Report: AI search startup Perplexity in talks with investors over $500M funding

Perplexity AI Inc., creator of an artificial intelligence-powered search engine platform, is reportedly discussing yet another huge funding round with investors that could increase its valuation to more than $8 billion.

In the last year, Perplexity has already closed on three big funding rounds, and its current valuation stands at $3 billion as of this summer, up from $1 billion in April and $520 million in January.

The fact that it’s reportedly looking to raise yet more money underscores the incredible enthusiasm of Silicon Valley investors to get in on the hottest AI startups. According to the Wall Street Journal, the startup is looking to raise around $500 million in additional funding, though the amount could change, people familiar with the matter said.

The talks come in the wake of OpenAI’s most recent funding round, which saw the AI market leader raise $6.6 billion at a valuation of $157 billion.

Perplexity, which was founded two years ago and is backed by Amazon.com Inc. founder Jeff Bezos, SoftBank Group Corp. and Nvidia Corp., among others, has built an AI search engine and chatbot combo that aims to provide an alternative to Google Search.

Like Google, Perplexity’s AI engine searches the web for the most up to date information, but rather than produce a list of links, it will respond to users’ queries in a manner that’s more akin to ChatGPT.

The startup’s tools are free to use, but it makes money from selling premium subscriptions that enable more advanced features. Besides targeting consumers, it has also launched an enterprise-grade version of its search engine for businesses. That version can also search a company’s internal files to answer business-related questions.

In addition, Perplexity has said it plans to integrate ads with its platform as a way of generating additional revenue.

The Journal said Perplexity’s consumer-focused search engine typically handles about 15 million queries per day, citing one of the people familiar with the funding talks. The same source said its annualized revenue currently stands at about $50 million, up from just $10 million in March.

Like a lot of AI startups, Perplexity has attracted some controversy lately, finding itself in the crosshairs of various web publishers that have accused it of using their content to generate its results without permission. For instance, Forbes has complained that Perplexity plagiarized one of its paywalled articles in a search result. Wired has accused it of scraping content from websites, including its own, even if it sets its robots.txt files to instruct search engine crawlers not to do this.

More recently, the New York Times reportedly sent Perplexity a “cease and desist” letter, asking it to stop accessing its content.

Perplexity has responded to this criticism by holding out an olive branch. In July, it announced a revenue-sharing program for publishers, saying those who participate will receive a flat fee every time their content is used in search results that generate ad revenue.

To sweeten the deal, Perplexity is also offering participating publishers a free, one-year subscription to its paid platform, as well as access to its application programming interface, giving them the option to embed its search engine into their own web pages.

At the time, Perplexity Chief Executive Aravind Srinivas said the startup was trying to “align incentives” for all parties in a scalable and sustainable way, adding that he wants to avoid any antagonistic relationships with news publishers.

Image: Perplexity AI