Perplexity AI wants to raise $1B at $18B valuation
What's the story
Perplexity AI, an artificial intelligence start-up, is said to be in talks to raise between $500 million and $1 billion.
This new investment could potentially double its valuation from $9 billion in December to $18 billion. Bloomberg was the first to report the funding talks.
Perplexity competes in the crowded arena of AI search engines, taking on tech behemoths such as Google and Microsoft-backed OpenAI.
Market competition
Perplexity AI's valuation history
Perplexity AI's valuation has grown significantly over the last year, tripling from $3 billion in June 2024 to $9 billion in December of the same year.
The growth came as generative AI took off after OpenAI launched ChatGPT in late 2022.
Despite its impressive growth, Perplexity AI is also facing rising competition in the AI search market.
Market challenges
Company faces increasing competition
Just recently, Anthropic introduced a web search product allowing its chatbot Claude to show real-time results to select users.
OpenAI also launched a search feature within ChatGPT last year while Google has integrated AI Overviews into its search product.
These developments pose new challenges for Perplexity as it seeks additional funding.
Investment strategy
Venture fund and investment strategy
Last month, CNBC reported that Perplexity was nearing a $50 million venture fund focused on early-stage AI start-ups.
The company plans to be an anchor investor in this fund, with most of the capital coming from outside partners.
Perplexity's network of around 80,000 developers gives the company potential investment opportunities.
Founders and investors of Perplexity are also contributing to this fund, some of which is in the form of stock.
Revenue model
Revenue-sharing model and future plans
Notably, in July 2024, Perplexity launched a revenue-sharing model for publishers.
As part of this scheme, whenever a user asks a question and ad revenue is generated from citing an article in the answer, Perplexity shares a portion of that revenue with the publisher.
The company also made a bid in January to merge with TikTok amid uncertainty over its future in the US.