Perplexity's Billion Dollar Breakthrough

0:00Perplexity is on an absolute tear and is in talks according to sources that are familiar with the matter to raise$1 billion. million dollars. 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, they mix in there.

0:33But 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 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.

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1:34So 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.

2:06So 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.

2:42And 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 in April of 2024. They did a round there. So one year after a billion dollar valuation, they're raising a billion dollars cash at 18 billion dollar 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, you know, going around essentially that there is some new competition in the AI powered search space.

3:18We 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 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 to ChatGPT, 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 Claude with the internet on perplexity.

3:48So, 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 chat gpt was on and off with 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 a paywalled new york times article and chat gpt would like summarize it and 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 slow to the game, some would argue.

4:32So 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.

5:25They 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.

5:53They 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 going to go parabolic. This is essentially how 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.

6:25So 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 this stuff gets leaked out, is that a perplexity is working on launching a quote-unquote agentic browser that they're going to call Common. 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 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 to perplexity.

7:00Perplexity is a very tiny, you know, one, 2 % of the whole search market or something very small, but people are saying, but I mean, for an, 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, then all of a sudden it starts to threaten perhaps Google Chrome and people will just use this.

7:32They're going to 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 offerings. 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 strategy.

8:00This thing isn't probably insanely expensive and their costs, their acquisition costs. Plus they know that if they're at university, 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 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 thing is really cool.

8:28If you have a bunch of internal documents in your company that obviously are online, you can't ask ChatGPT about them. Now you can ask Perplexity about them. And you can tie Perplexity into ChatGPT, 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.

8:56And 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. Means the world to me, honestly. 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 AI Hustle School community, I'll leave a link in the description and in the show notes. You could check that out. Amazing community, over 300 members.

9:22And 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.