This AI Startup Just Hit $1B — Here’s How Perplexity Did It
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perplexity is on an absolute tear and is in talks, according to sources that are familiar with the matter, to raise $1 billion. This is absolutely insane. I feel like we've seen of the top AI companies, they're able to do round after round of funding. As long as they can show positive user growth, there's a handful of these companies that are really showing themselves as the winner. Perplexity is 100% one of these, and I've been

absolutely blown away by the fact that, you know, they may not be best known for like, you know, a foundation model chat GPT. Although I think they have like some of their own tech that they'll say they mix in there. But as far as being like a quote unquote GPT rapper that a lot of people criticize or make fun of, well, they're raising a billion dollars. So they're doing a fantastic job. They do a lot of cool stuff. So today on the podcast, I want to be diving into what they're doing with that billion dollars, how they were able to actually achieve that and raise that money. And I'll

Also, what I think this means for the industry going forward in the future. So stick around. This is going to be a great episode. Before we get into it, I wanted to mention that if you ever wanted to grow and scale your business using AI tools, I have a community where every single week I post exclusive videos.

a podcast and videos I don't post anywhere else, breaking down how to grow and scale your business using AI tools. There's over 50 videos. I've been doing this for over a year now. And if you want to join the community, the link is in the description. In the past, I had this set at $100 a month. It's currently discounted at $19 a month. And if you get in at the discounted price, when I raise the price in the future, you'll be locked in at that

I would love to have you as a member of the community. We have over 300 members that all share amazing insights and perspectives about their businesses. So it's a great place to be. I will leave a link in the description. All right, let's get into what's going on with perplexity. So the first thing is, of course, like the big headlines like, oh, my gosh, they're raising a billion dollars. Their valuation is an $18 billion valuation.

all things considered, like the equity they're giving up for a billion dollars is not that much. This is really impressive. They've raised a lot. So this is actually coming from Bloomberg.

that kind of reported on this. Their annual revenue and annual recurring revenue just came out, and it has now reached $100 million. So it's interesting. I mean, $100 million in annual recurring revenue. If everything froze today, you'd say in 10 years, they would make a billion dollars. Obviously, they're seeing rapid growth, and that's why they're able to get such a high valuation because

you know, beyond just, okay, let's say 10 years, like X their annual revenue is how much they're raising, but their valuation is 18 billion. So I think that's pretty impressive. This has went up a ton. This is almost double their current valuation. So in December, if you remember, not very long ago, December, they raised at a $9 billion valuation. And now in

April, they are in April, sorry, of last year. So we're going 2024. I mean, we're coming to the end of March right now. So this is literally one year after they reached a billion dollar valuation, April of 2024, they did around there. So one year after a billion dollar valuation, they're raising a billion dollars cash at $18 billion valuation. This is really, really rapid growth. There's a couple of things that I think contribute to the rapid growth. And of course, this is all coming as there's a bunch of rumors of a

going around essentially that there is some new competition in the AI powered search space. We see Claude adding search, but I really believe that's one of the reasons why perplexity has actually stayed in the market so long has been so successful is because Anthropics Claude for better or for worse, they kind of were like, oh, for safety reasons, we'd want to create a contained AI model. We don't want to get it out into the world. And so Claude

you know the big competitor chat gpt literally did not have internet access perplexity absolutely exploited this from day one literally branding themselves as the replacement for google where you would go and you could use clod with the internet on perplexity so

You know, it's kind of interesting because now that Claude is adding that, I bet there's a huge subset of people that just love the Claude model and they'll just bump back over to Claude. I wonder if you'll see revenue or usage dip because of that. I'm sure Perplexity has got a lot of things in the works to continue to grow. But like that is something I think to be aware of. But they really milked that at a time when even ChatGPT was on and off with their web browsing because, you know, the New York Times was suing them for showing like

you know, getting behind, like you could essentially go and post a paywalled New York Times article and Chachaputi would like summarize it and read it to people. And so,

Because of that opening, I pulled their internet off, their web browsing off. So there's kind of been back and forth and Google was slow to the game, some would argue. So perplexity really got in this from the beginning. And because of that, I think did quite well. So I think with everything coming into focus, this is going to definitely be heating up a lot of competition.

you know, right now, its core market is getting much more crowded. And because of this, Anthrop or perplexity has actually teased a couple new things. And I think this is kind of what they're fundraising on, right? When you when you look at these companies doing like a billion dollar fund around fundraising round, you know that it's coming from like, they're showing investors something that's not publicly available. It's very common.

I think with a lot of like the big AI companies that I've looked at recently, right as they like, they'll kind of do like a big new feature announcement along with a funding announcement. So like, hey, we just, you know, released the ability to do this super cool new voice model thing. And we also just raised $20 million. They kind of do them in tangent. And I think it's smart from a branding perspective because

It's like the news of, you know, raising $20 million is definitely going to get out there and then they can kind of add their new feature on. But the thing that I think not a lot of people think about is the fact that whatever that new feature was is how they got the money. They've been talking to investors about it for the last, you know, three to six months, however long they did their crowdfund or however long they did their fundraising for. And so, you know, you can assume they probably had a really cool feature for three months. They don't want to just release it and then

maybe the feature flops or I guess that's kind of a pessimistic way to say it but like raising money is all about hype so if they can go to investors and say look at this absolutely incredible in-house tool or in-house feature we've built it blows all the competitors out of the water we're about to release this get in your funding now because once we release it we're gonna go parabolic this is essentially the how these

these AI companies are raising money. And so it's interesting to me to see how people are pairing up new feature teases or announcements with these crowdfunding. So the new tease out of perplexity as they're kind of talking about this $1 billion, which no doubt a lot of times the tease or the leaks are coming from investors that see the pitch deck and then share it with reporters. This is how a lot of the stuff gets kind of leaked out, is that

A perplexity is working on launching a quote unquote agentic browser that they're going to call comment. So comment. So this is very interesting. They've kind of dominated this AI search space to the point where some people are saying, oh, they're going to be a competitor to Google. And if you look at the actual like usage of web search.

you know, you can kind of see the market like Google is not really losing any ground. Perplexity, perplexity is a very tiny, you know, one, two percent of the whole search market or something very small. But people are saying, but I mean, for, you know, an incumbent like this is actually quite impressive for a small startup to get there. And so now that they're now that they've reached that, the next place that they're looking at

is actually owning the browser. So if they can make an impressive browser, like, look, this is an agentic browser. It can do all these different things. You can use Google or Bing or whatever you want. I'm sure they'll default to perplexity, but if they can create a browser that people are switching to that, then all of a sudden starts to threaten perhaps, you know, Google Chrome and

and people will just use this, they're gonna start expanding their footprint that way. So I think this is very smart. This is what they've been teasing. They're also ramping up their enterprise offering, so they're working a lot more with companies. I have seen a ton of universities, for example, using Perplexity, and a lot of people, they have a deal essentially where if you get like, you know, 50 people at your university to sign up for Claude, then everybody at your university gets it for free for a year or something like that. Or sorry, not Claude, for Perplexity. And I think this is absolutely genius. This is a great marketing tool

strategy. This thing isn't probably insanely expensive in their costs, their acquisition costs. Plus they know that if they're at universities, these are people that are going to go into the workforce most likely and probably be power users. So I think this is really smart. They've done a lot of this with enterprise, with universities. They have a lot of these kind of offerings. They're

ramping up and they are they have recently launched an AI search engine that helps essentially businesses get information from their internal documents so they're pulling out all this new stuff I think the internal documents things really cool if you have a bunch of internal documents your company that obviously are online you can't ask chat GPT about them now you can ask perplexity about them and you can type perplexity into chat GPT Claude

Mistral and every other AI model. So I think Perplexity is doing something very, very good there. And I'm really excited to see how this new fundraise goes. I wanted to bring up all the new features because it's so easy to be like, oh my gosh, they're raising a billion dollars. And I think less often people are talking about...

how they're actually able to raise that, what the new features are. And so cool stuff coming out of perplexity. I'll definitely keep you up to date on all of that. When this billion dollars of funding closes, thanks so much for tuning into the podcast today. I hope you learned something new and that this was insightful. If it was, I would appreciate a review. Um, means the world to me. Honestly, uh, I read all your reviews. Yeah, really, really do appreciate them. So thanks so much for tuning in. And if you're interested in joining the hustle school community, I'll leave a link in the description. Um, and in the show notes, you could check that out. Uh,

amazing community, over 300 members. And I learn things all the time. And I share every single week videos there on how to grow and scale your business with AI. Thanks so much for tuning in and I will catch you next time.