AI Search Company Perplexity Raises $26 Mn To Offer Competitor To Google

Perplexity AI, which makes a conversational search engine powered by artificial intelligence, has raised USD 25.6 million in a funding round led by New Enterprise Associates, the latest deal in the booming AI sector. 

The confusion is part of a growing wave of startups looking to use artificial intelligence to loosen Google's grip on internet searches. Its investors include a surprising number of Google's own AI researchers.   

The San Francisco-based startup offers a new application model. Users post simple questions on its website – one recent popular example: "Why can't we digest grass?" – and Perplexity responds with short answers generated by its AI systems. In conjunction with the funding round, the company launched an iOS app on Tuesday after realizing that most of its traffic comes from mobile devices. 

The startup quickly found a following, attracting a star-studded list of investors, including Yann LeCun, a chief artificial intelligence researcher at Meta Platforms Inc. Its backers also include at least six current and former AI researchers from Google and sister company DeepMind. including Jeff Dean, Google's head of research and artificial intelligence, who was an early angel investor in the company, according to research firm PitchBook.

The outsized presence of Google staffers among the startup’s investors speaks to Google’s ubiquity in the burgeoning field of artificial intelligence — and to how the company’s foundational work in the field often spills over beyond its Mountain View, California campus.

Those putting money into new chat interfaces like Perplexity and OpenAI's wildly popular ChatGPT chat are betting that the new tools will eventually drive users away from Google's core search product. Alphabet Inc's Google is trying to boost AI, and executives declared a code red shortly after launching ChatGPT. But many competitors in the field work with researchers who have left  AI labs — and, in Perplexity's case, they fund them. 

Perplexity's ties to the search giant can be traced back to its CEO Aravind Srinivas, who worked as a researcher at DeepMind and Google's Brain research group before founding Perplexity. Those early relationships explain why so many Googlers invested in Perplexity, said Bob Muglia, a former Microsoft manager who also invests in a startup. 

Perplexity's funding round is relatively modest compared to other AI startups that have announced new raises in recent weeks. Founded by ex-Googlers, Character.AI also recently raised USD 150 million. Adept, another AI startup, said it raised USD 350 million from investors including Spark Capital and General Catalyst.

Srinivas said that he raised the smaller round because the company did not need large cash reserves. "It's in our best interest to stay lean and lean and stay at the same fill rate," he said.  Peter Sonsini, head of investor NEA, joined Perplexity's board as part of the funding deal. Too many rounds can disrupt a business, he said. "People have these vanity pens," Sonsini said. "We've all seen in recent years how it can go  wrong if you raise too much money before you need it." 

Perplexity has released new features to users every week since its launch in December. "Perplexity is not even six months old and has shipped more products than most companies in their lifetime," investor Nat Friedman,  former CEO of software platform GitHub, wrote on Twitter. 

Perplexity's traffic is still only a small fraction of Google's traffic, but it is gaining traction.

According to the digital intelligence firm's sister company, the company's website had nearly 13 million visits in February, more than double the previous month. According to Samanweb, startups like Character.AI and You.com have also seen traffic increase in recent months, showing how interest in ChatGPT has boosted smaller players.