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 comes on the heels of two other big fundraises that have seen company’s valuation leapfrog in the last four months: in January the company raised nearly $74 million at a valuation of $540 million (up from $121 million in April 2023). And at the beginning of March, the company closed $56 million on a valuation of $1 billion — a raise that has been quietly public since then (it was on PitchBook’s database for one), and which Bloomberg highlighted earlier today.
Those two reported rounds are not the full story. We understand from multiple sources close to the company that it is actually also raising a further round to capitalize on the attention it’s getting in the market. NEA and IVP, both previous backers of the company, are among those looking to invest in this larger round, according to sources.
Whether they or other previous backers participate, a source said, may depend on how willing Perplexity is to work with existing investors rather than diversity, expanding its cap table to bring in new investors.
“They are growing very rapidly,” a partner from an existing investor said. “Yes we will look to participate.”
The core of Perplexity’s product is a generative AI-based search engine that provides results using a chatbot-style interface. It’s definitely not the only company in generative AI pursuing the search opportunity: that is essentially how many people are using products like ChatGPT and Microsoft’s Bing (powered by OpenAI), and Google is making a big push to improve search results with its Gemini LLM.
But Perplexity is building its algorithms incorporating a variety of LLMs, the idea being that this produces a more accurate and richer response.
“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. “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.
Considering that the company has only been around since 2022, Perplexity’s current investor list is already long, running to 46 names according to PitchBook data.
In addition to IVP and NEA, it includes other notable VCs such as Sequoia, Bessemer and Kindred; strategic backers like Nvidia, Databricks and Bezos Expeditions; and many recognizable individuals such as Jeff Bezos, Meta’s chief AI scientist Yann LeCun, Naval Ravikant, Susan Wojcicki, Elad Gil, Nat Friedman, and Clément Delangue from Hugging Face. A newer backer, Daniel Gross, led the $56 million round from March with other new backers Stanley Druckenmiller, Y Combinator head Garry Tan and Figma’s CEO Dylan Field also participating, among others.
One fundraise coming rapidly on the heels of another is reminiscent of rolling fundraising that we’ve seen from other big startups over the years. In the years leading up to is IPO during a time of rapid growth and major attention, Snap regularly appeared to be raising money on an ongoing basis. These days, it appears to be all about AI, with companies like OpenAI, Anthropic and Mistral all raising at a rapid pace and seeing their valuations skyrocket along with that.
In the case of Perplexity, the startup is standing out in the market for a couple of reasons. Most obviously, it’s one of the ambitious, albeit smaller, hopefuls in the race to build generative AI services. Its unique position in the market is that it’s not focused on the race to build multi-purpose large language models. Instead, taking a page from one of the biggest technology companies in the world today, it is tacking one specific product, at least for now: search.
Perplexity is not the only startup in AI that is building on very focused opportunities and by targeting enterprise. Synthesia in the UK is taking a similar approach with AI video tools, aiming them specifically at the business market, for the building of training and customer support video content.
In the case of Perplexity, the startup offers its tools on free and enterprise, paid tiers, and so far its processed 75 million queries this year and is currently on ARR of $20 million, according to Bloomberg.
Its reason for raising again so soon? Yes, perhaps to capitalize on customer and investor interest at what one investor described as a “zeitgeist moment” for the startup. But also because of the mechanics of building any kind of AI service right now.
“Compute is very expensive, so they may need to raise” for that reason alone, one said.
We have reached out to Srivinivas for comment and will update this post as we learn more.
