Perplexity AIs challenge to Google hinges on something simple but toughbeing the best

There are two major Steve Jobs movies.

I learned this talking to Perplexity AI cofounder and CEO Aravind Srinivas, who wanted to be clear with mehe was talking about the Steve Jobs movie featuring Michael Fassbender, not Ashton Kutcher.

Id only seen Fassbenders 2015 take on Jobs, and I should keep it that way, Srinivas told me.

Thats the good one, he said. Theres this scene where Wozniak comes in and says to Jobs: You dont write any code. You dont do design. Then Jobs says, I play the orchestra. And thats what Perplexitys like. We dont train the foundation models. We dont build the core GPU infrastructure. But we take all that, and play the orchestra.

And Srinivas Perplexity AI orchestra has played a promising first movement. The AI search startup last week announced that it had raised $73.6 million in a funding round led by IVP and including Jeff Bezos, NEA, NVIDIA, Databricks, and Bessemer Venture Partners at a $520 million valuation. Like a number of AI startups, Perplexity has managed to raise money in a tough environment. In 2023, $170.6 billion was invested across venturethat marks a decline of $71.6 billion from 2022 totals, and a whopping $177.4 billion drop from 2021, according to PitchBook and NVCA data released Wednesday. Much of 2023s deal value was bolstered significantly by the $17 billion raised by Open AI and Anthropic combined, a testament to the AI booms power.

But theres an extra wrinkle to Perplexitys story. The company is looking to make its mark on the search market, famous for the spectacular dominance of one player: Google. Srinivas says Perplexity will find its place because the company is operating with a fundamentally different business model.

Google has no incentive to actually move fast and nail this product experience because their core money is coming from making people click on links and view links, he told me. Right now, our core money is coming from being the best.

Benchmarking in AI is difficult, but I will say this: I have found Perplexity to be pretty compelling. Ive asked specific questions, from What are some famous IPOs in which the company was not profitable? to How many Steve Jobs movies are there? And Ive found the answers to be accurate and concise on an interface thats easy to use. Im the target customer for Perplexity right now, as the company is currently operating on a subscription business model selling Perplexity Pro for $20 per month or $200 per year to knowledge workers. The free version doesnt have the image upload or assistant called Copilot, but it is able to take on the same sorts of queries.

Our value proposition is that the free product is already so good that you can still use it without having to pay for it, but the paid product is going to be insane, he said.

So its a business predicated on being the best, which is tough to objectively ascertain and, well, stressful. That got me thinking about another on-screen drama: I recently (finally) watched FXs The Bear, a TV show thats ostensibly about a fine dining chef, but is really so much moreits about the crippling anxiety and inevitable pitfalls that come with wanting to be the absolute best at something. I asked Srinivas if hed seen The Bear, and he hadnt. But I told him about something one character says to another, as they talk about her ambition to win a Michelin star: Youre going to have to care about everything, more than anything.

I ask him if he agrees. Srinivas sat back, and paused. There was a long beat.

You have to care about the things that matter.

I pressed, asking how you can know what matters.

Part of being a leader is looking at 100 different things, and telling people that these are the three that matter, Srinivas said. Thats my job, and if Im not doing it, I shouldnt be the CEO anymore, adding that he thinks often of leaders he admires like Elon MuskI know hes controversialand Bezos.

Its the sort of reference that speaks to what a big swing Perplexity AI is. Its hard to believe Google will hold its place at the top of the search heap forever (nothing lasts that long), but its also hard to see how they wont. And Perplexity is also competing with chatbots fielded by heavyweight tech companies like Meta, Amazon, and AI startups like Anthropic and Open AI. I say that this all strikes me as pretty bold.

Startups are all about being bold, Srinivas told me. Are you building a company that has unbounded potential? Thats risky, but theres an infinite reward if it works.

I tell him that Im just not sure how on earth Perplexity finds scale in search. Srinivas takes it in stride.

You can ask all these questions and I think theyre all fair, pretty rational ways of thinking about it. But startups are for irrational people, right?

See you tomorrow,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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VENTURE DEALS

– PerformYard, an Arlington, Va.-based employee performance management platform, raised $95 million in funding from Updata Partners.

– Conta Simples, a So Paulo, Brazil-based expense management platform and corporate card provider, raised $41.5 million in Series B funding. Base10 Partners led the round and was joined by existing investors Valor Capital, Jam Fund, Y Combinator, and others.

– Neocis, a Miami, Fla.-based developer of robot surgical systems for dental implant surgery, raised $20 million in new funding from Mirae Asset Capital and NVentures.

– Ask-AI, a Toronto, Canada and Tel Aviv, Israel-based AI assistant designed to integrate into employee workflows and cut down on repetitive tasks, raised $11 million in Series A funding. Leaders Fund led the round and was joined by Vertex Ventures, State of Mind Ventures, GTMFund, and others.

– OneAdvisory, a Miami, Fla.-based client data management platform for registered investment advisors, raised $8 million in seed funding. F-Prime Capital led the round and was joined by Fika Ventures, Great Oaks, and Twelve Below.

– PierSight, a Gujarat, India-based satellite surveillance provider for the maritime industry, raised $6 million in seed funding. Alpha Wave Ventures and Elevation Capital led the round and was joined by existing investor Techstars.

– Peerlogic, a Scottsdale, Ariz.-based AI assistant for dental offices, raised $5.7 million in seed funding. AZ-VC led the round and was joined by In Revenue Capital, Cervin Ventures, Singularity Capital, and Revere Partners.

– Credo, a Denver, Colo.-based company using AI to analyze medical records, raised $5.3 million in seed funding. FCA Venture Partners led the round and was joined by existing investors Hannah Grey VC, FirstMile Ventures, and SpringTime Ventures.

– Mercor, a San Francisco-based platform that uses AI to connect companies with talent, raised $3.6 million in seed funding. General Catalyst led the round and was joined by Scott Sandell, Soma Capital, and others.

– tibo energy, an Eindhoven, Netherlands-based provider of energy management software, raised 3 million ($3.3 million) in seed funding. SET Ventures led the round and was joined by Speedinvest and members of the tibo energy founding team.

– NumberEight, a London, U.K.-based platform designed to help advertisers identify audiences through the use of AI, raised $2.7 million in pre-Series A funding. ACF Investors led the round and was joined by Nauta Capital, Ascension Ventures, and others.

PRIVATE EQUITY

– Bloomerang, backed by JMI Equity, acquired Qgiv, a Lakeland, Fla.-based fundraising platform. Financial terms were not disclosed.

– Crest Rock Partners acquired a majority stake in Specialty Pipe & Tube, a Mineral Ridge, Ohio and Houston, Texas supplier of mechanical pipe and tubing. Financial terms were not disclosed

– Legacy Restoration, a portfolio company of Bessemer Investors, merged with Southern Roofing and Renovations, a Memphis, Tenn.-based provider of exterior restoration and remodeling services. Financial terms were not disclosed.

– Mitratech, backed by HgCapital Trust and Noble Rock Advisors, acquired Syntrio, a Northbrook, Ill.-based compliance training, ethics hotlines, and employee reporting platform, and Mineral, a Portland, Ore.-based predictive human resources and compliance platform. Financial terms were not disclosed.

– Verdantas, backed by RTC Partners, acquired Peterson Brustad, Inc., a Folsom, Calif.-based water services company. Financial terms were not disclosed.

OTHER

– Hewlett Packard Enterpriseagreed to acquire Juniper Networks, a Sunnyvale, Calif.-based networking hardware company, for approximately $1.4 billion.

PEOPLE

– ATL Partners, a New York City-based private equity firm, hired Caleb Clark as a senior partner. Formerly, he was with Palladium Equity Partners.

– Bain Capital Ventures, a Boston, Mass.-based venture capital firm, promoted Rak Garg to partner and Abby Meyers to principal.

– Cathay Innovation, a Paris, France-based venture capital firm, hired Michael Schuster as venture partner. Formerly, he was with Speedinvest.

– Headline, a San Francisco-based venture capital firm, hired Zehra Naqvi as an investor. Formerly, she was with Republic.

– Kainos Capital, a Dallas, Texas-based private equity firm, promoted Steven Koch to principal and Alex Stanek to manager on the Kainos operations team.

– Kian Capital Partners, a Charlotte, N.C.-based private investment firm, promoted Jordan Lee to partner and David Hare to principal.

– Millennium Technology Value Partners, a New York City-based venture capital firm, promoted Joseph Kao to partner.

– Work-Bench, a New York City-based venture capital firm, promoted Kelley Mak to general partner, Priyanka Somrah to principal, and Daniel Chesley to principal.

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