AI search company Perplexity has just raised yet another enormous funding round, adding yet another $100 million that brings its valuation to $18 billion. That is more than its $14 billion valuation in a couple of months’ time, according to a recent Financial Times article.
The capital news comes on the heels of Perplexity’s massive $500 million round last month, and it shows just how red-hot the AI space is. What is notable here is how the round was constructed.
The company initially was going for an $18 billion valuation on its latest round of funding, but ran into some resistance from investors who believed that it was too high. But once that round had been finalized, new investors started knocking and were willing to pay that same $18 billion price.
Soaring Success of Perplexity in Reshaping Search with AI
Perplexity’s own growth has been nothing less than phenomenal. The three-year-old company started the year 2023 at a valuation of just $500 million, and today it is valued at 36 times that in less than two years. Such explosive growth is the best term to define the AI boom that swept Silicon Valley and much wider.
The firm has set itself up as a direct threat to Google’s search monopoly, offering AI-powered answers beyond the traditional search results. Users can ask complex questions and get rich, sourced answers rather than a list of links. It’s this approach that has drawn users and investors.
The figures behind Perplexity’s growth are just as startling. The annualized revenue run-rate of the company has gone from $35 million last August to $150 million for this month. That’s over four times the growth in a little over a year, demonstrating that folks aren’t just experimenting with the service, they’re actually paying for it.
This is particularly noteworthy in that it is genuine market demand and not just investor frenzy. While the majority of AI companies are still trying to sort out how to profit from their technology, Perplexity seems to have solved the mystery.
Perplexity’s Edge in the AI Battle
Perplexity’s success story is being written against the backdrop of an increasingly competitive AI landscape. Startups and tech companies are racing to build the next big thing in artificial intelligence, with the likes of OpenAI, Google, Amazon, and Meta aggressively competing to stay in the lead.
The battle has turned into what is now widely referred to as a talent war. The big corporations are employing their deep pockets to buy out potential startups and poach top talent. Meta recently made headlines by engaging in acquisition talks with Thinking Machine Lab and Safe Superintelligence, which were both started by ex-OpenAI employees. The social media giant also acquired a 49% stake in Scale AI for close to $15 billion last month.
Google has been just as determined, paying $2.4 billion to recruit the management team at coding firm Windsurf. These moves illustrate how far AI talent has increased and how much companies will go to acquire it.
Perplexity’s list of investors is a who’s who of tech investing. It’s supported by Nvidia, the semiconductor giant whose brand is most closely associated with AI infrastructure. SoftBank Vision Fund 2 and seasoned venture capital firms New Enterprise Associates and IVP are also on board.
Perplexity’s Rise: How AI is Changing Search
Having Nvidia as an investor is particularly strategic, given that the company is a market leader in AI computing hardware. The investment likely offers Perplexity access to the finest technology out there and insight into how the market is evolving.
Perplexity’s rapid rise to prominence poses interesting questions about search in the future. Google has long ruled internet information discovery. Challengers like AI-driven Perplexity are showing, however, that there may be room for new approaches that provide more direct, conversational answers.
The company’s success suggests that consumers are prepared for more conversational search experiences, more like interacting with a smart assistant than browsing pages of results. Or at least, that is what investors clearly think, as Perplexity’s valuation of $18 billion suggests that they believe it may very well be the future.