From $500m to $9bn: Charting Perplexity’s Soaring Valuation
In a whirlwind year for Perplexity AI, the Gen AI challenger has been making waves in the search engine industry.
But just because 2024 draws to a close, does not mean the California-based startup is finished breaking boundaries.
Indeed, Reuters recently reported that the startup is raising new investment that would see its valuation soaring to an unprecedented US$9bn. This is all the more remarkable when considering it was valued at only US$500m earlier this year.
From millions to billions
This latest investment, reportedly led by Institutional Venture Partners (IVP), is set to inject over $500m into the startup's coffers.
At the beginning of 2024, the company was valued at around US$500m following a Series B funding round of US$73.6m. This round, also led by IVP, included investments from notable figures such as Jeff Bezos and chip designer Nvidia.
By mid-2024, Perplexity's valuation had already soared to US$3bn, reflecting the rapid pace of its growth and the increasing excitement surrounding its AI-driven search capabilities.
SoftBank, one of the world’s largest banks, put US$20m into Perplexity as part of its AI fund.
The company's ability to attract substantial investments in such quick succession speaks volumes about the perceived value of its technology and its potential to disrupt the search engine market.
Innovations and challenges
Perplexity's success can be attributed to its innovative approach to search technology.
The company has developed what it describes as the world's 'first fully functional conversational answer engine', which goes beyond traditional keyword-based search to offer users instant, reliable answers to complex queries with complete sources and citations included.
This commitment to accuracy and transparency has led to impressive user growth.
Launched at the end of 2022, Perplexity handled about 350 million queries in September as use accelerated from the 500 million queries at the search engine during all of last year, according to its CEO Aravind Srinivas.
At that rate, Perplexity could be handling a half-billion search queries daily by 2026, he reasoned. Perplexity boasted 15 million monthly active users by the first quarter of 2024.
The platform's ability to provide trustworthy information quickly and efficiently has struck a chord with users in an era where concerns about AI hallucinations and misinformation are on the rise.
However, Perplexity's rapid ascent has not been without challenges. The company has found itself embroiled in legal disputes with major publishers, with the Wall Street Journal taking legal action against the company.
These media giants have accused Perplexity of copyright infringement, claiming that the startup engages in unauthorised use of their content for AI-driven search results.
Perplexity, has however, in an unprecedented move for a Gen AI platform announced a new revenue-sharing model with news publishers.
Redefining search in the AI era
As Perplexity AI stands on the brink of securing its US$9bn valuation, the question is: what comes next?
The company's trajectory suggests that it is well-positioned to compete with established search giants like Google.
Wanting in on the Gen AI race, Google has invested US$300m in Perplexity rival Claude, and has developed their own internet-connected Gen AI system Gemini.
Yet Perplexity’s ability to deliver complex generations and be connected to the internet means that neither one of those have been able to overtake it.
Aravind has laid out a vision of Perplexity moving to make advertising revenue a part of their revenue model along with the pro versions.
As AI continues to reshape the landscape of search and knowledge discovery, Perplexity stands at the forefront of this revolution. Its meteoric rise from a US$500m valuation to US$9bn in under a year is testament to that.
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