Perplexity AI raises $74M to take on Google and Microsoft Bing with AI-native search

Today, California-based Perplexity AI, the year-old startup looking to reinvent knowledge discovery with an AI-native search engine, announced it has raised $73.6 million in a series B round of funding.

The investment comes from IVP with participation from NEA, Databricks, Nvidia, Bessemer Venture Partners and Kindred Ventures.

Notably, several tech visionaries also joined the list of backers, including Amazon founder and former CEO Jeff Bezos, former X VP Elad Gil, GitHub CEO Nat Friedman, Shopify CEO Tobi Lutke and Vercel founder Guillermo Rauch.

Perplexity, which has now raised a total of $100 million at an estimated valuation of over $500 million, plans to use the capital to build out its AI-driven search engine offering and take on heavyweights Google and Microsoft in the age of generative AI and large language models (LLM).

What exactly does Perplexity AI have on offer?

While Google and Microsoft have been in the search engine space for years — with the former largely dominating the game, Perplexity believes it can take them on (or maybe even dethrone them) by delivering a better, AI-native experience.

The startup offers a knowledge search platform that combines web indexes with a range of AI models to provide answers to every question a user may have. The experience is entirely conversational, where there’s just the information required and no need to click on different links (including ads/sponsored posts), compare answers or endlessly dig for information. 

To make the experience even better, Perplexity also gives users the ability to delve into the details of the information provided by surfing the most relevant sources and citations along with the results. 

“In an era where misinformation and AI hallucinations are causing increasing concern, we’re built on the idea that accuracy and transparency are prerequisites to making AI-powered search ubiquitous. The times of sifting through SEO spam, sponsored links, and multiple web pages will be replaced by a much more efficient way to consume and share information, propelling our society into a new era of accelerated learning and research,” Aravind Srinivas, co-founder and CEO of Perplexity, wrote in a blog post.

The company offers a free version of the platform, where one can search for the information they need using the default model of the company. However, if there’s the need to do more, there’s also a Pro version, billed at $20/month, that brings the ability to choose the model of choice, including GPT-4, for better results.

The paid tier also gives access to Perplexity API credits to integrate cutting-edge open-source LLMs into projects as well as unlimited querying support for Perplexity Copilot, the interactive research assistant of the company.

“Copilot tailors search queries with custom follow-up questions, introducing the concept of generative user interfaces. It removes the burden of prompt engineering and does not require users to ask perfectly phrased questions to get the answers they seek. This enables users to gain more relevant and comprehensive answers than other AI chatbots, traditional search engines or research tools,” Srinivas added.

Significant growth but challenges remain

Perplexity launched its search engine a year ago and already claims to have gained significant traction with 10 million monthly active users and more tha a million mobile users.

The CEO noted that the platform served over half a billion queries in 2023, with its Copilot getting particular traction from academics, students, and knowledge workers who rely on frequent research for their day-to-day needs.

Even though this is a great start for the company, it is imperative to note that it is still far off from its core mission “to serve the entire planet’s unbounded curiosity”.

Google and Microsoft both have billions of users and are already moving to loop in generative AI into their search engines. Google Search is testing its all-new Gemini model, which has reduced the latency of responses by 40% for English in the U.S., while Microsoft Bing has tapped OpenAI’s GPT-4 for information search and DALL-E 3 for image generation. Both players, however, continue to surface links and ads in their results — which is not the case with Perplexity.

It will be interesting to see how the company builds on its efforts – and unique features like model flexibility – to take on these behemoths and scale to enable knowledge discovery in the age of AI.