Prime Highlights:
Perplexity AI is negotiating to raise between $500 million and $1 billion, potentially increasing its valuation to $18 billion, doubling its December 2024 valuation of $9 billion.
The company generates nearly $100 million in annual recurring revenue (ARR).
Key Background:
Perplexity AI, a prominent player in the artificial intelligence search engine market, is in early discussions to secure between $500 million and $1 billion in new funding, according to sources familiar with the matter. If successful, the funding round could increase the company’s post-money valuation to $18 billion, effectively doubling its most recent valuation of $9 billion in December 2024.
The AI startup, which generates nearly $100 million in annual recurring revenue (ARR), competes directly with tech giants such as Google and Microsoft-backed OpenAI. Despite its rapid growth, Perplexity faces mounting competition, particularly with the recent launches of real-time search features by competitors like Anthropic and OpenAI’s integration of search capabilities into its popular ChatGPT chatbot. Google has also introduced AI-powered search features, though it faced criticism following notable errors in its results.
Founded amidst the surge of generative AI technologies, Perplexity has experienced significant growth. In June 2024, its valuation was just $3 billion, marking a remarkable threefold increase by the end of the year. However, with rising competition, the company has adapted by looking to expand its presence and resources.
In addition to its funding talks, Perplexity AI is also making strategic moves in the investment space. The company is close to raising a $50 million venture fund dedicated to early-stage AI startups, with Perplexity itself acting as an anchor investor. The startup’s network of approximately 80,000 developers provides valuable insights into the most active users of its application programming interface (API), potentially giving it an edge when identifying promising investment opportunities.
Despite its rapid expansion and innovations, Perplexity has faced some controversy. The company has been accused of plagiarizing content from media outlets, though it introduced a revenue-sharing model in July 2024, offering to share earnings from articles cited in its search results with the respective publishers. As the company moves forward, its ability to secure new funding will be pivotal in maintaining its competitive edge in the dynamic AI industry.
