Perplexity AI is said to be in talks for a huge new funding round of $500 million to $1 billion, doubling the valuation of the company to $18 billion. The AI search company, whose valuation was $9 billion only last December, is on its way to strong growth in the crowded artificial intelligence search space.
Bloomberg initially broke the news of these funding talks, reporting that Perplexity has aggressive growth plans in spite of growing competition from tech behemoths such as Google and Microsoft-funded OpenAI.
The firm has seen explosive growth in the last year, with its value more than tripling from $3 billion in June 2024 to $9 billion by December. The sudden rise is a follow-on to the wider generative AI surge that started after OpenAI introduced ChatGPT late in 2022, sparking universal interest in AI-based search solutions.
While Perplexity has emerged as a force to be reckoned with as a player to watch in the arena of AI search engines, the fight is hardly over. Most recently, Anthropic launched a web search product that allows its chatbot Claude to deliver live search results to a few thousand users. OpenAI launched its own search feature in ChatGPT last year, and Google introduced AI Overviews to its search offering.
These moves by established technology players present great challenges to Perplexity as it tries to secure additional funding for its expansion plans.
Apart from its core search business, Perplexity is broadening its investment strategy. In a report last month by CNBC, the company was introducing a $50 million venture fund to invest in early-stage AI companies. Perplexity will be a anchor in the fund, but the majority of the funding will come from external partners.
Perplexity’s wide base of some 80,000 developers provides a rich reservoir of potential investment targets. Both investors in the current fund and Perplexity’s co-founders are committing money to this fund, part of which will come in the form of shares of company stock.
Perplexity introduced a new model of revenue-sharing with publishers in July 2024. Under this model, for every time a user searches for something and ad revenue is generated through quoting an article in the answer, Perplexity rewards the publisher with a share of the ad revenue. The model is aimed at building a more sustainable model of content creators and making the company’s search solutions stronger.
Earlier this year, in January, Perplexity also made headlines with a surprise bid to combine with TikTok, when the popular social media site was unsure about its future operations in the United States.
The announced new funding round, if successful, would be a strong vote of confidence in Perplexity’s strategy of AI-driven search and information discovery. Perplexity has offered itself as a different kind of search engine by giving direct answers to questions instead of lists of links, using generative AI technology to produce more conversational and intuitive search experiences.
With the AI search space changing so rapidly all the time, Perplexity’s hypothetical valuation of $18 billion would make it a serious contender in the market even against companies with multiple orders of magnitude more capital and established bases of users.
Industry watchers will be paying close attention to whether Perplexity is able to sustain its momentum and secure a lasting foothold in an increasingly dominated marketplace by tech titans with deep pockets and a large amount of AI research firepower.
