VC-Backed AI Startup's 50% Valuation Increase Signals Sector's Strength

VC-backed AI startup Perplexity is seeking a new funding round based on a 50% increase in its valuation from last year. 

The increase suggests that investor interest in gen AI remains strong, despite its myriad challenges in terms of cost and computing power. At least some of that enthusiasm appears driven by AI's increasingly evident impact on big tech, especially as Google searches fell over the past two months - for the first time in 20 years - due primarily to the growth in AI-driven search. JL 

Berber Jin reports in the Wall Street Journal:

Perplexity is in talks for a new funding round that would value it at $14 billion, a 50% increase from last year. Venture-capital firm Accel is set to lead the new round. The raise underscores investor enthusiasm for generative AI companies, some of which have begun to challenge Google’s dominance over search. Perplexity sells an AI-powered search tool that provides summarized answers using information gathered from the web. It is planning to launch its own web browser in a potential challenge to Google Chrome and Apple’s Safari. Google searches fell over the past two months for the first time in more than 20 years, attributed to more people using gen AI services such as ChatGPT and Perplexity.  

Perplexity is in advanced talks for a new funding round that would value it at $14 billion, a more than 50% increase from late last year, according to people familiar with the matter.

Venture-capital firm Accel is set to lead the new round, which is expected to total $500 million, people familiar with the matter said. The raise underscores investor enthusiasm for generative artificial-intelligence companies, some of which have begun to challenge Google’s longstanding dominance over search. 

Perplexity was valued at $9 billion last November, its fourth round that year, The Wall Street Journal reported. It is one of a set of AI startups that have grown quickly after the launch of ChatGPT three years ago.

The San Francisco-based company sells an AI-powered search tool that provides summarized answers using information gathered from the web. Instead of the list of blue links users have long seen on Google, Perplexity offers answers in sentence form with links to the websites it pulls information from. 

It is also planning to launch its own web browser, called Comet, a potential early challenge to incumbents such as Google Chrome and Apple’s Safari. Last week, Apple executive Eddie Cue said that Google searches over the Safari web browser fell over the past two months for the first time in more than 20 years. He attributed the drop to more people using generative AI services such as ChatGPT and Perplexity.

Cue said Apple has held conversations with Perplexity, OpenAI and Anthropic about adding AI search features onto Safari. Google’s share price dropped more than 7% after news reports about the comments, which were delivered during the penalty trial phase of the Justice Department’s antitrust lawsuit against Google.

Perplexity has been criticized by news publications for using their content without permission or compensation. Last year, The Wall Street Journal parent company Dow Jones sued Perplexity and the New York Times sent it a “cease and desist” notice.

The startup faces rising competition from other well-funded tech companies. Last year, OpenAI added a search engine to ChatGPT and recently made the service available to all of its users. Google also introduced an AI-powered search feature, called AI Overviews, last May. 

As part of the new funding, Accel partner Sameer Gandhi is set to join Perplexity’s board, the people said.