Thursday, November 7, 2024

On Perplexity - Timeline and Hypotheses



Perplexity baffles me! 

It’s a fast-growing startup that has built a great product and is stirring competitive reactions from the likes of Google and OpenAI.

At the same time, it's sustainable competitive advantage is unclear, and it's saddled with growth expectations attached to a $3B valuation (maybe $9B). 

To help wrap my had around Perplexity, I created a 2 year timeline to understand where they've been and help me think through where they might be going.

Read on for a fully sourced timeline of Perplexity's rise, covering:

  • Fundraising
  • Product Launches
  • MAUs
  • Revenue 
  • Legal action
  • and more

🧑‍🤝‍🧑 Team

Founders: 

Team Size: Approximately 250 (LinkedIn)


🗓️ Timeline

2022

August 2022 

  • Founded
September 2022 

  • $3.1 Seed Round
December 2022 

  • 2 million MAUs


2023

March 2023

  • Raised  $25.6 million Series A


2024

January 2024 

  • Raised $73.6 million in Series B
  • 10 million MAU's
  • 500,000+ mobile app installs across iOS and Android

April 2024
 
  • Raised an additional $62.7 million
  • Valuation > $1B
  • Total dollars raised: $165M
  • 169M queries per month
  • Launched Perplexity Enterprise Pro product
May 2024 

  • Launched Perplexity Pages product
  • "your new tool for easily transforming research into visually stunning, comprehensive content."

June 2024 

  • Legal action threatened against Perplexity 

July 2024 


August 2024

  • $35M annualized revenue 
  • Started 2024 with $5M annualised revenues
  • 250M queries answered in July
  • Reportedly closed $250M funding round at a $3B valuation

October 2024

  • $50M annualized revenue
  • 15M queries per day (est. 450M queries per month)

  • Legal action: News Corp v. Perplexity

  • $150-$200M acquisition offers were made in 2023

Introducing ChatGPT search [October 31, 2024]
  • OpenAI launches SearchGPT prototype 
November 2024

  • Raising $500M at a $9B valuation
  • Shop via Perplexity
  • Introduces Perplexity Merchant Program "to make it easy for large retailers to share their product specs with us, ensuring we can access live details on all the best available products"
December 2024

  • "$500 million round of funding that triples the company’s valuation to $9 billion"


🤔 Where does Perplexity grow next?

The big question: How is Perplexity going to grow into its $3B valuation?

Strengths

  • Capital - they have more capital than other LLM search startups
  • Product - their product is unequivocally better than Google for some category of queries
  • Early mover advantage in AI-powered search
  • Clear demand for alternatives to traditional search engines

Challenges

  • Google and OpenAI are direct competitors with more resources and distribution 
  • Google and OpenAI have more brand recognition than Perplexity
  • Perplexity has no proprietary distribution channels 
    • Google has its own devices and browser
    • ChatGPT has apple devices
    • OpenAI intends to build its own hardware
  • Perplexity is facing legal challenges from publishers, and has less money to cut deals like OpenAI. 
    • I suspect that a lot of their fundraising is due to the need to cut deals with publishers 
  • Challenged business model
    • An ad business is the only way to for them to go consumer at the scale they intend to reach
    • Perplexity is trying, but it's fighting Google on its turf and that's a losing proposition 
Questions on my mind
  • What unique tech have they built? 
    What’s the secret sauce that others haven't and can't crack?
  • What F500 companies need that tech? Certainly there is a buyer out there.
  • How do their economics / user-base hold up to scrutiny?

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