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An Ai Search Startup Raises $26 Million To Offer A Rival To Google

March 28, 2023
minute read

In the latest deal in the booming AI sector, Perplexity AI raised $25.6 million in a funding round led by New Enterprise Associates. 

Perplexity is one of a growing number of startups seeking to challenge Google's dominance of online search. Google's own AI researchers are among its investors.

The San Francisco-based startup offers up a new model of search. On its website, users can type simple questions - such as “Why can’t we digest grass? ” — and Perplexity responds with short answers generated by its AI systems. After finding that a majority of its traffic comes from mobile devices, the company launched an iOS app simultaneously with the funding round on Tuesday.

A star-studded investor roster has backed the startup, including Yann LeCun, chief AI scientist at Meta Platforms Inc. According to data provided by research firm Pitch, it is backed by at least six AI researchers from Google and DeepMind, including Jeff Dean, Google's senior vice president for research and AI, who was an angel investor in the startup. 

Google's outsized presence among the startup's investors illustrates the company's ubiquity in artificial intelligence, and how its foundational work in the field often extends beyond its Mountain View, California headquarters.

Perplexity and ChatGPT, the wildly popular bot from OpenAI, are among those putting their money behind new chat interfaces designed to siphon users away from Google's core search product. Alphabet Inc.'s Google is aiming to move faster in AI, with executives declaring a "code red" shortly after ChatGPT was released. Yet many of its competitors in the field have left its AI labs - and, in the case of Perplexity, are funded by them as well. 

According to Perplexity's chief executive officer, Aravind Srinivas, who worked at Google Brain and DeepMind before founding the company, Perplexity has connections to Google. Bob Muglia, a former Microsoft Corp. executive who also invested in Perplexity, said those early relationships explain why so many Googlers invested in the company.

The people believe in Aravind," Muglia said. "They see this as a dynamic space, and they're utilizing that and learning at the same time. It's all about learning here."

A Google spokesperson declined to comment. Interview requests for Dean were not responded to. 

Perplexity's funding round is relatively modest compared to other AI startups that have announced new investments recently. Recently, Character.AI, founded by former Googlers, raised $150 million. A second AI startup, Adept, raised $350 million from Spark Capital and General Catalyst. Srinivas said he raised a smaller round because the company didn't need vast amounts of money. "We need to stay lean and frugal while keeping up with the same speed of execution," he explained. 

As part of the financing deal, Peter Sonsini, a general partner at NEA, joined Perplexity's board. Rounds that are too large can distract companies, he said. "People have vanity rounds," Sonsini said. "We've all seen in the last few years what can happen if you raise too much money before you need it."

Ashish Vaswani, Srinivas's mentor at Google before leaving to create his firm, is another Perplexity investor. Vaswani wrote the seminal work "Attention is all you need," which established the notion of transformers, which aid AI models in focusing on the most significant information in the data they're examining. Several of the field's leading startups, like Perplexity, have created products employing the technology.

"They were among the first to place a wager on it," Vaswani explained. "It takes bravery."

Perplexity has been providing new features to users every week since its introduction in December. "Perplexity is not yet six months old and has released more stuff than most startups do in their entire careers," former CEO of software platform GitHub Nat Friedman commented on Twitter.

Perplexity's traffic is still a tiny fraction of Google's, but it is growing. According to digital intelligence firm Similarweb, the company's website had roughly 13 million visitors in February, more than double the previous month's figure. According to Similarweb, startups such as Character.AI and You.com have seen their traffic jump in recent months, demonstrating how the explosion of interest in ChatGPT has buoyed lesser companies.

Srinivas discussed how Perplexity and Google may be used to look for vehicle insurance during a conversation with a Trade Algo reporter. When asked about the best sort of insurance for a 2020 Hyundai, Perplexity provided a concise paragraph referencing many sources, whereas Google provided a lengthy list of links. "At the end of the day," Srinivas said, "you simply want answers."

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