How an AI company became an Unicorn

Perplexity is the only substantial product from this AI revolution that has faced competition from big tech and still stood tall. Meta AI offered real-time search, but they poorly summarized their results. Moreover, Google’s AI summaries weren’t accurate and haven’t been released to the world yet. Some companies like SSI and Cognition Labs have billion dollar valuations with no product released. Furthermore, I am excluding OpenAI in this topic since its cofounders were well-connected and it was easier for them to raise capital without building a great product in the earlier days. Companies like Perplexity and Civitas had great products from the beginning, which catalyzed their growth.

Background: There are four co-founders for Perplexity. All co-founders possess industry experience working for Tech companies such as Quora, Databricks, OpenAI, Meta, and Google. Aravind Srinivas and Dennis Yarats were researchers at OpenAI and Meta respectively. While Johnny Ho was an engineer at Quora and Andrew Konwinski was the co-founder of Databricks. Furthermore, they got funding from Elid Gill and Nat Friedman to explore text2sql search. As they were building their text2sql search product, they had a lot of questions that Google couldn’t answer, so they built their chatbot to answer these questions.

How it works? Perplexity uses NLP techniques to understand queries then it conducts a real-time web search to find the best sources to extract relevant pieces of information. Finally, it sends all of the extracted information and the original query into an LLM for a summary.

The Launch: When Chatgpt was released there was a desire to get real-time answers and Perplexity filled that void a week later. They launched two bots one was a Twitter bot that went viral thanks to Jack Dorsey’s tweet and another was the perplexity bot. They released the Twitter bot to test their text2sql product for enterprises since they weren’t sure, which product people would like. The Perplexity bot was performing better and when Elon Musk brought Twitter he increased the price of API requests, hence the team couldn’t afford it, so they pivoted to the Perplexity bot. After, a successful launch they raised $25.6 million in series A at a $121 million valuation.

Where are they now? Their last reported results were in March 2024. In the report, they claimed to have 10 million users daily. The site is most popular in Indonesia and India. Moreover, they get a lot of attention from the media as they perceived to be the Google Search killer. Google offers better search results than Perplexity for certain queries such news, game scores, weather updates, navigational queries (ie. Going to a specific site), local queries (ie. pizza place near by ) and transactional queries (ie. Best deal for a laptop). While, Perplexity is meant to answer more conversational queries(ie. what is the root cause of a recession ), follow up questions (ie. ‘What are the first signs of a recessions’’), research questions (ie. Summarize the findings and recent studies of Capitalism ). Even If Perplexity takes away Google’s ad word business. Alphabet Google’s parent company still has Youtube and Google Cloud, which bring in around $100 billion in revenue. They also own Waymo, which could disrupt many industries like ride-hailing, delivery, and transportation.

Conclusion: Perplexity is changing the way we think and use search while facing fierce competition from much bigger companies. For example, OpenAI also released its real-time search product called SearchGPT, but it’s still in beta. This success gave rise to more funding that valued the company at a billion dollars. There’s speculation the company is planning to raise more funds from Softbank at a $3 billion valuation. It’s onward and upward for them.

If you’re interested in more AI applications. Check out The Frontier