Perplexity becomes an AI unicorn with new $63 million funding round

The buzzy AI-native search company Perplexity has joined the Unicorn club. The company has raised another $62.7 million in its fourth round of funding, at a $1.04 billion valuation. The company’s total is now $165 million. 

The funding round was led by Daniel Gross, the former head of AI at Y Combinator, with participation from OpenAI co-founder Andrej Karpathy, Stanley Druckenmiller, Y Combinator CEO Garry Tan, Altimeter Capital founder Brad Gerstner, Angel List founder Naval Ravikant, Figma CEO Dylan Field, former Cadence CEO Lip-Bu Tan, and Jakob Uszkoreit (co-inventor of Transformers). 

Perplexity says many of its previous investors also participated, including Jeff Bezos, NVIDIA, Tobi Lutke, Elad Gil, Nat Friedman, IVP and NEA. 

Perplexity has developed a loyal user base by returning helpful and well-attributed search results to users of its Android and iOS apps, and its web portal. Rather than returning Google-style “blue links,” Perplexity creates a narrative answer with linked citations to the sources it called upon. 

The company currently has an annualized revenue rate of between $15 and $20 million. The majority of that revenue comes from selling subscriptions to its Perplexity Pro service, which offers a search co-pilot, and direct access to powerful third-party large language models, including OpenAI’s GPT-4 and Meta’s open-source Llama-3 LLM. 

Perplexity has a chance to begin making revenue from selling ads within or around its “answers,” although the startup is still experimenting with different approaches. The uniqueness of Perplexity could be threatened in the future by Google, which has also been developing an AI-native Search Generative Experience. The company has reportedly just begun including SGE within its results for certain kinds of searches, and only from a small number of users. 

The fate of Perplexity may depend on whether it can return more accurate and complete AI-generated answers–especially for “commercial” searches for products like cars and insurance policies–than Google or anyone else, and/or deliver them faster. 

Perplexity was founded by Aravind Srinivas, Denis Yarats, Johnny Ho, and Andy Konwinski in the summer of 2022. It launched its “answer engine” late that year.

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