Only months after buzzy AI search-engine startup Perplexity AI raised its last round of funding, the company is yet again raising additional funds, as investors clamor to back tech's next big generative AI startup. Over the past few months, Silicon Valley has been swooning over the startup, which rivals Google's search and counts Jeff Bezos (who was an early backer of Google) as an investor.
Perplexity is raising this additional money at a significantly higher valuation cap than its previous pricing of $520 million, according to two people with direct knowledge. The company closed on $74 million in January in a round led by IVP.
Details are not yet finalized and the figures involved are subject to change.
Perplexity declined to comment. A spokesperson told Business Insider that the details of the deal were incorrect but did not clarify when asked for further information.
Silicon Valley is buzzing about the deal, which is just the latest indication that investor fervor around generative artificial intelligence will continue into the new year.
The additional funding comes in the form of convertible securities known as simple agreements for future equity, or safe notes, according to one source with direct knowledge. This type of security gives VCs the right to purchase a startup's shares at a fixed price in the future in exchange for providing the startup with funding today.
The structure allows the company to grab more capital in response to investor appetite, but delay diluting its existing shares by keeping the same equity split until its next fundraise, the same source said.
Founded in 2022, Perplexity makes a search engine on steroids. Powered by a combination of open-source models and large, "god models" from OpenAI and Anthropic, the app tries to understand the user's question and answers in straightforward paragraphs, with sources and citations, instead of returning a list of ads and web pages.
The company mostly competes with OpenAI's ChatGPT and Google's Bard.
Perplexity has tapped into the demand for artificial intelligence-powered consumer apps. In a year and a half since launch, the search engine has amassed 10 million monthly active users and processed more than 500 million queries, a spokesperson told Business Insider in January. More than a million people have installed Perplexity's mobile apps for iOS and Android since last March.
The fast-follow financing shows the best companies are getting funded, especially in artificial intelligence, even as the rest of the startup world competes for relative scraps.
Perplexity has lots going for it. Led by Aravind Srinivas, a former research scientist at OpenAI, Perplexity came out of a mafia of former employees who have raised billions of dollars in capital already. It's attracted more than $102 million in funding to date, from top-shelf investors including New Enterprise Associates and Bessemer Venture Partners, chipmaker giant Nvidia, and operators-turned-investors Elad Gil, Nat Friedman, and Bezos.
Safe notes are typically used in early-stage rounds by startups, and are preferred by some founders because they're simpler and faster to close than convertible notes. Though some investors, most notably Fred Wilson, have pushed back against the financial instrument.
Safes are so quick to turn around because the investor agrees to provide the startup with funding immediately, without getting into thorny negotiations on pricing and ownership. This can cause trouble at the next round of funding, when the money converts into shares of stock, if the founder and investor aren't on the same page.
