilities. The Perplexity AI core search experience is free of cost.
Aravind Srinivas, who has experience working with Google, OpenAI, and DeepMind, is optimistic about Perplexity AI’s revenue potential. He believes the company's ability to fine-tune the leading AI models for its search offers a competitive advantage. Srinivas believes Perplexity AI is the next-gen tool that will transform how people access information online.
Srinvas’s optimism is reflected by the broader trend in the industry where tech giants pivot towards AI-first interfaces for their search products. "Google is going to be viewed as something that's legacy and old, and Perplexity will be viewed as something that's the next generation and future," said Srinivas.
The ambitions of Perplexity AI go beyond search. It has already begun serving its own GenAI models based on its search index and public web. However, Perplexity is going to face some stiff competition from Google Search, which is testing its all-new Gemini model, and other players in the market who are focusing on incorporating AI in their search products.
With its innovative approach to search, Perplexity AI has positioned itself as a potential disruptor in the world of AI-powered search engines. Only time will tell whether it can fulfill its potential and grab a major chunk of the GenAI market, which is expected to be worth $667 billion by 2030.