Money-hungry AI search startup Perplexity in talks to raise up to $1B in fresh funding – News

The artificial intelligence search application company Perpexity AI Inc. is gearing up for yet another mammoth funding round, according to the latest chat from Bloomberg and CNBC.

Anonymous sources told Bloomberg that the early-stage discussions with investors could see the company raise between $500 million and $1 billion, and ultimately boost its value to a cool $18 billion.

Perplexity was last valued at $9 billion after closing on a $500 million raise last December. That was triple its prior $3 billion valuation.

The company competes with the likes of Google LLC and Microsoft Corp. in the web search industry, as well as chatbots such as OpenAI’s ChatGPT. It has been growing fast, riding a broader generative AI boom that kicked off in earnest back in late 2022, when ChatGPT emerged to take the world by storm.

Perplexity gained a significant first-mover advantage in the AI search space as it was one of the first alternatives to ChatGPT. According to CNBC’s sources, it has grown its annual recurring revenue to just under $100 million. However, in recent months it has faced increased competition from both old and new rivals.

Just this week, the large language model developer Anthropic PBC launched its first dedicated web search product, enabling its chatbot Claude to search the web and display real-time results. Last year, OpenAI added a similar web search feature to ChatGPT, aiming to take on Perplexity as well as Google.

Of course, the world’s biggest search company hasn’t stood still. Last year it debuted an AI Overviews feature within Google Search, which provides more concise responses to user’s search queries instead of just displaying a list of web links.

Perplexity has responded to this increased competition in a number of ways. Last month, CNBC said the company had put together a $50 million venture fund that will focus on early-stage AI startups. Though Perplexity will invest in the fund, most of the capital will come from third-party venture capitalists, the report said.

The company believes it’s in a good position to identify some promising startups, though, thanks to the recent launch of its Sonar application programming interface, which allows developers to embed its AI search features into their own applications. Through Sonar API, the company has visibility into which applications are using its search tools and generating traffic, so that could help it to spot some up and coming stars.

In January, the company raised eyebrows with a radical proposal to merge with ByteDance Ltd.’s TikTok, which has come under pressure in the U.S. The proposed merger would allow TikTok to continue operating in the country once a federal ban, which was temporarily halted by President Donald Trump through an executive order, comes into effect. Whether that ambitious plans comes to fruition remains to be seen, but it probably won’t happen.

Perplexity is also looking to step up its rivalry with Google. Last month, the company teased its upcoming AI-powered Comet browser, which it said is designed for “agentic search” and would go up against traditional browsers like Google Chrome, Safari, Firefox and Opera. Few details were revealed, but the company insisted that it was “reinventing the browser” with Comet, and has promised to reveal more in due course.

Holger Mueller of Constellation Research Inc. said Perplexity needs the additional funding to try and innovate its way out of trouble, for its competitors are making life much tougher.

“We just saw Anthropic adding search abilities to Claude, and OpenAI continues to build out its own search features, and these are direct competitors to Perplexity’s value proposition,” the analyst said. “What’s not clear is how Perplexity sees its future. Will it double down on AI search, or will it look to bring AI automation into other areas?”

Meanwhile, the company continues to face controversy, with persistent accusations that its AI search results are simply plagiarizing content from media outlets. In response to this, Perplexity introduced a new revenue-sharing model for publishers, which launched in June. Anytime it generates ad revenue from an answer that cites an article, it said, the publisher of that story will receive a percentage.

The company said earlier this month it now has more than 15 million active users, and it has been attempting to make money from them in other ways, too. For instance, it offers a premium subscription that provides access to more advanced search capabilities, so users can search their own files on their computer or smartphone. It also provides more advanced features for finance-related queries relating to stock prices and earnings reports.

Image: News/Perplexity