Perplexity AI’s challenge to Google hinges on something simple but tough—being the best

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

I’d only seen Fassbender’s 2015 take on Jobs, and I should keep it that way, Srinivas told me. 

“That’s the good one,” he said. “There’s this scene where Wozniak comes in and says to Jobs: ‘You don’t write any code. You don’t do design.’ Then Jobs says, ‘I play the orchestra.’ And that’s what Perplexity’s like. We don’t train the foundation models. We don’t 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 venture—that 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 2023’s deal value was bolstered significantly by the $17 billion raised by Open AI and Anthropic combined, a testament to the AI boom’s power. 

But there’s an extra wrinkle to Perplexity’s 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. I’ve 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 I’ve found the answers to be accurate and concise on an interface that’s easy to use. I’m 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 doesn’t 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 it’s 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 FX’s The Bear, a TV show that’s ostensibly about a fine dining chef, but is really so much more—it’s about the crippling anxiety and inevitable pitfalls that come with wanting to be the absolute best at something. I asked Srinivas if he’d seen The Bear, and he hadn’t. But I told him about something one character says to another, as they talk about her ambition to win a Michelin star: “You’re 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. “That’s my job, and if I’m not doing it, I shouldn’t be the CEO anymore,” adding that he thinks often of leaders he admires like Elon Musk—“I know he’s controversial”—and Bezos. 

It’s the sort of reference that speaks to what a big swing Perplexity AI is. It’s hard to believe Google will hold its place at the top of the search heap forever (nothing lasts that long), but it’s also hard to see how they won’t. 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? That’s risky, but there’s an infinite reward if it works.”

I tell him that I’m 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 they’re 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
Submit a deal for the Term Sheet newsletter here.

Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

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

- Conta Simples, a São 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 Enterprise agreed 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.