AI startup Perplexity AI is close to raising $500 million round at a $9 billion valuation

Perplexity AI is reportedly in the final stages of securing an additional $500 million funding round at a $9 billion valuation, according to a CNBC source. This news arrives just weeks after initial reports that the AI startup was in talks to double its valuation from $4 billion to $8 billion.

In just two years, Perplexity AI has gone through three funding rounds, an unusually fast trajectory even for Silicon Valley. Starting with a $520 million valuation in January, the company saw its valuation soar to $3 billion by mid-summer as investor interest surged alongside the growing generative AI trend. Institutional Venture Partners, a Bay Area firm, is said to be leading the new round, though details are still under wraps.

Founded in 2022 by Aravind Srinivas, Andy Konwinski, Denis Yarats, and Johnny Ho, Perplexity AI redefines search by providing direct answers to user questions. Competing with giants like Google and OpenAI, the company recently launched an iOS app to make its AI-driven search engine more accessible to mobile users.

According to a pitch deck for advertisers reviewed by CNBC, Perplexity’s app has surpassed 2 million downloads, handling over 230 million queries each month, the company reported in August. U.S.-based queries have surged eightfold over the past year.

Perplexity faces competition from major players like OpenAI’s ChatGPT, which recently added a search feature that delivers real-time information on topics like sports, news, and stock quotes. Powered by web partnerships, OpenAI’s addition strengthens its position in the search arena.

Perplexity’s journey hasn’t been without controversy. The startup recently received a “cease and desist” notice from The New York Times, which accused it of scraping content without authorization. Perplexity has denied these allegations, but similar claims have also surfaced from media outlets like Forbes and Wired. In response, Perplexity launched a revenue-sharing model that compensates publishers whenever ad revenue is generated from their content.

The company’s tool is built on multiple large language models, including OpenAI’s and Meta’s open-source Llama, delivering instant answers with sources cited. Perplexity is currently generating around $50 million in annual revenue, bolstered by the rapid rise of generative AI technology.

The broader AI industry has seen pushback from publishers, who are increasingly scrutinizing the use of their content by AI-powered platforms like Perplexity and OpenAI. While some media companies, including The Atlantic and Vox Media, have opted for licensing agreements with OpenAI, others continue to voice concerns about unauthorized usage.

Perplexity AI (Credit: Kim Komando Show)