Embarrassment, the AI search engine startup, is a hot property right now. TechCrunch has learned that the company is currently raising at least $250 million more at a valuation between $2.5 billion and $3 billion.
The news comes on the heels of two other big fundraises that saw the company’s valuation jump in the past four months: In January, the company raised nearly $74 million at a $540 million valuation (up from $121 million in April 2023). And in early March, the company closed funding at a $1 billion valuation — a raise that’s been quietly public since then (it was on The PitchBook database for one at $56 million), and which Bloomberg is emphasized earlier today (no value noted) and CEO Aravind Srinivas it was noted to be $62.7 million.
These two mentioned rounds are not the full story. We understand from multiple sources close to the company that it is in fact reporting this as well further round of at least $250 million to capitalize on the attention it’s getting in the market. NEA and IVP, both previous backers of the company, are among those looking to invest in this larger round, according to sources.
Whether those or other previous backers participate, a source said, may depend on how willing Perplexity is to work with existing investors rather than diversify by expanding its cap table to bring in new investors.
“They’re growing very fast,” said one partner from an existing investor. “Yes, we’ll look into participating.”
The core of Perplexity’s product is an AI-powered search engine generator that delivers results using a chatbot-like interface. It’s certainly not the only AI company chasing the search opportunity: That’s essentially the number of people using products like ChatGPT and Microsoft’s Bing (powered by OpenAI), and Google is making a big push to improve search results with Gemini LLM.
But Perplexity builds its algorithms by incorporating a variety of LLMs, with the idea that this produces a more accurate and richer response.
Now he’s using them to create what he describes as a more advanced “pro” enterprise product.
“Unlike other enterprise tools for knowledge work such as Microsoft Copilot, Perplexity Enterprise Pro is also the only enterprise AI offering that offers all the cutting-edge foundational models on the market in a single product: OpenAI GPT-4, Anthropic Claude Opus, Mistral, and more to come,” CEO and co-founder Aravind Srinivas famous earlier today in a tweet promoting the new offer. “This gives customers and users options to explore and customize their experience based on their use cases.” This “more to come” may well include more than Hugging Face and Meta, if Srinivas public approvals and investor lists are something to follow.
Considering the company has only been around since 2022, Perplexity’s current list of investors is already long, reaching 46 names according to PitchBook data.
In addition to IVP and NEA, it includes other notable VCs such as Sequoia, Bessemer and Kindred. strategic supporters such as Nvidia, Databricks and Bezos Expeditions; and many recognizable people like Jeff Bezos, Meta’s Chief AI Scientist Yann LeCun, Naval Ravikant, Susan Wojcicki, Elad Gil, Nat Friedman, and Hugging Face’s Clément Delangue. A younger backer, Daniel Gross, led the $56 million round from March with other new backers Stanley Druckenmiller, Y Combinator head Garry Tan and Figma CEO Dylan Field, among others.
One fundraiser that comes quickly on the heels of another is reminiscent of the rolling fundraiser we’ve seen from other big startups over the years. In the years leading up to its IPO, a period of rapid growth and heightened attention, Snap regularly seemed to raise money on an ongoing basis. These days, it seems to be all about artificial intelligence, with companies like OpenAIAnthropic and Mistral all rising at a rapid pace and seeing their valuations skyrocket along with it.
In Perplexity’s case, the startup stands out in the market for two reasons. Apparently, it is one of the ambitious, if smaller, in the race to create productive AI services. Its unique position in the market is that it is not focused on the struggle to build large multi-purpose language models. Instead, taking a page from one of the biggest technology companies in the world today, faces a specific product, at least for now: search.
Perplexity isn’t the only AI startup building on highly focused opportunities and targeting businesses. Synthesia in the UK is taking a similar approach with its AI video tools, specifically targeting the business market to create training and customer support video content.
In Perplexity’s case, the startup offers its tools in free and enterprise, paid tiers, and has processed 75 million queries so far this year and currently has $20 million in ARR, according to Bloomberg.
The reason for it to rise again so soon? Yes, perhaps to take advantage of customer and investor interest in what one investor described as a “boot moment” for the startup. But also because of the mechanics of building any kind of AI service right now.
“DOompute is very expensive, so they might have to raise” for that reason alone, one said.
We’ve reached out to Srinivas for comment and will update this post as we learn more.
