Perplexity soars to $9 billion valuation after $500 million funding round, competing with Google and OpenAI

SAN FRANCISCO: Perplexity an artificial intelligence-driven search engine, has closed its fourth finding round this year, tripling its valuation to $9 billion as it seeks to compete with offerings from Google and OpenAI, reported FT.

The $500 million round was led by Institutional venture Partners, with involvement from Nvidia, New Enterprises Associates, B Capital and T Rove Price, according to multiple people with knowledge of the deal. Previous investors have included SoftBank’s Vision Fund2, Nvidia an Amazon founder Jeff Bezos, as well as several prominent names from the AI industry such as OpenAI co-founder Andrej Karpathy and Meta’s chief AI scientist Yann LeCun.

The San Francisco-based group has grown rapidly this year, with its product receiving hundreds of millions of queries a month. It has 15 million monthly active users with most of that traffic coming from the US.

The new finding will help Perplexity compete with west coast rivals in an increasingly fierce fight for engineers. “The talent war for AI is like no other time before,” according to Ali Ghodsi, co-founder and chief executive of Databricks, the AI and data analytics company that announced a $10 billion fundraising round on Tuesday.

Perplexity is seeking to capitalise and improve on the search advertising system pioneered by Google, in which marketers bid to have a sponsored link placed against search queries. It is in talks with major brands o pilot advertising on its platform.

In a sign of growing competition in the space, AI companies have recently targeted the search market by linking up chatbots to the internet. This week, OpenAI rolled out web searching for its popular ChatGPT product, while Anthropic’s Claude can perform searches through a feature called ‘computer use’

Google and Microsoft, which are leaders in their $300 billion digital advertising world, also recently incorporated large language models, which power AI chatbots and make results more conversational into their search engines.

The latest round has pushed Perplexity’s valuation higher by nine-fold since the start of the year, in another sign of how hot start-ups developing new AI tools can draw in hundreds of millions or even billions of dollars in investment.

After OpenAI’s $6.6 billion fundraising in October – one of the largest in Silicon Valley – one person close to the company said Perplexity was inundated with unsolicited interest from new investors.

Run by former Google intern Aravind Srinivas, Perplexity raised $250 million this summer, on top of previous funding rounds in January and April

Perplexity makes money through subscriptions. It says its annualised revenues – a projection of full-year revenues based on extrapolating the most recent month’s sales – have grown from $5 million in January to %35 million in August.

The spate of deals for lossmaking AI start-ups has stoked concern among some investors that rising valuations in the sector show all the hallmarks of a bubble, however. But even those who argue most AI valuations are increasingly detached from reality are willing to take bets on companies they believe could be winners.

Perplexity and T Rowe Price declined to comment. IVP, B Capital, NEA and Nvidia did not immediately respond to a request for comment. The closing of the round was first reported by Bloomberg.